[LONDON] A number of major economies could see their credit ratings cut or outlooks lowered if record low interest rates rise to more normal levels, Standard and Poor's warned on Tuesday.

Without the ultra-supportive policies of major central banks, S&P said, most the world's top countries' finances would be worse off, having seen little real budget tightening in recent years.

Headline deficits for most of the 25 countries S&P analysed would have been 1 to 2 percentage points of GDP higher in 2015 had interest rates been closer to their longer-term average, meaning a rise in rates could spell bad news.

"If interest costs rise without being offset by higher growth and revenue, the fiscal performance will deteriorate," Moritz Kraemer, an S&P analyst, said in a new report. "Since fiscal performance is one element of our sovereign ratings methodology, the downward pressures on ratings could intensify."

The United States, which has already started raising rates, would have had a headline deficit 1.3 percentage point larger last year under more normal circumstances, Kraemer calculated.

The issue was most pronounced in the euro zone, where the European Central Bank is just about to start a new round of stimulus in the form of corporate bond purchases.

Italian, French and Spanish deficits would all have been about 2 percentage points higher. Germany's balanced budget would have been replaced by a 1.6 per cent deficit.

Outside the eurozone, Britain would have seen a deficit 1.9 percentage points higher. Poland and South Africa's would have been 1.3 percentage points higher.

At the other end of the spectrum were emerging economies. Brazil, Russia, Indonesia and China would all benefit from a return to the rates that prevailed from 2001 to 2008.

"We conclude from our simple interest rate-corrected fiscal balance measure that, especially in the advanced economies, there is little reason for complacency," Mr Kraemer said. "Recent budget improvements are mostly due to the palliative effects of monetary expansion. Indeed, discretionary fiscal adjustment appears to have come to a halt in many economies."

REUTERS