Eif, Tower in Paris, France

Paris [France], April 29 : Credit rating agency Fitch downgraded France's debt worthiness a notch to "AA-" from "AA" on Friday, claiming that the country's "Fiscal metrics are weaker than peers," according to the Fitch Agency's statement.In its report the Fitch agency said, "Fiscal metrics are weaker than peers and Fitch expects general government debt/GDP to remain on a modest upward trend, reflecting relatively large fiscal deficits and only modest progress with fiscal consolidation."The agency project a fiscal deficit of 5 per cent of GDP this year, above the 2022 level of 4.7 per cent due to the weaker economic growth and higher inflation-indexed expenditure that will offset a lower net cost of the inflation relief package and the continued phasing out of (post-)pandemic support measures.And the deficit is forecast to fall to 4.7 per cent next year as energy support measures are phased out. Deficits in both years are well above the 'AA' medians of 2.3 per cent and 0.9 per cent, respectively.The government's recently presented Stability Programme is more ambitious than the prevision programme, and aims for a further slow consolidation, reducing the deficit to 2.7 per cent by 2027. However, this is based on a stronger economic growth forecast than Fitch's."Public finances, and in particular the high level of government debt, are a rating weakness," Fitch said in a commentary on its rating action which said the country's outlook was stable.Political deadlock and (sometimes violent) social movements pose a risk to Macron's reform agenda and could create pressures for a more expansionary fiscal policy or a reversal of previous reforms, the statement added.The agency warned that "materially lower economic growth prospects and weakened competitiveness," and also the "large and persistent increase in government indebtedness resulting from higher than expected public deficits and an increase in fiscal rigidities," could lead to Negative Rating Action/Downgrade.France President Emmanuel Macron has sought to push through unpopular reforms to the retirement system, including increasing the retirement age to 64 from 62, insisting the changes are necessary for the pension system to be financially viable. But this new reform had sparked nationwide protests, Macron has set a 100-day target amid plans for a second term in office.However, the agency said the general government debt or GDP continuing on a firm downward path over the medium to long term to significantly lower levels, for example, due to sustained fiscal consolidation. will lead to the upgrade.And even the evidence of improved medium-term growth prospects, particularly if underpinned by effective structural reforms and competitiveness gains could result in a rebound in credit rating, the agency noted.Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor

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