Fitch maintains France’s rating at “AA-”, but with a “negative” outlook

The decision has been made. The Fitch rating agency on Friday maintained France’s rating at “AA-”, but places it under negative outlook, which means that it plans to downgrade it in the future, it indicated in a press release. During its last assessment of French finances in April – a status quo – the American agency warned of a downside risk in the event of “significant and persistent increase in debt (…) resulting from higher than expected public deficits“. However, France made brutal revisions to its deficit forecast for 2024, going from 4.4% at the end of 2023 to 5.1% in April to finally peak at 6.1% of GDP.

“Fiscal policy risks have increased since our last review”explains Fitch in its press release. “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. We “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. “Strong political fragmentation and a minority government complicate France’s ability to implement sustainable fiscal consolidation policies”indicates the rating agency.

The government “takes note”

The Minister of the Economy Antoine Armand indicated “take note” of the decision, while adding that “the agency highlights the strength of our large and diverse economy, the effectiveness of our institutions and our history of macro-financial stability.”

The government, which has just presented its 2025 finance bill (PLF), was well aware of walking on eggshells. “Any absence of clear signals of reduction in the public deficit when this budget is adopted will degrade the confidence that the markets (…) can have in our ability to finance ourselves sustainably and to have a sustainable debt”warned the Minister of Finance, Antoine Armand, on Friday during a hearing in the Senate. “We are not making a policy for rating agencies, but we are obviously looking at what the international climate is”he had admitted a little earlier.

Reduce the public deficit to 5% in 2025

To prove one’s will and avoid a risk of “financial crisis” in the words of Prime Minister Michel Barnier, the government presented on Thursday a draft budget for 2025 planning to generate 60 billion euros in savings. Efforts in the form of spending cuts and tax increases in order to reduce the public deficit to 5%. Magnitude “relatively unprecedented”, according to the president of the High Council of Public Finances (HCFP) Pierre Moscovici, who analyzed the macroeconomic contours, this potion mixing tax increases and spending cuts could put France back on less slippery rails after a year 2024 described as «noire» THURSDAY.