S&P sees U.S. growth slowing, government debt rising

NEW YORK (Reuters) - Real economic growth in the United States is expected to slow to 1.2 percent in 2008, forcing higher borrowing by federal and local governments which face the risk of falling tax revenues, Standard & Poor's said on Friday.

Medium- and long-term borrowing among all levels of government is projected to reach $1.378 trillion this year, the credit ratings agency said in a statement.

S&P said the recently enacted federal stimulus package should help boost a U.S. economy, which appears on the verge of a recession in the wake of a government report that showed job loss for a second straight month.

"The Economic Stimulus Act of 2008 will help the U.S. economy, but damage the federal deficit in 2008," S&P said of the federal stimulus plan.

A consequence from the stimulus program will be a $200 billion increase in combined government borrowing, it said.

In 2008, new debt securities to be sold by the U.S. federal government are expected to account for about a third of borrowing by all G7 governments, according to S&P.

U.S. state and local government are projected to issue almost half of all new debt issued by local and regional governments worldwide, it said.

In total, all U.S. governments will account for a quarter of both global government borrowing forecast and global government debt outstanding for this year, S&P said.

(Reporting by Richard Leong; Editing by Theodore d'Afflisio)