2023-04-28 21:18:18
The blow is harsh for the French economy, but also for the government, which was counting on the enactment of the pension reform to reassure the markets regarding the financial situation of France. The financial rating agency Fitch Ratings downgraded France’s rating by one notch on Friday, April 28, from AA with a negative outlook to AA− with a stable outlook.
The agency cites recent social tensions which, according to it, will weigh on the country’s ability to reduce the deficit and debt, as well as lower growth prospects than anticipated. “Political stalemate and (sometimes violent) social unrest pose a risk to Macron’s reform agenda and might create pressure for more expansionary fiscal policy or a reversal of previous reforms”writes the rating agency in a press release.
She also returns to the government’s decision to have used 49.3 to pass the pension reform. A decision that will likely strengthen radical and anti-establishment forces” in the country, predicts Fitch.
The Minister of Economy and Finance, Bruno Le Maire, immediately reacted in a press release: if he takes “note of the decision” of Fitch, he recalls that “the Moody’s agency made a different assessment the previous week by not reopening the question of the rating of the French debt”. Expected for an update of its rating last Friday, Moody’s ultimately did not carry out any rating action. France has so far been rated Aa2 by this agency, which corresponds to the AA of its counterparts. The S&P Global agency must publish its findings on June 2.
0.2% growth in the first quarter
Bruno Le Maire regrets the“Fitch’s pessimistic assessment of France’s growth prospects and debt trajectory” and regrets that the agency “underestimates the consequences of the reforms” incurred: unemployment insurance, pensions and lower production taxes.
Fitch foresees less robust growth than anticipated in its November forecasts: this would ultimately be 0.8% this year instead of 1.1%, and 1.3% in 2024 once morest 1.9% imagined when latest forecasts. The government expects 1% growth in 2023.
The National Institute of Statistics and Economic Studies (Insee) noted Friday morning a very slight growth in gross domestic product (GDP) in the first quarter of 2023 (+0.2%). But the clouds are gathering on the horizon for the following months.
Economists cite a combination of factors: food prices remaining at high levels despite a possible lull in inflation from mid-2023, global economic slowdown, drying up of credit under the effect of the rate hike decided by the Central Bank Europe, energy crisis which might come back to the fore with the return of winter…
Debt, France’s “weak point”
For Fitch, the main ” weakness “ of France is “the high level of public debt”. In response, Bruno Le Maire states, in his press release, “Total Determination” of the government “to restore the public accounts within the next four years” to reduce the deficit and the debt.
The World Buying Guides
Reusable water bottles
The best water bottles to replace disposable bottles
Lire
After reaching 4.7% in 2022, the French public deficit should rise slightly this year to 4.9% before gradually declining from 2024, anticipates the government in its stability program published in recent days, which is counting on a back in the European budgetary nails in 2027. But Fitch anticipates for its part a 5% deficit this year.
The government also plans to accelerate debt reduction to reach a debt of 108.3% of GDP in 2027, ie 4 points less than previously envisaged, but still very far from the European objective of 60%. It was at 111.6% of GDP at the end of 2022.
1682739940
#Fitch #rating #agency #downgrades #Frances #rating