On Friday, the Fitch rating agency announced that it was maintaining France’s rating at AA-, equivalent to 17/20, while placing the country under a “negative outlook”. Fitch’s decision follows the presentation of the 2025 draft budget, which provides for an effort of 60 billion euros to curb the increase in the public deficit.
The Minister of Economy and Finance, Antoine Armand, reacted by taking note of this decision, while emphasizing that “the agency underlines the strength of our economy, vast and diversified, the effectiveness of our institutions and our history macrofinancial stability.
“A worsening of the risks”
The Fitch agency justifies this placement by citing the worsening of risks linked to budgetary policy since its last review in April. Indeed, the agency forecasts higher deficits for France and estimates that public debt will reach 118.5% of GDP by 2028. According to Fitch, this budgetary trajectory puts the country in a “more unfavorable situation”.
While the government plans to bring the deficit below 5% of GDP in 2025 and below 3% in 2029, the agency expresses its skepticism. “We do not expect the government to meet its revised medium-term deficit forecast to bring the deficit below 3% of GDP by 2029,” the analysts explain.
Many obstacles in perspective
Fitch highlights several obstacles, including “strong political fragmentation” and a minority government, which complicate the implementation of sustainable fiscal policies. France also stands out in the euro zone for its difficulties in reducing its deficit. In comparison, Spain forecasts a deficit of 2.5% of GDP in 2024 and Italy of 3.3%. The research firm Oxford Economics also notes that France “is an exception” in Europe, with very little chance of reducing its deficit in the years to come.
Last June, the S&P Global agency lowered France’s sovereign rating from AA to AA-, a first since 2013 which could lead to an increase in borrowing rates on the bond markets. After Fitch, the Moody’s agency, which still gives a higher rating to France, will deliver its verdict on October 25, followed by S&P Global on November 29. These assessments will determine whether France continues to benefit from the confidence of the financial markets or whether it will have to face further downgrades of its sovereign rating.