The French Minister of Economy and Finance, Bruno Le Maire, near Le Havre, France, on March 29, 2024. On Friday, April 26, both Moody’s and Fitch rating agencies announced their spring ratings on French sovereign debt, with both agencies maintaining France’s sovereign rating unchanged. Moody’s kept the rating at “Aa2” with a stable outlook, citing a very low risk of default despite the recent deterioration of the country’s public finances. Fitch, which had downgraded the rating last year, maintained it at “AA-” with a stable outlook.
French Economy Minister Bruno Le Maire acknowledged the verdicts of the two agencies, stating that this decision should encourage the government to redouble its efforts to restore public finances and meet the President’s goal of reducing the deficit to under 3% by 2027. These ratings come after a series of setbacks in Bercy’s forecasts. In February, the government had to lower the expected growth rate for the year from 1.4% to 1% and urgently find 10 billion euros in savings from the state budget.
The discrepancies in macroeconomic forecasts are attributed by economists to lower revenues of 21 billion euros than expected in 2023, rather than out-of-control expenses that have been contained. The agencies are also concerned about the high level of debt in France, which has surpassed 3 trillion euros and now stands at 110.6% of the French GDP. In April 2023, Fitch downgraded the sovereign rating of France, but this month declared it would not lower the rating unless there was a significant worsening in debt, which is considered unlikely.
Moody’s, one level above Fitch, also deems the objectives set by the government to reduce the deficit by 2027 as “ambitious and increasingly out of reach.” Despite recurrent criticisms, the agencies have shown leniency towards France in recent years by maintaining its high ratings due to the liquidity of its debt and the strength of its banks. Bruno Le Maire remains calm amidst the storm, stating that the agencies are doing their job while he focuses on restoring public accounts. The minister will face the verdict of the third agency, S&P, on May 31, just nine days before the European elections, with S&P currently rating France’s credit as AA with a negative outlook.
In conclusion, despite ongoing challenges in meeting fiscal targets, the French government is working towards restoring public finances and reducing deficits. The ratings from Moody’s and Fitch reflect the concerns about the country’s debt levels and the need for more stringent fiscal policies. The government’s commitment to financial stability and the resilience of the French economy have played a crucial role in maintaining favorable ratings from international agencies. The coming months will be critical as France navigates its economic challenges and works towards meeting its fiscal targets.
