Fitch Sees French Debt Rising to 124% of GDP in 2028, Revises Outlook to Negative
Key Facts
Fitch revised its outlook on France to negative from stable on Friday and affirmed its credit rating at A+, warning that deteriorating public finances and political fragmentation are weakening prospects for stabilizing debt. The decision reflects the agency’s reduced confidence in the country’s ability to cut its deficit sustainably as the economy slows and borrowing costs rise. Fitch said the policy debate emerging ahead of the presidential election “has not materially strengthened its confidence in the prospects for a lasting deficit reduction that could lead to debt stabilization.” The outlook change raises the risk of a future downgrade but does not itself mean a rating cut. The agency forecast France’s deficit at 5.5% of GDP in 2027, citing a weaker growth assessment and the possibility of concessions in the budget.
Debt projections put the fiscal outlook at the center of Fitch’s decision: the agency sees the debt-to-GDP ratio rising to about 124% by 2028, compared with 115.7% in 2025. Data from the National Institute of Statistics and Economic Studies showed public debt at 119.0% of GDP at the end of the second quarter of 2026, up from 117.5% in the first quarter. On an annual basis, the general government deficit was 5.1% of GDP in 2025, down from 5.8% in 2024. But public debt rose to 115.6% of GDP at the end of 2025, from 112.6% at the end of 2024. Fitch estimates that government interest payments will rise to 3.3% of GDP in 2028, from 2.5% in 2025, adding to the budget burden as the government seeks to narrow the deficit.
The warning came in a week when third-quarter data showed French GDP contracted 0.1% quarter on quarter, after holding steady in the second quarter. The decline was uneven across components of activity: household consumption accelerated to 0.4% from 0.2% in the second quarter, while general government consumption continued to rise, up 0.3% after 0.4%. By contrast, gross fixed capital formation fell 0.6%, after declining 0.5% in the previous quarter. Domestic demand excluding inventories contributed 0.1 percentage point to GDP growth, the same contribution recorded in the second quarter. But the contribution from foreign trade turned negative at 0.6 percentage point, after a positive contribution of 0.6 percentage point, as exports fell 1.7% after rising 2.8% in the previous quarter.
Alongside weak growth, the National Institute of Statistics estimated consumer prices rose 3.4% year on year in October 2026 and 0.4% month on month. In the bond market, the yield on French 10-year bonds exceeded 5.14% in the week before Fitch’s decision, reaching its highest level since 2002 amid investor concerns about the fiscal trajectory and the difficulty of passing a budget. On October 22, the yield rose 11.5 basis points to 5.11%, after reaching 5.1415% during the session, its highest level since July 2002. France’s risk premium over German bonds widened to 173.58 basis points that day, the widest gap since the eurozone debt crisis in November 2011. These moves link market concerns about government financing to the budget outlook and the political ability to secure a lasting deficit reduction.
Despite the fiscal risks, Fitch said the A+ rating is supported by a large, wealthy and diversified economy, strong institutions, eurozone membership and a resilient banking sector. In a separate assessment, Moody’s expects France’s deficit to reach 5.4% of GDP in 2026. The agency said its affirmation of France’s rating assumes adoption of a budget that reduces the deficit in 2027, alongside some easing in financing costs and social tensions over the coming months. The next budget will be a practical test of whether fiscal pledges can be translated into a sustainable reduction, amid the political fragmentation cited by Fitch. Fitch expects to review France’s rating by the end of February 2027 at the latest, without announcing a specific review date.