Fitch says government shutdown exposes weakness in US fiscal policy

Fitch Ratings affirmed that the US government shutdown has no near-term impact on the country’s sovereign credit rating of “AA+” with a stable outlook.

However, the agency emphasized that the crisis reflects ongoing challenges in fiscal decision-making and weak governance.

In a report issued, on Oct. 1, Fitch stated that the repeated reliance on temporary funding measures to keep federal government operations running points to a chronic shortfall in fiscal policy, which has persisted since the US rating was downgraded from “AAA” in 2023.

The agency added that ongoing disputes over spending cuts to healthcare programs and Congress's role in controlling the federal budget highlight deep political divisions that contribute to legislative gridlock.

It also projected the federal budget deficit to decline to 6.8% of GDP in 2025, down from 7.7% in 2024, supported by an increase in tariff revenues, which could reach $300 billion this year, up from $77 billion in 2024.

Fitch also noted that the direct economic impact of the government shutdown will depend on its duration and scale, expecting GDP growth to slow to 1.6% in both 2025 and 2026, compared to 2.8% in 2024, before accelerating to 2.1% by 2027.