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Investing.com -- S&P Global Ratings has downgraded France’s sovereign credit ratings to ’A+/A-1’ from ’AA-/A-1+’ on Friday, citing heightened risks to the country’s budgetary consolidation efforts. The outlook is stable.
The ratings agency pointed to political instability as a key factor impeding progress on fiscal consolidation. France has experienced unprecedented political fragmentation since May 2022, with six prime ministers in three years and two hung parliaments under President Emmanuel Macron.
The downgrade comes just days after newly reappointed Prime Minister Sébastien Lecornu submitted a 2026 budget proposal to the National Assembly on October 14. Parliament has until December 23 to finalize the legislation.
S&P projects France’s government debt will reach 121% of GDP by the end of 2028, up from 112% at the end of 2024. The agency noted that uncertainty around public finances remains elevated ahead of the 2027 presidential elections, highlighting the government’s decision to suspend the pension reform that was introduced in 2023.
The political uncertainty is affecting the French economy by dampening investment activity and private consumption. S&P forecasts real economic growth of just 0.7% in 2025, with a modest recovery to about 1.0% in 2026.
Despite spending discipline at the central government level and improved revenue collection this year, S&P expects France’s budget deficits to remain elevated over the next three years. The agency believes the government will meet its 2025 general government budget deficit target of 5.4% of GDP, with a primary deficit of 3% of GDP.
For 2026, S&P projects a slight improvement in the general government budget deficit to 5.3% of GDP. The draft budget includes proposals to deindex pensions and other social transfers next year and reduce tax breaks on pensions, which could improve the primary budget deficit to 2.4% of GDP.
The stable outlook balances rising government debt and weak political consensus against France’s credit strengths, including its wealthy and balanced economy, high private savings, large financial sector, and euro area membership.
S&P could lower the ratings further if France’s budgetary position deteriorates beyond forecasts or if economic growth prospects worsen significantly. Conversely, a faster-than-expected narrowing of the budget deficit and accelerated economic growth could lead to an upgrade.