S&P lowers France’s long term ratings to ‘AA-‘ on budgetary concerns (NYSEARCA:EWQ)

S&P Global Ratings lowered its long-term ratings on France to ‘AA-‘ from ‘AA’ as the country’s budget position is expected to deteriorate in the coming years with a rise in government debt.

“The downgrade reflects our projection that, contrary to our previous expectations, France’s general government debt as a share of GDP will increase as a result of larger-than-expected budget deficits over 2023-2027. We now expect general government debt will reach 112.1% of GDP in 2027, up from 109.0% in 2023,” the ratings agency said on Friday.

S&P projects France’s general government interest payments to increase to 5% of general government revenue in 2027 from 3.3% in 2023. “We expect the French economy will pick up from the second half of 2024 and expand by an annual average of 1.4% in 2025-2027.”

The inflation rate in France decreased to 2.20% in April from 2.30% in March 2024, while the unemployment rate was 7.5% in the first quarter of 2024.

The ratings agency also mentioned that political fragmentation adds to uncertainty regarding the government’s ability to continue implementing policies that increase economic growth potential and address budgetary imbalances.

S&P affirmed France’s short-term ratings at ‘A-1+’ with outlook at stable.