2024-10-19 08:32:00
Scope Ratings lowered France‘s rating to “AA-, from AA” previously, but nevertheless revised “the outlook to “stable”, from “negative” previously”.
The rating agency Scope Ratings downgraded France’s rating by one notch on Friday, due to the slippage in public finances and “difficult political prospects”but the place in perspective «stable» specifies the press release.
Scope Ratings lowered France’s rating to “AA-, against AA” previously, but has however revised “the outlook is “stable”, compared to “negative” previously”.notably thanks to its “favorable debt profile, excellent access to markets and a robust banking sector”.
The decision to downgrade France’s rating was motivated “by the continued deterioration of public finances, characterized by a higher budget deficit than expected and a regular increase in public debt”explains Scope Ratings.
“Difficult political context”
Faced with a public deficit of 6.1% of gross domestic product (GDP) in 2024, well above the European ceiling of 3%, the French government has set itself the objective of reducing it to 5% in 2025, which represents an effort of several tens of billions of euros, then below 3% in 2029.
But the rating agency Scope Ratings does not believe in it, despite the savings plan “ambitious of 60 billion euros (around 2% of GDP)”.
“Moderate growth prospects and uncertainties about its implementation, given the difficult political context, represent significant risks”the government does not have a majority in the National Assembly, she explains.
Thus, for 2025, Scope forecasts that France’s public deficit will stand at 5.2% of GDP and that it should be “3.8% of GDP by 2029”.
The rating agency also estimates that the French public debt ratio should “reach 119% of GDP by 2029, compared to 97.4% in 2019”.
“Moreover, the planned fiscal consolidation, based on spending cuts, will likely be undermined by increasing pressures on military spending, costs linked to population aging and energy investments, as well as by increased payments of interests”estimates Scope Ratings.
The previous week, the rating agency Fitch left its rating unchanged, still granting a «AA-» to France, which is the equivalent of a 17/20 (i.e. a 17 on a scale of 20 rating levels), but has for its part accompanied it with a “negative outlook”which means that it plans to downgrade this rating in the future.
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