“Political deadlock and polarization have intensified in France following the 2024 snap elections and collapse of the Barnier government over the 2025 budget bill,” Fitch said. “The current center-right coalition led by Prime Minister Bayrou lacks an absolute majority in a highly fragmented National Assembly, complicating economic and fiscal policy making,” it added.
The rating agency said new French elections “will likely be called” in the second half of this year. “The outcome and economic policy implications are highly uncertain,” it said.
“An increase in defense spending from the current 2.1 percent of GDP will intensify fiscal pressures,” Fitch added.
The government’s deficit plans are based on the forecast that the French economy will grow by 0.9 percent this year. But earlier this week, France’s central bank revised downward its 2025 growth estimate to 0.7 percent, raising doubts on whether the French government will manage to deliver on its deficit reduction plan.
In its statment Friday, Fitch slashed its growth forecast for France and now sees expansion of just 0.6 percent this year, compared with an earlier prediction of 1.2 percent.
Fitch last October lowered the outlook on France’s rating to “negative” from “stable,” citing the country’s spiraling debt.
