Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or 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 by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the French Republic (long-term local- and foreign-currency issuer and senior unsecured debt ratings: AA/Negative Outlook; short-term local- and foreign-currency issuer ratings: S-1+/Stable Outlook) on 26 April 2024.

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

For the updated rating report accompanying this review, click here.

France’s long-term ratings of AA are underpinned by multiple credit strengths, including i) the country’s large and diversified economy driven by high value-added sectors; ii) its core euro area membership reflected in its role as an EU founding member and leading guarantor of the European institutional framework; iii) its favourable debt profile and excellent capital market access; and iv) its sound and resilient banking sector.

France’s ratings are challenged by i) weakening public finances, including a high public debt-to-GDP ratio, sustained primary fiscal deficits and an uneven track record of fiscal consolidation; ii) growing political fragmentation and polarisation, potentially limiting the government’s ability to address structural pressures through ambitious reforms; and iii) a moderate growth potential, constrained by low productivity growth and persistent labour market bottlenecks.

Real GDP growth declined to 0.9% in 2023, down from 2.5% in 2022, as persistent pressures on real wages and tighter financing conditions weighed on private demand, despite government support measures and resilient labour markets. Scope projects an increase in GDP growth to 1.3% in 2025, up from 0.8% in 2024, to be driven by the recovery in household consumption and business investment, underpinned by declining inflation, pent-up demand, and slowly loosening funding conditions.

Sluggish economic growth and inflation-related spending weighed on the fiscal deficit, which widened to 5.5% of GDP in 2023, up from 4.8% in 2022. Scope projects a gradual fiscal consolidation, with the headline deficit narrowing down to 5.1% of GDP in 2024, and steadily declining to 3.2% of GDP by 2029. Slower than expected consolidation reflects sustained primary spending pressures, a rising interest burden, and constrained revenue growth. The debt-to-GDP ratio is projected to increase moderately from 110.6% of GDP in 2023 to 111.8% in 2024, and stabilise around 113.0% between 2025 and 2029.

Despite the less favourable fiscal trajectory displayed in the stability programme 2024-27, the government is committed to reduce the deficit below 3% of GDP and public debt to around 112% of GDP by 2027. Notwithstanding planned savings of EUR 20bn in 2024 (about 0.7% of GDP) and close to EUR 20bn in 2025, the government expects this ambitious fiscal consolidation effort to be complemented by additional spending cuts resulting from the ongoing spending reviews and by higher fiscal receipts linked to a stronger economic momentum. Nonetheless, a fragmented political landscape and heighted political polarisation could limit the government’s ability to deliver on its fiscal consolidation plan and supply side reform agenda.

The Negative Outlook reflects Scope’s opinion that risks to the ratings are skewed to the downside.

The ratings could be downgraded if, individually or collectively: i) the fiscal outlook weakened, for example, via insufficient budgetary consolidation and/or a structural increase in the public debt-to-GDP trajectory; and/or ii) the growth outlook deteriorated significantly, for example, due to a weaker reform momentum and/or external shock.

Conversely, the Outlooks could be revised to Stable if, individually or collectively: i) the fiscal outlook improved, for example, via sustained budgetary consolidation and/or a structural decline in the public debt-to-GDP trajectory; and/or ii) the growth outlook improved significantly.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 29 January 2024) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Thomas Gillet, Director

© 2024 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.