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PARIS (Reuters) -The rating agency Fitch Ratings maintained France’s credit rating at “AA-” on Friday but lowered its outlook to negative due to the slippage in public accounts.
The French government, faced with a soaring public deficit beyond 6% of gross domestic product in 2024, presented on Thursday a draft budget for 2025 which provides for massive savings of 41.3 billion euros and 19.3 billion euros in additional revenue via a significant increase in taxes.
The Minister of Economy and Finance, Antoine Armand, took note of the agency’s decision, which “underlines the strength of our vast and diversified economy, the effectiveness of our institutions and our history of macro stability. financial”.
“The draft budget for 2025 that we have just presented reflects the government’s determination to straighten out the trajectory of public finances and control France’s debt,” he assures.
Fitch lowered France’s credit rating to “AA-” in April 2023, estimating that the political and social context could complicate the reduction of public spending.
In its note published Friday, the agency estimates that fiscal policy risks have increased since its previous note in April 2024, in a political landscape fragmented by the dissolution of the National Assembly in June which led to the constitution of a fragile minority government.
“We now expect larger budget deficits which will lead to a sharp increase in public debt up to 118.5% of GDP in 2028,” she wrote.
Noting the commitments of Michel Barnier’s government in its finance bill, the agency’s analysts say they have “cautiously” included only part of the measures due to political uncertainties.
The public deficit is forecast at 6.1% of GDP this year, well above the forecast of 5.1% published by Fitch last spring.
“We have raised our budget deficit forecasts for 2025 and 2026 to 5.4% of GDP,” says Fitch, which says it does not expect to see the government reduce the deficit to less than 3% by 2029, its new medium-term objective.
On October 25, it will be the turn of the Moody’s agency to update France’s credit rating, before S&P Global on November 29.
Moody’s maintained its rating at “Aa2” last April while S&P lowered it to “AA-” in May.
(Jean-Stéphane Brosse, with the contribution of Blandine Hénault)
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