2023-04-29 01:21:41
Published on :
The Fitch agency lowered the French rating by one notch on Friday, citing the strong social tensions at work around the pension reform.
It is a blow for the French economy, but also for the government. The international financial rating agency Fitch downgraded France’s rating by one notch on Friday 28 April. In question, ” political deadlock and social movements (sometimes violent) that pose a risk to Macron’s reform agenda “, writes the rating agency in a press release which announced the downgrading of the French rating by one notch, to ” AA- “, against ” AA previously.
Six weeks ago, the government definitively adopted its pension reform project providing for a postponement of the legal age from 62 to 64, thanks to the support of article 49-3 of the Constitution which allows a text to be passed without a vote in Parliament. This decision led to a clear hardening of the protest, and several days of violent demonstrations throughout the territory, recalling the episode of the yellow vests from 2018.
« The move sparked protests and strikes across the country and will likely bolster radical and anti-establishment forces “, continues Fitch who had matched his previous rating with a negative outlook, the risk of a lowering. The current deadlock situation could also “ create pressure for a more expansionary fiscal policy or a reversal of previous reforms “Said Fitch, which this time accompanied its “AA-” rating with a stable outlook.
Bruno Le Maire regrets
The Minister of Economy and Finance Bruno Le Maire regretted in a press release the ” pessimistic appreciation by Fitch, believing that the rating agency underestimates the consequences of the reforms », in particular that of pensions. Bercy recalls in a statement “ total determination ” of the government ” to restore the public accounts within the next four years ” in order to lower the deficit and the debt. The government hoped that the enactment of the pension reform would reassure the markets about the country’s financial situation. In its conclusions published on Friday, Fitch mentions “ large budget deficits and modest progress about their reduction.
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. Fitch for its part anticipates a 5% deficit this year and 4.7% next year.
Deleveraging should know a boost according to the government, with a debt representing 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.
Fitch also anticipates less robust growth than anticipated in its previous November forecasts. This would be 0.8% this year against 1.1% previously anticipated, and 1.3% in 2024 against 1.9% imagined in the latest forecasts. The government is counting on 1% growthand this year.
(With AFP)
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