Fitch Ratings has maintained France's sovereign credit rating at A+, but lowered its outlook from “stable“ to “negative“. The agency cited weaker growth, higher government borrowing costs and a widening budget deficit as factors that are worsening the prospects for debt stabilization.
“The political debate shaping up ahead of the presidential election has not significantly strengthened Fitch's confidence that a sustained deficit reduction that would lead to debt stabilization is possible,“ the rating agency said.
Debt expected to continue to rise
Fitch forecasts that the government debt-to-gross domestic product ratio will rise from 115.7% in 2025 to around 124% in 2028. This is 1.3 percentage points above the agency's August estimate. Fitch expects the budget deficit to reach 5.5% of GDP in 2027, meaning it will not shrink next year, the agency said.
The decision comes amid a sharp rise in the cost of financing for the French state. The yield on 10-year bonds exceeded 5.14% in October, reaching its highest level since 2002. Higher interest rates increase debt servicing costs and limit the government's ability to support the economy in the event of new shocks.
Weak growth and political uncertainty
The French economy shrank by 0.1% in the third quarter of 2026, despite expectations of weak growth. Inflation accelerated to 3.4% year-on-year in October from 3% in September, preliminary data from France's National Institute of Statistics and Economic Research showed.
According to Fitch, a highly fragmented political landscape and social tensions are making it difficult to negotiate and implement a credible medium-term strategy to curb the deficit. Prime Minister Sébastien Le Corneille's government is trying to secure the adoption of a 2027 budget but lacks a stable majority in parliament.
The downgrade does not mean an immediate downgrade, but it does indicate an increased risk of such a move. France is already rated lower by Moody's, which maintained its rating at Aa3 on October 23 but also maintained a negative outlook. Fitch points out that France's large and diversified economic sector, strong institutions and membership of the eurozone continue to support the A+ rating.
Sources: uk.marketscreener.com, axios.com, lemonde.fr