Citi expects Fitch to cut France’s credit rating to A+

Published 17/03/2025, 10:14
Citi expects Fitch to cut France’s credit rating to A+

Investing.com -- Fitch Ratings has decided to keep France’s sovereign credit rating unchanged at AA-, disregarding its Sovereign Rating Model (SRM) that indicates an A+ score.

The SRM rating typically serves as the initial point for the analysis. However, Fitch’s sovereign rating committee considers this A+ rating as a potential temporary or unsustainable deterioration and has chosen to start the analysis with AA- instead.

In the ’Qualitative Overlay’ phase of the process, where the committee manually adjusts the SRM rating, Fitch added an upward adjustment for the macroeconomic environment, stating that the variability in the GDP is artificially high due to the pandemic’s impact on the data history.

A downward adjustment was made to reflect the high and continually increasing government debt-to-GDP ratio. These adjustments resulted in maintaining the overall rating at AA-.

The rating agency also kept the negative outlook in place. The decision highlights the fiscal slippage primarily caused by high expenditure growth that occurred despite the phasing-out of crisis-related spending.

Fitch also pointed to the revised deficit target under the Bayrou government and the temporary, revenue-focused nature of the consolidation efforts, similar to S&P’s observation two weeks prior. Consequently, Fitch predicts significant fiscal deficits in the coming years, with 5.5%, 5.6%, and 5.4% of GDP for the years 2025-27 respectively.

Fitch has also revised its growth forecasts downward: from 1.2% to 0.6% for 2025 and from 1.3% to 0.9% for 2026.

Citi commented on the decision, stating, "We still expect an eventual downgrade to A+ over the next year or so. Friday’s decision to leave the rating unchanged was in line with our base case, though by no means a foregone conclusion. We expect Fitch to lower the rating in one of the upcoming reviews."

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.