Fitch on Friday cut France's sovereign credit
rating by one notch to 'AA-', citing a potential political deadlock and
social movements that are posing risks to President Emmanuel Macron's
reform agenda.
"Social and political pressures illustrated by the protests against the pension reform will complicate fiscal consolidation," the global credit ratings agency said.
Fitch, which also revised up the country's outlook to stable from negative, said the French economy
will expand by 0.8% this year, in line with the euro zone average but
below the agency's 1.1% growth forecast in its last review in November.
The
economy trudged up slightly in the first quarter despite a series of
strikes against the government's pension reform bill, but inflation
remained stubbornly high.
Fitch
forecast that inflationary pressures will ease during the second half
of 2023 due to base effects and that inflation will average at 5.5% in
2023, before falling to 2.9% in 2024.
The euro zone's second-largest economy saw its
inflation rise to 5.9% year-on-year in April from 5.7% in March.
Statistics agency INSEE attributed the increase in inflation partly on
higher energ prices.
The ratings agency added that the country's fiscal metrics are weaker than its peers and it expects general government debt/GDP
to remain on a modest upward trend, reflecting relatively large fiscal
deficits and only modest progress with fiscal consolidation.
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