2023-04-28 23:10:51
Yellow card. The rating agency Fitch on Friday lowered France’s sovereign rating by one notch to “AA-“, citing social tensions linked to the pension reform as well as lower than expected growth prospects. “Political stalemate and (sometimes violent) social movements pose a risk to Macron’s reform agenda,” wrote the rating agency in a statement announcing the downgrade of France’s rating by one notch.
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 makes it possible to pass a text 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.
“This decision has sparked protests and strikes across the country and will likely strengthen radical and anti-establishment forces,” said Fitch, who had attached a negative outlook to his previous rating, i.e. the risk of a downgrade. .
Moody’s expected June 2
The current deadlock situation could also “create pressure for a more expansionary fiscal policy or a reversal of previous reforms,” said Fitch, who this time accompanied his “AA-” rating with a stable outlook.
Fitch is the first of the three main international rating agencies to downgrade the French rating since the adoption of the pension reform.
Expected for an update of its rating last Friday, the Moody’s agency ultimately did not carry out any rating action, while the S&P Global agency, which currently grants an “AA” rating to France with a negative outlook , is due to publish its findings on June 2.
“Pessimistic assessment”, according to Le Maire
The Minister of Economy and Finance Bruno Le Maire regretted in a press release the “pessimistic assessment” of Fitch, considering that the rating agency “underestimates the consequences of the reforms”, in particular that of pensions. In its conclusions published on Friday, Fitch refers to “significant budget deficits and modest progress” in reducing them.
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 budget nails in 2027. Fitch for its part anticipates a 5% deficit this year and 4.7% next year.
Debt reduction should experience a boost according to the government, with debt representing 108.3% of GDP in 2027, i.e. 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 expects 1% growth this year.
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