Relief for the government: the rating agencies Moody’s and Fitch did not modify France’s sovereign rating this Friday. Finance Minister Bruno Le Maire immediately “took note” soberly of this news in a brief press release, adding that “this decision should invite us to redouble our determination to restore our public finances and meet the objective set by the President of the Republic: to be below 3% (of GDP, Editor’s note) deficit in 2027”.
“We will stick to our strategy based on growth and full employment, structural reforms and the reduction of public spending”assures the minister.
This is good news for Mr. Le Maire. Fitch, which had already downgraded France’s rating in April 2023, moving it to the “AA-” level, had suggested at the start of the month that it did not intend to lower this rating further unless there was an increase. “consequent” debt in the meantime.
Moody’s rating, “Aa2”, which remains a notch above that of Fitch, was accompanied by a stable outlook, and commentators believed that it could be lowered to negative on Friday, which did not been the case.
However, Moody’s judges “unlikely” that the government achieves its objective of reducing the deficit to 2.9% of GDP in 2027, the agency estimating that the debt could continue to increase to almost 115% of GDP in 2027, while the government thinks that it will not exceed 112% on this date.
France was not very optimistic, after a slippage in the deficit and a high debt ratio
The outlook could improve if the government “succeeds in having and implementing measures” allowing a significant reduction in debt, explains Moody’s. But the outlook and the rating itself could deteriorate in the future if the debt situation deteriorates more in France than in its “peers”.
France’s public deficit has slipped sharply to 5.5% of GDP in 2023 instead of 4.9% hoped for, and with 110.6% of GDP debt, it has the third highest debt ratio in the world. EU after Greece and Italy.
The ratings assigned by the two agencies still classify the country’s debt as “high quality”. France lost its triple A in 2012, marking the safest sovereign debts, like that of Germany currently.
