Fitch Maintains France's A+ Credit Rating Amid Economic Stagnation and Rising Debt Concerns

Fitch Ratings has upheld France's credit rating at A+ with a stable outlook, despite mounting challenges in the country's economic growth and public finances as it approaches the crucial 2027 budget. The rating agency highlighted France's fragile fiscal position, estimating the public deficit will remain high at 5.2% of GDP in 2026, increase to 5.5% in 2027, and stabilize to 5.2% in 2028. Meanwhile, public debt is projected to escalate to 122.7% of GDP by 2028, up from 115.7% in 2025, underscoring concerns about fiscal sustainability if current policies persist.

Economic growth has notably weakened, with the National Institute of Statistics and Economic Studies (Insee) reporting zero GDP growth in the second quarter of 2026, a downward revision from the earlier estimate of 0.2%. The first quarter even saw a 0.2% contraction, leading to a cumulative 0.2% decline in the first half of the year. This stagnation, coupled with political fragmentation and uncertainties in the 2027 budget vote, has dampened investor confidence. Inflation has risen to 2.4% in August, further pressuring public finances.

Fitch cautioned that without significant budget adjustments, France's deficit could approach 7% of GDP by 2030, underscoring the need for sustainable fiscal reforms. Prime Minister Sébastien Lecornu faces a challenging political environment as he prepares the 2027 budget amid a fragmented parliament and mounting debt costs—the highest borrowing rates in nearly two decades. These rising costs have contributed to growing public debate, with opposition figures like Jean-Luc Mélenchon proposing partial debt cancellations, fueling discord among political factions.

Economic experts, including IESEG's Eric Dor, have noted valid reasons for Fitch's vigilance and potential downgrade considerations. Additionally, Moody's and S&P Global Ratings are scheduled to review France's credit rating later this year, on October 23 and November 27 respectively.

As the government prepares for the pivotal 2027 budget, scrutiny from rating agencies and the fiscal outlook places France's long-term economic trajectory under close watch. Fitch's stable outlook signals cautious optimism but acknowledges the significant challenges ahead.