Fitch cuts France's rating to 'AA

(Reuters) - Fitch cut France's sovereign credit rating on Android version of Forex MT4 download official websiteFriday by one notch to 'AA-', saying a potential political deadlock and social unrest posed risks to President Emmanuel Macron's reform agenda.

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)

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