Fitch Cuts France’s Credit Rating Outlook to ‘Negative’... Debt-to-GDP Ratio Seen at 124% in 2028

[Financial News] International credit rating agency Fitch maintained France’s long-term credit rating at A+. However, it lowered the outlook from “stable” to “negative.” Fitch said the already fragile debt structure had deteriorated further as slowing growth, rising borrowing costs and a widening fiscal deficit converged.
According to investment banking (IB) industry sources on the 31st, Fitch released its assessment on the 30th (local time). A negative outlook is a warning that a rating downgrade could follow if risk factors are not resolved. Fitch said the move fell outside its regular review schedule. It said it would reassess France’s rating by the end of February 2027 at the latest, citing significant changes in creditworthiness since its August review that made it difficult to wait until the next scheduled assessment.
Fitch forecast that France’s government debt-to-GDP ratio would rise from 115.7% in 2025 to about 124% in 2028, 1.3 percentage points above its August forecast of 122.7%. It also estimated that the cumulative fiscal adjustment needed to stabilize the debt had grown from 3.0% of GDP to around 3.5%. Fitch said, “France’s debt ratio is about twice the median for A-rated countries,” adding that “a significant portion of public spending is politically difficult to cut, while the tax burden is already high, leaving little room to raise additional revenue.”
Market unease first showed up in government bond yields. The yield on French 10-year government bonds topped 5% on the 21st, the first time in about 24 years, since July 2002. The following day, it surged to as high as 5.14% during intraday trading. According to Fitch, the 10-year yield rose from 4.1% at its August review to 4.9% at the end of October. The spread over German government bonds (Bunds) widened at one point to 174 basis points (1 bp = 0.01 percentage point) before narrowing to the 150-basis-point range. Fitch said the much larger yield increase than in other major economies “shows that the market is correspondingly more sensitive to shifts in confidence.” Interest costs are projected to rise from 2.5% of GDP in 2025 to 3.3% in 2028, more than twice the 1.5% median for countries in the same rating category.
Economic indicators are also weak. According to France’s National Institute of Statistics and Economic Studies (INSEE), GDP fell 0.1% in the third quarter from the previous quarter, the opposite of market expectations for 0.1% growth. A 0.6% decline in business investment in equipment drove the contraction. After shrinking 0.2% in the first quarter and recording no growth in the second, the French economy has yet to post positive growth this year. Fitch had previously cut its growth forecasts for this year and next to 0.5% and 0.9%, respectively, in its September Global Economic Outlook; the latest figures, it said, have increased the downside risks.
The political landscape is seen as the biggest obstacle to fiscal consolidation. France will elect a successor to President Emmanuel Macron next April or May. Far-right and far-left candidates are leading in opinion polls. Fitch said the political landscape was “deeply fragmented, making it difficult to agree on a credible fiscal strategy.” It also cited as a burden the spread of protests that began with high school students calling for better educational conditions and grew into nationwide unrest over public services and the cost of living.
The government’s 2027 budget proposal includes spending cuts and other measures totaling €43 billion. It aims to reduce the fiscal deficit from 5.4% of GDP this year to 5.0% next year. The government also released its own estimate that the deficit would reach 6.4% next year without additional measures. Fitch judged that the budget was likely to pass, even without a parliamentary majority, through the use of constitutional mechanisms. However, reflecting slower growth and concessions during negotiations, it forecast next year’s deficit at 5.5%. Finance Minister Roland Lescure said, “This shows the urgency of passing a responsible budget before the end of the year,” and called on politicians to cooperate. He had previously said he was prepared to use any means necessary to secure the budget.
Attention is also focused on the moves of other credit rating agencies. Moody’s maintained France’s rating at Aa3 with a “negative” outlook on the 23rd. S&P Global has assigned it an A+ rating with a “stable” outlook and is due to review it on the 27th of next month. An investment banking industry source said, “With Fitch also issuing a negative outlook, French government bond spreads could widen again depending on the S&P result.”
Fitch said France’s large, high-income economy, strong institutions, eurozone membership and resilient banking sector continue to support its rating. It cited net external debt of 40% of GDP—the highest among countries in the same rating category—as a weakness.

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