Fitch affirms France's triple-A rating, outlook negative
2012-12-14 12:00:35
Fitch Ratings affirmed France's triple-A rating citing its stable political and social institutions and an exceptional financing flexibility.
The rating agency on Friday, however, maintained negative outlook. The negative outlook is expected to be resolved during 2013 and indicates a slightly greater than 50% chance of a downgrade.
The long-term foreign and local currency Issuer Default Ratings as well as its senior debt were retained at 'AAA'.
Fitch said the top-notch rating is underpinned by its wealthy and diversified economy. Moreover, the economy is less exposed to private sector deleveraging and net foreign debt is equivalent to 23.1 percent of GDP, with the current account deficit below 2 percent of GDP.
France has a track record of relative macro-financial stability including low and stable inflation.
A weakness in the credit profile of France is its high and rising level of public debt. Under the Fitch baseline scenario, government debt to GDP is expected to peak around 94 percent in 2014 compared to Fitch's previous projection of 92 percent, significantly higher than other AAA- rated euro area peers.
Relative to high-grade peers, the flexibility and dynamism of the economy is constrained by rigidities in the labor and product markets.