Moody’s maintains France’s Aa2 rating and outlook on its debt

2023-10-20 22:02:00

The verdict was eagerly awaited. It is the same as before for France. The rating agency Moody’s has decided to maintain the Aa2 rating with a stable outlook on the French state’s debt. Moody’s is the first agency to look at the French rating again this year, before Fitch on October 27 and Standard & Poor’s (S&P) on December 1.

Good news after Fitch’s first warning shot

The fact that France escaped a further downgrade of its rating appears to be good news. Although it had few consequences on the markets, the lowering of France’s financial rating by Fitch to ” AA –» with a perspective « stable » last April was seen as a negative signal after several years of increasing public debt and the rise in key rates.

Fitch, for his part, pointed out “ large budget deficits and modest progress » concerning their reduction, after three years of abundant public spending intended to cushion the shock of Covid and inflation, and social tensions around pension reform. The agency also attacked the method used by the government to pass the contested pension reform.

16 billion euros in savings, in theory

A few weeks later, France also narrowly escaped a downward revision of the rating “ AA » attributed by S&P, considered the most influential of the three. But S&P had not touched the prospect either negative ”, which means that a lowering of the rating is possible in the future. S&P had in fact noted “ risks » relating to the execution of budgetary objectives, such as “ the absence of an absolute majority » in Parliament.

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Rating agencies: what should we expect for France’s economic policy?

While the debt has exceeded 3,000 billion euros and the deficit is largely outside the European charts, the draft Budget 2024 provides for at least 16 billion euros in savings resulting mainly from the end of measures exceptional measures, such as the tariff shield for electricity.

But some economic projections are considered optimistic by some economists and organizations. The ministry is banking on economic growth of 1% this year, then 1.4% in 2024. It plans to reduce the public deficit from 4.9% of GDP in 2023 to 4.4% in 2024, then to 2. 7% in 2027. Debt would remain stable at 109.7% of GDP in 2024, reaching 108.1% at the end of the five-year term.

(with AFP)