A bipartisan deal was reached to end the government shutdown and raise the debt ceiling on Wednesday. While this provides immediate relief, the agreement is only a short reprieve. Funding to the government now ends January 15, and the debt ceiling will only be raised through February 7th.
This follows nearly two weeks of acrimonious debate in the House and Senate which triggered concern in the markets about downgrades by the major credit agencies. In fact, Fitch Ratings warned on Tuesday that it might downgrade U.S. debt amid fears Congress could not find a resolution to raising the debt ceiling. Fitch and Moody’s still assign the U.S. their top ratings (AAA and Aaa respectively); Standard & Poor’s downgraded the U.S. to AA+ in August 2011.
As of October 16, Fitch was alone with its downgrade warning. At the time, S&P spokesman John Piecuch told reporters that the agency’s ratings reflected the potential that a deal could not be struck between Democrats and Republicans. In the last two years, three major countries have lost their top rating from at least one agency: the United States, the United Kingdom and France. In light of the Fitch warning, some have wondered what those few remaining AAA-rated countries have going for them. 24/7 Wall St. examined the 11 countries with perfect AAA ratings from all three ratings agencies.
When determining a country’s debt rating, agencies consider several factors, including the country’s political climate. Most of the countries with AAA ratings have a stable political environment, something the U.S. can no longer exactly claim. Few of these countries have faced the bitter battle that was and may continue to be waged in the U.S. over federal spending and debt.
The countries with the highest credit ratings are wealthy economies, with high levels of GDP per capita. All 11 of these countries are in the top 25 for this figure. Luxembourg, by virtue of its growing financial services industry, generated GDP per capita income of nearly $78,000 2012, 50% greater than in the U.S.
U.S. government gross debt amounted to 102% of GDP in 2012, 11th highest in the world. On Some of the top-rated countries have relatively low debt to GDP, including Australia and Luxembourg, which had debt levels at 27% and 21% of GDP in 2012.
Having low debt to GDP, however, is not necessarily a sign of a stable economy. According to many economists, wealthy, stable countries are able to borrow significantly more than developing nations. For some countries, high debt is a sign of a healthy economy. Five of the AAA-rated countries had debt exceeding 50% of national GDP as of 2012.
To determine the countries that are higher rated than the U.S., 24/7 Wall St. reviewed credit ratings for sovereign countries published by Moody’s, Fitch, and Standard & Poors (S&P). In order to make the cut, nations had to be awarded the highest possible credit rating from each institution– Aaa from Moody’s, or AAA from S&P and Fitch. We excluded countries with very small economies, including the Isle of Man, Guernsey and Liechtenstein. Unemployment rates are from the Organisation for Economic Co-operation and Development, excluding Singapore, while further data on economic activity is largely from the IMF’s World Economic Outlook.