Summary: On 12 September, the credit rating agency Fitch downgraded France’s credit rating from ‘AA-’ to ‘A+’ with a stable outlook, citing a rising budget deficit and political uncertainty as key factors hindering fiscal consolidation. This downgrade marks France’s lowest credit score on record, reflecting a shift from very high credit quality to high credit quality. The decision came shortly after Sébastien Lecornu was appointed Prime Minister, following the removal of former Prime Minister François Bayrou from office after his government lost a parliamentary vote of confidence on proposed budget measures.
Background: Since 2022, France has experienced political instability, with President Emmanuel Macron’s party losing its legislative majority. Snap elections in 2024 resulted in a hung parliament, leaving Macron’s party to lead a minority government. This has made it challenging to pass budgetary reforms and other key policies. In addition to political challenges, France’s economy has been affected by the lasting impact of the COVID-19 pandemic and the energy crisis triggered by the Russia–Ukraine war.
Implications:
- Fitch projects that France’s fiscal deficit will reach 5.5 percent of GDP in 2025, lower than in 2024 but still significantly above the projected eurozone median of 2.7 percent.
- French public debt is forecast to rise to 121 percent of GDP by 2027, up from 113.2 percent in 2024, with no signs of stabilization in the near term.
- The downgrade may weaken investor confidence, potentially raising the government’s borrowing costs.
Outlook: Fitch’s downgrade underscores France’s mounting economic and political challenges. With uncertainty surrounding the budget and broader reform agenda amid political fragmentation, the country’s debt ratio is expected to remain high. Additional downgrades could follow depending on fiscal performance and debt market developments. The downgrade places increased pressure on Prime Minister Lecornu and President Macron’s minority government to design and pass a new budget and implement reforms aimed at stabilizing the economy. Businesses may face the effects of budget adjustments, tax changes, or other policy shifts, and should continue to monitor developments closely.
