Fitch Ratings Inc. downgraded France's credit rating from AA to AA- on Friday, characterizing its outlook as stable. The company forecast that France's fiscal deficit will reach 5% of GDP this year, compared to 4.7% in 2022, with real GDP growth of 0.8% this year and 1.3% next year, compared to the French government's expectations of 1.0% and 1.6%, respectively. Fitch also expects that expenditure pressures will remain high and that uncertainties surrounding the revenue trajectory will persist. France's debt is expected to reach 114.3% of GDP by the end of 2027, while interest payments will rise to 4% of revenues by 2024.
In addition, Fitch saw the ongoing anti-pension reform protests and political deadlock "could create pressures for a more expansionary fiscal policy or a reversal of previous reforms." On the downside, the ratings company said inflation is cooling, predicting it will stand at 5.5% in 2023, before falling to 2.9% in 2024. Risks to the banking sector and those from a "cooling real estate market" are limited.
