CHINESE credit ratings agency Dagong said Thursday it had put U.S. sovereign debt on negative watch for a possible downgrade, following a similar move by Moody’s the previous day.
Moody’s Investor Service on Wednesday placed the United States’ triple-A rating on a downgrade watch because of rising prospects the U.S. debt limit will not be raised in time.
Dagong followed suit, saying the ability of the United States to repay debt was likely to decline given its economic growth was expected to slow and fiscal deficits to remain high in the next couple of years.
“Various factors that affect the repayment ability of the U.S. federal government will keep deteriorating,” it said in a statement.
“Dagong will downgrade the U.S. sovereign ratings if there is no substantive improvement in its repayment ability and willingness within the period of observation.”
A downgrade could sharply raise U.S. borrowing costs, worsening the country’s already dire fiscal position, and send shock waves through the financial world, which has long considered U.S. debt a benchmark.
Dagong has made a name for itself by hitting out at its three Western rivals — Moody’s, Fitch and Standard & Poor’s — saying they caused the financial crisis by failing to properly disclose risk.
Dagong has given the United States and several other nations lower marks than they received from the big three.(SD-Agencies)