NEW YORK: The US fiscal health is at higher risk after the election of Republican Donald Trump as the next US president and given the likely composition of Congress, said rating agency Moody’s.

US budget deficits and government debt levels were largely projected to surge under either candidate in the Nov 5 election, according to several estimates, although Democrat Kamala Harris was expected to add less debt than Trump.

Trump’s victory has contributed to a selloff in government bonds earlier this week as key elements of his economic plans such as tax cuts and tariffs are expected to lead to faster growth as well as higher inflation and wider budget deficits.

As of Friday, Trump’s Republicans appeared set to possibly win control of both chambers of Congress, a scenario that could allow for a faster implementation of new policies.

“In the absence of policy measures to help limit fiscal deficits, the federal government’s deteriorating fiscal strength will increasingly weigh on the US sovereign credit profile,” Moody’s said in a Nov 7 note.

“Given the fiscal policies Trump promised while campaigning, and the high likelihood of their passage because of the changing composition of Congress, the risks to US fiscal strength have increased,” it added.

Moody’s remains the last of the three major rating agencies to maintain a top rating for the US government.

It lowered the outlook on its triple-A US credit rating to “negative” from “stable” in November last year, and it typically “resolves” an outlook, meaning in case of a negative outlook it either brings it back to stable or goes ahead with a rating downgrade, within 18 to 24 months.

“With Republican control of the Legislature and the Executive, policy shifts could be implemented quickly,” said the agency.

This raised the risk of “potentially abrupt and sweeping changes in tax, trade, immigration and climate policies that could particularly affect manufacturing, technology and retail,” it said.

Published in Dawn, November 9th, 2024

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

United stance
Updated 13 Nov, 2024

United stance

It would've been better if the OIC-Arab League summit had announced practical measures to punish Israel.
Unscheduled visit
13 Nov, 2024

Unscheduled visit

Unusual IMF visit shows the lender will closely watch implementation of programme goals to prevent it from derailing.
Bara’s businesswomen
13 Nov, 2024

Bara’s businesswomen

Bara’s brave women have proven that with the right support, societal barriers can be overcome.
System failure
Updated 12 Nov, 2024

System failure

Relevant institutions often treat right to internet connectivity with the same disdain as they do civil and political rights.
Narrowing the gap
12 Nov, 2024

Narrowing the gap

PERHAPS a pat on the back is in order for the ECP. Together with Nadra, it has made visible efforts to reduce...
Back on their feet
12 Nov, 2024

Back on their feet

A STIRRING comeback in the series has ended Pakistan’s 22-year wait for victory against world champions Australia....