The Fitch rating agency maintained, Friday, March 14, the sovereign note “AA-” of France, which it had accompanied in October with a “negative perspective”. This threat of lowering did not materialize this time. Fitch observes that, despite its “budget skid” of 2024 (the public deficit went from 4.4 % of GDP in 2023 to 6 % of GDP), France retains a “vast and diverse” economy, with “strong and effective institutions”.
The rating agency notes, however, that the public deficit remains at a high level and that its reduction remains difficult due to political uncertainty and the absence of a majority of the Bayrou government in the National Assembly. The Ministry of the French Economy immediately “noted” of the Fitch decision “to confirm the French rating to AA−, testifying to the very high quality of the French signature, and to maintain its negative perspective”.
“The government, writes Bercy in a press release, is determined to continue the implementation of its public finance consolidation trajectory initiated by the 2025 finance law and to register it. The Aa- note designates a debt of “good quality”. A lowering would have dropped France, “upper average”, with the risk of interest rate on the higher markets and an annual debt burden which ends up becoming the first budget of the nation, before education.
The three major agencies, S&P, Fitch and Moody’s, now classify France in the same way, Moody’s, however retaining a stable perspective. Fitch provides for a public deficit at 5.5 % of GDP this year and not 5.4 % as hoped for by the government, and growth at 0.6 % (0.9 % for the government). “This decrease is mainly explained by the risks of rise in international protectionism and slowdown in growth in Germany, the first trading partner in France,” she explains. US President Donald Trump continues to shake up threats to increase American customs tariffs since returning to the White House in January.
Defense and aeronautics
On Thursday, he said he was ready to bring rights to European alcohols 200 % if Brussels did not abandon the idea of taxing bourbon at 50 %. A news that would be “particularly worrying” for France, according to Sylvain Bersinger, Asterès chief economist, because she is a large producer of alcohol. Fitch nevertheless considers that the impact of these negative points “is somewhat mitigated by the increase in European defense spending, which will benefit the French sector of Defense and Aeronautics”.
The EU will indeed massively increase its deterrent capacity in the face of Russia, the aims of American foreign policy having become more uncertain since January. Fitch also notes that political uncertainty in France “decreased after the approval of the 2025 budget”. “But the confidence of companies and households remains weak,” she observes.
The threat of future degradation is still there. Fitch enamels his note of observations according to which the French financial situation is worse than that of his peers classified “AA”. “The inability to implement a credible medium-term budgetary consolidation plan, for example due to political opposition or social pressures, which would lead to debt stabilization in the medium term”, instead of a decrease, would be a factor of degradation, she warns. The debt represented 113.7 % of GDP at the end of the third quarter. Fitch anticipates it above 120 % of GDP at the end of 2028.