Fitch affirms France's debt rating at 'A+' amid rising interest rates

Fitch Ratings has maintained France's long-term debt rating at 'A+' with a stable outlook. This decision comes at a time when market interest rates have reached their highest levels since 2008, a period marked by financial crisis. The rating agency's assessment was released ahead of a significant budget debate in France.

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The fragmentation of political power limits policies and constitutes a key weakness for the rating, as it reduces the authorities' ability to implement lasting fiscal adjustments and limits policy predictability.

Despite affirming the rating, which signifies a medium-to-high level of credit quality, Fitch pointed out that France's deficit reduction over the past two years has been slower than anticipated. The agency forecasts the deficit to rise to 5.2% of GDP this year and 5.5% in 2027, before a slight decrease to 5.2% in 2028. These figures are higher than Fitch's previous projections in March, attributed to lower growth, increased interest expenses, and additional defense commitments.

Fitch does not expect any improvement in the primary deficit in 2027, largely due to the upcoming presidential elections. Modest reductions are anticipated in subsequent years, but these are expected to be largely offset by higher interest payments. Consequently, French public debt is projected to increase from its current 117% of GDP to 122.7% by 2028, a figure 1.7 percentage points higher than previously estimated by the agency.

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The French economy is large, diversified, and prosperous, which supports the maintenance of its rating.

The agency identified political fragmentation in France as a key weakness, stating it limits policy-making capacity and hinders the implementation of durable fiscal adjustments. Fitch believes this fragmentation reduces policy predictability and is likely to persist beyond the upcoming elections, continuing to impede deficit reduction efforts. Nevertheless, Fitch acknowledged France's economy as "large, diversified, and prosperous," which supports the maintenance of its current rating. The agency anticipates that economic growth will remain moderate, projecting GDP growth of 0.8% this year and 1.1% in both 2027 and 2028, though it noted downward revisions to earlier data suggest downside risks to these forecasts.

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Economic growth will remain moderate.