Scope Ratings reviews its ratings either yearly, or at least every six months in the case of sovereigns, sub-sovereigns and supranational organisations. Scope performs monitoring reviews to determine whether outstanding ratings remain proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodology/ies, latest developments, and the rated entity’s financial and operational aspects relative to similarly-rated peers; or through targeted reviews of an individual credit. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the French Republic (AA/Stable; S-1+/Stable) on 25 May 2021. The review resulted in no action on the assigned ratings. This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

Key rating factors

France’s AA/Stable rating is supported by the French Republic’s status as a core euro area member, its large and diversified economy, a recent track record of structural reforms and high public investment underpinning its moderate growth potential, and a favourable debt structure. At the same time, high public debt levels and labour market challenges remain structural weaknesses. The Covid health crisis hit the French economy in 2020 more severely than most euro area peers, leading to widening fiscal deficits in 2020 and 2021, as the extensive fiscal stimulus measures and increased ECB support absorbed the shock to the economy’s growth potential and limited the cost of higher public debt. Longer term, the main credit challenges relate to: i) the implementation of additional structural reforms to raise productivity and employment to increase the economy’s medium-term growth potential; and ii) a lack of sustained fiscal consolidation via current spending reduction to place the debt-to-GDP ratio on a firm downward trajectory once the economy returns to pre-Covid 19 levels.

The Stable Outlook reflects Scope’s view that risks remain broadly balanced at this stage.

The ratings/outlooks could be upgraded if: i) the medium-term growth outlook improved, underpinned by the effective implementation of structural reforms; and/or ii) sustained fiscal consolidation results in a firm downward trajectory of the debt-to-GDP ratio. The ratings/outlooks could be downgraded if: i) the country’s medium-term growth outlook weakened, for example, due to a fading commitment and/or capacity to implement structural reforms; and/or ii) the fiscal outlook deteriorated further, resulting in a sustained increase of public debt levels over the coming years.

For the updated scorecards accompanying this review, click here.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Sovereign Ratings, 9 October 2020) is available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Alvise Lennkh, Executive Director.

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