'Negative' outlook for French economy

Ratings agency S&P says recovery could prove elusive - sending Cac 40 share index to lowest in a year

10 October 2014

FRANCE'S economic outlook has been downgraded to "negative" by a leading analyst, with French shares suffering their biggest weekly fall in two years.

The Cac 40 index of top shares in Paris closed on Friday down 4.8 per cent on the same time last week. At 4,073 points, it is the lowest level seen since the new year.

Ratings agency Standard and Poor's announced earlier in the day that it was worried about weak economic recovery in France and the state of public finances.

It maintained the "AA" rating for French debt - which has been in place since November 2013 - but revised its perspective from "stable" to "negative".

S&P forecasts that the French economy will grow by 0.5% this year, 1.1% in 2015 and 1.5% in the two years that follow.

The agency said: "In our view, the French government's budgetary position is deteriorating in light of France's constrained nominal and real economic growth prospects.

"A recovery of the French economy could prove elusive and France's public finances might deteriorate beyond 2014."

Finance minister Michel Sapin said in a statement that he "took note" of S&P's findings.

Rival ratings agency Fitch still sees France as "stable" with an AA+ rating, while Moody's shares the "negative" outlook of S&P, with an AA1 score.

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