The agency of notation Fitch recently lowered the French credit rating outlook from “stable” to “negative”, while maintaining the rating at AA-. This decision comes in the context of the presentation of the draft budget by the French government. Fitch justifies this change by an increase in risks linked to fiscal policy since its last assessment in April.
The agency emphasizes that France is starting from a less favorable financial position, with forecasts of larger budget deficits than initially expected. The plan to reduce deficits by 60 billion euros in one year, announced by the government, is received with skepticism. Fitch expresses doubts about the executive’s ability to fully implement these measures, citing continued political uncertainty and risks related to the application of certain provisions.
The French budgetary situation raises particular concerns. According to Fitch, France’s deficit in 2024 will be the second largest in the euro zone, representing almost three times the median deficit forecast for Category AA countries. Additionally, the spending-to-GDP ratio is considered one of the highest among the countries rated by the agency.
Political fragmentation and the absence of a government majority are also singled out. These factors make it difficult to implement sustainable fiscal consolidation policies, Fitch believes. This decision by Fitch could presage similar assessments from other major rating agencies. Moody’s and S&P Global should soon comment on the French financial situation.
Analysts anticipate the possibility of a change of outlook, or even a rating downgrade in the months to come. Faced with this announcement, the Ministry of the Economy and Finance took note of Fitch’s decision. Bercy underlines that the budget presented “reflects the government’s determination to redress the trajectory of public finances”.
