S&P Global Ratings has revised the outlook for France’s ‘AA-/A-1+’ credit ratings from stable to negative, citing concerns over deteriorating public finances. The decision, announced on February 28, 2025, comes after France’s minority government approved its 2025 budget on February 5, 2025.

The 2025 budget relies significantly on temporary tax measures aimed at reducing the deficit by approximately 0.4% of GDP this year. However, the fiscal strategy beyond 2025 remains unclear. S&P Global Ratings also forecasts French GDP growth will fall below 1% this year, further complicating the fiscal outlook.

By 2028, France’s average debt servicing cost is expected to equal nominal GDP growth. To reduce the debt-to-GDP ratio, France would need to achieve a primary budget surplus—a milestone it hasn’t reached since 2001. Given this fiscal pressure and limited political support for reform, France’s sovereign rating outlook was revised to negative.

The negative outlook reflects rising public debt amid weak political consensus on addressing France’s substantial budget deficits amid uncertain growth prospects. S&P Global Ratings warned that a downgrade could occur if the government fails to reduce large budget deficits further within the next two years or if economic growth remains persistently below expectations.

Conversely, ratings could improve if France’s budget deficit shrinks faster than projected and economic growth accelerates, resulting in a declining ratio of net government debt to GDP.

Despite these challenges, France’s $3.2 trillion economy remains the seventh-largest globally. The services sector—including information technology, healthcare, education, transportation, design, arts, real estate, and tourism—accounts for over 80% of the country’s gross value added. France’s relatively small manufacturing sector may partially shield the economy from some negative effects of growing global protectionism.