(Bloomberg) -- France’s credit outlook was downgraded to negative from stable by S&P Global Ratings as the nation’s slowing economy and the government’s measures to cushion households and businesses from higher energy inflation weigh on public finances. 

The nation’s rating was affirmed at AA, the third-highest for S&P, and on par with South Korea and Abu Dhabi. The negative outlook reflects rising risks to France’s public finances and the resulting reduction in fiscal space, according to a Friday statement . 

“The rise in energy prices since the Russia-Ukraine war started may be a much longer lasting shock to European economies than the temporary fall in demand triggered by the Covid-19 pandemic in 2020,” S&P analysts Remy Carasse and Marko Mrsnik wrote. “France’s fiscal strategy partly focused on subsidizing energy costs for households and businesses may complicate medium-term fiscal consolidation.”

S&P also revised its growth forecast for the country next year to 0.2% from 1.7% and raised its budget deficit estimate to 5.4% of gross domestic product from 4% previously, according to the statement. A protracted economic recession, the reversal of budgetary consolidation and additional delays to the government’s reform agenda could also reduce the nation’s fiscal space. 

Moody’s Investors Service affirmed the nation’s rating at Aa2, the third-highest level, with a stable outlook Friday. Fitch Ratings scores the country as AA. 

(Updates with context throughout.)

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