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 material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

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 21 February 2022.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating 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 record of structural reforms and high public investment underpinning its moderate growth potential, as well as a favourable debt structure. At the same time, high public debt levels, labour market challenges and low productivity growth remain structural weaknesses. France’s GDP growth rate surpassed consensus forecast in 2021 thanks to extensive fiscal stimulus measures and ECB support, which have absorbed the shock to the economy’s growth potential. However, lower but still large fiscal deficits continue to weigh on public debt metrics, while growing political fragmentation and polarisation constitutes a risk for France’s reform momentum. Longer term, the main credit challenges relate to: i) a lack of sustained fiscal consolidation via current spending reduction to place the debt-to-GDP ratio on a firm downward trajectory; and ii) the implementation of additional structural reforms to raise productivity and employment to increase the economy’s medium-term growth potential, despite a growing political fragmentation that can hinder effective policymaking.

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 report accompanying this review, click here.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Sovereign Ratings, 8 October 2021) 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: Thomas Gillet, Associate Director.

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