Oct 24 (Reuters) – European rating agency Scope downgraded the United States’ credit rating by one notch on Friday, citing sustained deterioration in public finances and weakening governance standards.

Scope cut the U.S. local and foreign currency long-term issuer and senior unsecured debt ratings to “AA-” from “AA”, but revised the outlook to “stable” from “negative.”

The downgrade follows the October 1 government shutdown, when Congress failed to reach an agreement to extend funding beyond the end of the federal fiscal year on September 30.

According to Scope, persistently high federal deficits and rising interest payments are the key drivers behind the worsening public debt-to-GDP ratio, which the agency projects could reach 140% by 2030 — significantly above most of the country’s peers.

“The extension of previous tax cuts and the high share of mandatory spending constrain budgetary flexibility in the near term,” Scope said in its statement.

The agency also noted that the consolidation of power within the executive branch, combined with a polarized and gridlocked Congress, continues to erode policy stability and raise risks of fiscal mismanagement.

Despite the downgrade, Scope revised its outlook to ‘stable’, signaling a reduced likelihood of further downgrades in the near term.