Fitch decided. The rating agency maintained France’s rating at “AA-” this Friday evening, but placed it under negative outlook. A decision which comes the day after the presentation of a draft 2025 budget which provides for an effort of 60 billion euros to contain the soaring deficit.
Following this announcement, the government declared via the Ministry of the Economy “to take note” of the negative outlook on France’s rating. “I note that the agency underlines the strength of our economy, vast and diversified, the effectiveness of our institutions and our history of macro-financial stability,” reacted the Minister of the Economy, Antoine Armand.
“Fiscal policy risks have increased since our last review,” explains Fitch, whose previous rating published on France dates back to April. “This year’s expected budget slippage places France in a more unfavorable situation, and we now expect larger budget deficits, which will lead to a sharp increase in public debt to reach 118.5% of GDP by 2028,” writes Fitch in its press release.
And while the government intends to reduce the French public deficit to 5% of GDP from 2025 then below 3% in 2029, the Fitch agency does not believe it: it has raised its public deficit forecasts for France in 2025 and 2026 “at 5.4% of GDP”. “We do not expect the government to meet its revised medium-term deficit forecast to bring the deficit below 3% of GDP by 2029,” she explains.
A decline in growth to be expected?
To prove its goodwill and avoid the risk of a “financial crisis”, in the words of Prime Minister Michel Barnier, the government presented on Thursday its finance bill for 2025 providing for 60 billion euros in efforts in the form of reductions. spending and tax increases in order to reduce the public deficit to 5%.
The Minister of the Economy, Antoine Armand, said this Friday that he had taken into account the “attentive look” of the agencies in drawing up the budget. “We are not making a policy for rating agencies, but we are obviously looking at what the international climate is and how the institutes view France,” he explained on France 2. “And this view is attentive” because “faced with the colossal debt we have, faced with the deficits which continue to slip away, we must take measures”.
“Relatively unprecedented” in scale according to the president of the High Council of Public Finances (HCFP) Pierre Moscovici, who analyzed its macroeconomic contours, this potion mixing tax increases and spending cuts could put France back on less slippery rails. after a year 2024 that he described as “black” this Thursday. But it also risks, according to him and economists, weighing on growth next year, currently anticipated at 1.1% by the government, and complicating the reduction of deficits in the future.
