Fitch reaffirms France triple-A rating
Paris, December 15, 2012
Fitch Ratings stuck by its triple-A rating on France in a much-awaited review yesterday but predicted a peak in debt in 2014 at a level that it said was the maximum for a country with a top-notch credit grade.
Fitch is the only agency to retain an AAA rating on the euro zone's second-largest economy. It kept to its negative outlook, saying that indicated a slightly greater than 50 per cent chance of a downgrade in future.
The ratings agency forecast growth of only 0.3 per cent in 2013, well below the 0.8 per cent the 2013 budget is built on, and believes the government will not be able to narrow the public deficit as by much as it hopes.
Fitch managing director David Riley said the deficit was likely to come in at 3.6 per cent of national output, more than the 3 per cent targeted by President Francois Hollande's government.
"The combination of weaker growth and slightly larger deficits compared to the government forecasts mean that we expect government debt to peak at 94 per cent (of GDP) in 2014 and gradually decline thereafter," Riley said.
The French government forecasts debt peaking in 2013 at 91.3 per cent of GDP and dipping in 2014 to 90.5 per cent.
"The key fiscal trigger for a rating action is not the precise 'point' forecast but rather confidence that government debt to GDP ratio will indeed be on a firm downward path from 2014," he added.
Many economists expect growth to be far weaker and that it will be necessary to cut spending further or raise more tax income to meet deficit targets. Hollande said after an EU summit in Brussels that he saw an economic recovery emerging in 2013.-Reuters