Fitch Ratings, one of the world’s leading credit rating agencies, announced on Tuesday that it has lowered the U.S. long-term foreign currency issuer default rating from AAA to AA+, the second-highest level, due to concerns about the country’s fiscal outlook and governance standards.

The downgrade reflects Fitch’s expectation that the U.S. general government deficit will widen to 6.3% of GDP in 2023, from 3.7% in 2022, as a result of weaker revenues, higher spending and rising interest costs. Fitch also noted that the U.S. government lacks a medium-term fiscal framework and has a complex budgeting process, unlike most of its peers.

Fitch also pointed to the repeated political standoffs over the debt limit, which have eroded confidence in fiscal management and raised the risk of a default. The agency said that the June bipartisan agreement to suspend the debt limit until January 2025 was a positive step, but not enough to restore the AAA rating.

Fitch said that the U.S. economy faces downside risks from tightening credit conditions, weakening business investment and a slowdown in consumption, which could lead to a mild recession in late 2023 and early 2024. The agency also warned that trade tensions with China and other countries could escalate and disrupt global growth.

The downgrade was met with criticism from the White House, which said that Fitch’s decision was “arbitrary and based on outdated data”. Treasury Secretary Janet Yellen said that Fitch ignored the strong recovery of the U.S. economy, which has outperformed other major economies in the world.

This is not the first time that a rating agency has downgraded the U.S. credit rating. In 2011, Standard & Poor’s cut the U.S. rating from AAA to AA+ after a similar debt ceiling crisis. At the time, S&P cited political risk as one of the main factors behind its decision.

Fitch Ratings, Moody’s Investors Service, and S&P Global Upgrade Emaar Properties PJSC’s Credit Ratings