PARIS ― France’s credit rating was affirmed by Fitch Ratings late Friday, though the rating agency maintained its negative outlook for the country, citing the government’s challenge of bringing down the swollen public deficit.
“Political fragmentation complicates France’s ability to implement sustainable fiscal consolidation,” Fitch wrote in a statement as it maintained its rating on France at AA-. The agency also cited “rising international protectionism” and weaker growth in Germany, France’s biggest trading partner, as risk factors.
Fitch forecast that French government debt will increase to more than 120 percent of gross domestic product by the end of 2028, higher than the agency’s previous forecast last October.
The French government led by Prime Minister François Bayrou is trying to finally rein in the country’s massive public deficit even as France and Europe brace for the economic impact of a transatlantic trade war.
After months of political turmoil, last month France belatedly adopted a budget law for 2025. The government aims to reduce the government deficit from 6.2 percent of gross domestic product in 2024 to 5.4 percent this year.
That’s still significantly above the 3 percent deficit limit imposed by the EU’s spending rules. The country is under a so-called excessive deficit procedure in Brussels for breaching the budgetary rules in 2023, but the European Commission has already given a first green light to Bayrou’s deficit-reduction efforts.
The French finance ministry said “we take note of Fitch’s decision,” adding that “reducing our deficits is a priority.”
“The French government is determined to continue implementing the public finance consolidation path initiated by the 2025 Finance Act, and to do so over the long term,” the ministry said in a statement.
‘Political challenges’
But Fitch forecast that “deficits will remain sizeable” through 2027, “given the lack of detail on medium-term fiscal consolidation and expected political challenges to getting the 2026 budget approved,” according to its statement.
“Political deadlock and polarization have intensified in France following the 2024 snap elections and collapse of the Barnier government over the 2025 budget bill,” Fitch said. “The current center-right coalition led by Prime Minister Bayrou lacks an absolute majority in a highly fragmented National Assembly, complicating economic and fiscal policy making,” it added.
The rating agency said new French elections “will likely be called” in the second half of this year. “The outcome and economic policy implications are highly uncertain,” it said.
“An increase in defense spending from the current 2.1 percent of GDP will intensify fiscal pressures,” Fitch added.
The government’s deficit plans are based on the forecast that the French economy will grow by 0.9 percent this year. But earlier this week, France’s central bank revised downward its 2025 growth estimate to 0.7 percent, raising doubts on whether the French government will manage to deliver on its deficit reduction plan.
In its statment Friday, Fitch slashed its growth forecast for France and now sees expansion of just 0.6 percent this year, compared with an earlier prediction of 1.2 percent.
Fitch last October lowered the outlook on France’s rating to “negative” from “stable,” citing the country’s spiraling debt.
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