Fitch downgrades French debt rating, citing risks of social unrest
Fitch Ratings said on Friday it had downgraded France's Long-Term Foreign-Currency Issuer Default Rating to “AA-” from “AA,” with a stable outlook.
Fitch said it expects France to run a fiscal deficit of 5% of GDP this year, up from 4.7% last year, due to a number of factors, including weaker economic growth and an increase in inflation-linked spending. These factors “ will offset the lower net cost of the inflation relief package and the continued reduction of (post)pandemic support measures ,” Fitch said. however, the problems are not only The rating agency continues,” Political stalemate and (sometimes violent) social movements pose a risk to Macron's reform agenda and could create pressure for more expansionary fiscal policy or a reversal of previous reforms ",
The move comes as a blow to Macron just weeks after his government enacted a long-promised pension reform to raise the retirement age by two years to 64, despite months of street protests and stiff resistance in parliament.
Now, also due to these social strains, the president's party does not have a parliamentary majority and could struggle to achieve other priorities, such as increasing employment and reducing the fiscal deficit, while improving public services such as schools. Zwithout considering how the protests against the pension reform are continuing, and it is not certain that they will intensify to the point of causing new road blocks or supplies.
For next year, Fitch predicts that France's deficit will fall to 4.7% "thanks to the gradual elimination of energy support measures", but these measures will affect economic growth, as well as further increase social tensions.
Fitch also said it expects real GDP growth of 0.8% this year and 1.3% next year for France. Additionally, uncertainty about France's revenue trajectory remains high, Fitch said.
France's public debt stood at 111.6% of GDP at the end of 2022, "the highest among 'AA' rated countries and more than double the 'AA' median of 48.4%," according to Fitch. In 2023 it is expected to increase slightly
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The article Fitch downgrades French debt rating, citing risks of social unrest comes from Scenari Economici .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/fitch-abbassa-il-rating-del-debito-francese-citando-i-rischi-di-disordini-sociali/ on Sun, 30 Apr 2023 16:30:21 +0000.