United States Country Risk Report Q1 2020

United States Country Risk Report Q1 2020

US economic growth will slow in 2019 and 2020 impacted by heightened trade tensions and slowing momentum in the global economy.

Our forecasts for real GDP growth of 2.2% in 2019 and 2.0% in 2020 still factor in a relatively constructive outlook for the US economy.

Wider budget deficits and a higher debt-to-GDP ratio are on the cards in the years ahead as tax cuts lower revenue but are not accompanied by offsetting reductions in spending.

The Democratic Party's winning control of the House of Representatives in the 2018 mid-term elections augurs a period of legislative gridlock in 2019-2020 as Republicans still control the Senate and both parties move into campaign mode ahead of the 2020 elections. This is made more likely given that in September Democrats have initiated an inquiry into impeaching President Donald Trump, which although unlikely to lead to the removal of the president from office, could 'suck out the air' of ongoing policies and lead to policy stagnation.

Major Forecast Changes

We revised down our end-2019 fed funds rate forecast to 1.75-2.00%, reflecting the 25bps 'insurance cut' in September and we note downside risks to the forecast, which could see another cut before the end of 2019 and beyond.

We revised down our 2019 fiscal deficit to 4.6% in 2019 (from 4.9% previously) to reflect slightly stronger revenue growth and slightly slower expenditure.

We

have

revised

our

Short-Term

Political

Risk

Index

score

from

84.2

to

80.0,

to

reflect

deepening

political

polarisation

following

Speaker

Nancy

Pelosi's announcement of an impeachment inquiry.

Key Risks

Foreign Policy: The White House's aggressive trade negotiating tactics and lack of clear goals risk a prolonged war of protectionism with the US's major trading partners, particularly China.

Growth: Should the slowdown in global growth be broader and deeper than we currently expect, this could negatively affect the US economy, posing downside risks to our 2019 and 2020 real GDP growth forecasts of 2.2% and 2.0% respectively.


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Expansionary Policy Stances To Provide Some Support To US Growth
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: NET EXPORTS FORECASTS
External Trade And Investment Outlook
USMCA Still Unlikely To Be Ratified By US
TABLE: CONCESSIONS OFFERED BY THE TRUMP ADMINISTRATION
Outlook On External Position
TABLE: TOP GOODS IMPORTS IN 2018
TABLE: TOP GOODS EXPORTS IN 2018
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy
US Fed To Remain On Hold, But Risks Of More Cuts Still High
TABLE: FOMC'S ECONOMIC PROJECTIONS
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
US Budget Deal Positive For Short-Term Fiscal Picture, But Long-Term Risks Rise
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES (2017)
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.United States Country Risk Q1 2020ContentsCurrency Forecast
US Dollar View: From Neutral To Bullish
10-Year Forecast
The US Economy To 2028
Slower Growth Long Term
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Trump Impeachment Inquiry: Initial Reactions
Domestic Politics II
US Economic Policy Becoming Less Predictable
Long-Term Political Outlook
Long-Term Challenges Remain
Operational Risk
Developed States
TABLE: LABOUR MARKET RISK INDEX
TABLE: LOGISTICS RISK INDEX
TABLE: CRIME AND SECURITY RISK INDEX
TABLE: TRADE AND INVESTMENT RISK INDEX
Global Macro Outlook
Downside Revisions To Stabilise Somewhat, But Policy Risks Remain
TABLE: GLOBAL MACROECONOMIC FORECASTS (2018-2023)
TABLE: DEVELOPED MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: UNITED STATES – MACROECONOMIC DATA AND FORECASTS

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