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The downgrade comes amid France’s already large general government debt, an implementation risk associated with its structural reform agenda, a wider economic slowdown and the European Central Bank’s monetary tightening, S&P said in its report.
The country’s slowing economy and government measures to cushion households and businesses from energy inflation is expected to weigh on public finances, the ratings agency said.
S&P said it believes the rise in energy prices since the Russia-Ukraine war may be a much longer-lasting shock to European economies than the temporary fall in demand triggered by the COVID-19 pandemic in 2020.
Ratings agency Moody’s (NYSE:MCO), in its most recent rating action, affirmed France’s rating at AA2, with a stable outlook.
In September, the French government forecast that public debt will hover around 111.5% of GDP until 2026 before easing..
The finance ministry forecast earlier that the economy would grow 2.7% this year before slowing to 1% next year, while the central bank expects 0.8% in 2023 at best.
The agency affirmed France’s sovereign credit rating at “AA/A-1+”.
