The rating agency Fitch lowered this Friday from stable to negative the prospect of France, fearing a deterioration in public finances and the economy this year, but without touching for the moment its “AA” rating.
“The lowering of the outlook reflects the substantial deterioration expected this year in public finances and economic activity due to the Covid-19 epidemic“, the agency said in a statement. “The deterioration in the parameters of public finances will occur in a context of an already high debt level (…), limited progress in fiscal consolidation since the financial crisis (of 2008) and moderate economic growth”, she added. Fitch pointed out, however, that “The parameters of the banking sector suggest that French banks are well positioned to face the pressure of the coronavirus crisis on assets”.
After this decision, Fitch has two years to possibly lower the rating of France, which influences the conditions under which the country can borrow money on the financial markets.
Moody’s and S&P also maintained the rating of France
In mid-February, the financial rating agency Moody’s also lowered the outlook for France, but by bringing it down from “Positive” at “stable”, due to the less effective than expected fiscal measures to stem the widening of the public deficit. It had also left unchanged its rating of France (“Aa2”). At the beginning of April, the S&P agency, for its part, had maintained its rating of France at “AA”, without however touching its perspective, which it had maintained “stable”.
The last French amending budget for 2020, approved at the end of April, includes a forecast of contraction in gross domestic product (GDP) of 8%, a public deficit of 9.1% and a public debt of 115% of GDP. Very far from European rules which cap the deficit at 3% and the debt at 60% of GDP. “We are in the amount of deficit and debt never reached since the Second World War”, recognized the Minister of Public Accounts Gérald Darmanin at the time, however, “France continues to be able to borrow under satisfactory conditions (…) with low rates”.