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Responding to the decision, French Finance Minister Bruno Le
Maire said Fitch was underestimating the positive impacts of the
government's plans to reform and strengthen the economy, and
reaffirmed France's commitment to cutting its debts.
Fitch, which also revised up the country's outlook to stable
from negative, said France's economy - the euro zone's
second-biggest - would 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.
"Social and political pressures illustrated by the protests
against the pension reform will complicate fiscal
consolidation," the global credit ratings agency said.
The French economy grew by 0.2% in the first quarter despite a
series of strikes against the government's pension 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 slowing to 2.9% in 2024.
Inflation in France rose to 5.9% year-on-year in April from 5.7%
in March. Statistics agency INSEE said the increase was partly
due to higher energy prices.
Fitch added that France'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 minor progress with fiscal consolidation.
Earlier this month, Le Maire said France's national debt burden,
which reached a record just shy of 3 trillion euros ($3.31
trillion) at the end of last year, is expected to ease from
111.6% of economic output in 2022 to 108.3% by 2027.
France faces a high debt servicing cost at the moment, with the
country borrowing at about 3% from 1% a year ago. On Friday,
French Budget Minister Gabriel Attal said that by 2027 the cost
of servicing the country's debt could be its biggest
budget-spending item.
($1 = 0.9074 euros)
(Reporting by Shreyaa Narayanan; Additional reporting by
Laetitia Volga in Paris; Editing by Maju Samuel and Helen
Popper)
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