Standard & Poor's (S&P) credit ratings agency has lowered its U.S. growth forecast warning of "significant downside risks" from federal spending cuts.
"We've lowered our forecast for U.S. GDP growth in light of the additional sequester spending cuts in 2014 as well as the potential for another political standoff in Washington after the October government shutdown," S&P said on Monday, ahead of the bipartisan budget deal struck in Washington.
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"We now expect the world's biggest economy to expand 2.6 percent next year, down from our forecast of 3.1 percent at last quarter's Credit Conditions Committee meeting," it added.
The ratings agency published its warning in its quarterly update on credit conditions in North America, the Asia-Pacific region and Europe on Monday, in which it gives its outlook on the "evolution of macroeconomic conditions and broad financial trends that could affect credit quality."
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U.S lawmakers reached a deal on Tuesday evening to fund the government past mid-January, averting another feared government shutdown like the one seen in October. In a new sign of bipartisan cooperation, Senate Democrats and Republicans agreed to reduce automatic spending cuts and the deficit levels by $23 billion over two years.