Euro zones second largest economy must deliver promised budget cuts in order to avoid further credit rating downgrade, analyst from Standard & Poors said yesterday.
The ratings agency diminished the AAA credit rating of France in January 2012, and it would confirm the countrys AA rating, if France managed to stabilize public debt ratio by 2015.
Standard & Poors predicts that Frances economy is going to contract by 0.2% this year and expand by 0.6% during 2014. As far as budget deficit is concerned, the ratings agency expects France to reduce it to 3.3% of its GDP during 2014 from 3.8% of GDP this year. This forecast is slightly more optimistic than the projections made by the European Commission.
One major cause for rating downgrade would be a scenario in which economic growth prospects continue to deteriorate or the economic stability to be put under threat by rigidities in the labor market and services sector, according to Marko Mrsnik, analyst from the agency.
Additional factor, posing potential threat, would be Frances National debt to increase over 100% of its GDP, as last year this indicator was a bit above 90% of GDP.
S&P has announced that it could confirm its current rating and change the outlook to stable if deficit cuts could stabilize Frances debt ratio in the next 2-3 years.
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