Fitch Ratings revised its outlook on France’s sovereign credit rating from stable to negative on Friday. The agency cited deteriorating budget indicators and domestic political fragmentation as the reasons.
Growth and deficit slip
French economic growth has slowed since Fitch’s previous review last August. At the same time, the budget deficit has risen more than expected. Financing costs have also climbed sharply, further weakening the sustainability of the country’s debt. Fitch analysts said the current political environment seriously endangers efforts to stabilise public debt.
The agency pointed to the wider policy debate in the run-up to the presidential election. Fitch said the debate has not strengthened investor confidence. Deficit reduction is needed to curb the debt ratio, and Fitch said the plans outlined so far do not guarantee that it will last.
What a negative outlook means
A negative outlook signals a risk of a future downgrade rather than an immediate cut.
Fitch’s move leaves France’s rating unchanged for now. The outlook change alone does not alter the rating level.
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Source: Fitch Ratings
