S&P Confirms AA Rating for France, Negative Outlook Maintained
Rome, December 1st – S&P Global Ratings has confirmed France’s long-term AA rating while maintaining a negative outlook. This decision comes as a result of uncertainties surrounding France’s public finances, characterized by a high budget deficit and a substantial public debt, despite gradual reduction. The agency estimates that France’s annual real economic growth will average 1.3% from 2024 to 2026, following an estimated 0.9% in 2023.
Regarding public accounts, S&P predicts a slow decline in the deficit to 3.4% of GDP by 2026, down from 4.9% in 2023. The agency also anticipates a minimal decrease in public debt as a percentage of GDP in 2025-2026 and beyond. S&P emphasizes that the transmission of higher financing costs due to high-interest rates will be gradual, given the long-term nature of France’s public debt, with an average maturity exceeding 8.5 years. Interest payments by public administrations represent less than 5% of total public administration revenue throughout the forecast period. Public debt is expected to remain below 110% of GDP (excluding guarantees related to the European Financial Stability Facility), slowly declining from its peak of 112.8% in 2020. France’s general government debt as a percentage of GDP is the third-highest in the Euro area, following Greece and Italy, according to our estimates for 2023.
The negative outlook reflects S&P’s concerns about the risks associated with the French government’s ability to tackle its high budget deficit and reduce public debt. The agency acknowledges the progress made in reducing the deficit, but emphasizes the need for sustained efforts and structural reforms to support fiscal consolidation and economic growth.
In response to the rating confirmation with a negative outlook, the French Ministry of Finance expressed determination to continue implementing necessary structural reforms to improve public finances and strengthen the economy. An official from the Ministry emphasized, We are committed to fiscal discipline and remain focused on reducing our budget deficit and public debt. The government has implemented several measures to boost economic growth and improve the business environment, which will contribute to our long-term financial stability.
While S&P’s confirmation of France’s AA rating reflects confidence in the country’s ability to honor its financial obligations, the negative outlook signals the need for cautious monitoring. The agency’s forecasts and concerns about the challenges of fiscal discipline and reducing public debt require ongoing attention and decisive actions from the French government.
As France works towards maintaining its economic stability and implementing structural reforms, the international community will closely observe the developments and policies adopted by the government. The outcome will determine France’s future creditworthiness and its ability to create an environment conducive to sustainable economic growth and financial resilience.
In conclusion, S&P’s confirmation of France’s AA rating with a negative outlook highlights the importance of vigilant fiscal management and sustained efforts to reduce the budget deficit and public debt. While the rating acknowledges France’s progress, ongoing structural reforms are critical for ensuring long-term financial stability and fostering economic growth. As France faces these challenges, its ability to implement necessary measures and achieve its fiscal targets will significantly impact its creditworthiness and international reputation.
