Factors Cited by S&P in New US Rating

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AP photo courtesy VOA News

The international credit rating agency Standard & Poor’s says its decision to drop the status of U.S. government debt from “AAA” one level to “AA+” was based on an analysis of the same five “pillars” in the sovereign rating framework used to determine the creditworthiness of the 126 countries that S&P evaluates.

The agency said a new analysis showed the United States now scored lower than top-rated countries in two of the five key areas – political risk and fiscal risk, including debt burden. The United States score remained stable on the overall economic structure, external risks and monetary policy.

David Beers, S&P’s global head of sovereign ratings, says the political battles over raising the U.S. debt ceiling and cutting spending highlighted what he called a “more uncertain political environment” that lowered the political risk score. He said the projections for U.S. government debt to rise to more than $20 trillion in the next ten years prompted S&P to lower the fiscal score.


S&P lists the five pillars in its Sovereign Rating Framwork as:

–Institutional effectiveness and political risks, reflected in the political score;

–Economic structure and growth prospects, reflected in the economic score;

–External liquidity and international investment position, reflected in the external score;

–Fiscal performance and flexibility, as well as debt burden, reflected in the fiscal score;

–Monetary flexibility, reflected in the monetary score.