The French government’s deficit targets “unambitious” and “increasingly out of reach”

Europe 1 with AFP 5:56 p.m., April 2, 2024

The Fitch rating agency estimates Tuesday that the French government's deficit reduction objectives are "unambitious" and "increasingly out of reach", without seeming to announce a further downgrade of France's sovereign rating.

In this comment, Fitch, which had lowered the French rating from AA to AA - with a stable outlook in April 2023 - rating confirmed in October - considers in fact that "any other negative rating action would depend on a further significant worsening of the public debt, which we consider improbable. Fitch is due to publish its new assessment of France on April 26.

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In this commentary, Fitch nevertheless recalls that France's public deficit stood at 5.5% of GDP in 2025, "largely exceeding" the government's estimates (4.9%) and that of the agency itself. same (4.9% in October).

Public debt slightly falling

It notes, however, that, "despite a larger deficit than expected, the public debt ratio decreased slightly, from 111.9% of GDP in 2022 to 110.6%" last year, "reflecting nominal growth solid GDP.

According to Fitch, this level, "the second highest among sovereign states in category AA", should "gradually increase to reach almost 113% of GDP by the end of 2025".

The agency notes that the government's medium-term budgetary plan "aims to slowly consolidate public finances, with the aim being to comply with the deficit criterion of 3% of EU GDP by 2027 only and to achieve to a balanced budget by 2032. But “even these unambitious goals seem increasingly out of reach,” she emphasizes.

Several slip-ups on the part of the government in 2023

She estimates that "the deficit will reduce more slowly than in the government's December projections and ours." In March, she recalls, we raised our deficit forecasts for 2024 to 5.1% of GDP (instead of 4.6%) and those for 2025 to 4.4% (instead of 4.2%). %), in anticipation of weaker budgetary results for 2023. Fitch also lowered its forecast for French GDP growth from 1% to 0.8% in 2024, compared to 1% anticipated by the government.

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The agency believes that the 2023 slippage “highlights the difficulties facing the French government in a context of low economic growth and a difficult domestic political environment”.

10 billion euros in “emergency savings” according to the agency

She estimates that in addition to the 10 billion euros of "emergency savings" announced in February for 2024, "additional budgetary measures would probably be necessary to meet the government's objectives of 4.4% in 2024 and to bring back the deficit to 2.7% by 2027.

For her, “the internal political situation remains delicate”. She recalls that President Emmanuel Macron "does not have an absolute majority in parliament" in this five-year term, and that his government "had to rely on article 49.3 of the Constitution" on numerous occasions to pass without a vote previous budgets or the pension reform last year.