Scope Ratings Downgrades France's Rating Amid Financial Concerns
On October 18, 2024, Scope Ratings announced a downgrade of France's credit rating from AA to AA- due to deteriorating public finances and a challenging political environment. Despite this downgrade, the outlook was revised to 'stable' from 'negative', reflecting the country's favorable debt profile and strong banking sector. The agency highlighted concerns over France's budget deficit, which is projected to be 6.1% of GDP in 2024, significantly exceeding the European Union's threshold of 3%. The French government aims to reduce this deficit to 5% in 2025 and below 3% by 2029, although Scope Ratings expressed skepticism about these targets given the country's political instability and lack of a parliamentary majority.
Scope's projections indicate that France's public debt could rise to 119% of GDP by 2029, up from 97.4% in 2023. The agency cautioned that planned fiscal consolidations might be hindered by rising military expenditures, costs associated with an aging population, and energy investments, along with increasing interest payments.
S&P Maintains Italy's Rating with a Stable Outlook
In a contrasting report, S&P Global Ratings affirmed Italy's BBB rating with a stable outlook on the same day, noting a positive growth forecast for the country's GDP, projected to grow by approximately 1% between 2024 and 2025. However, S&P pointed out that Italy's public debt remains a significant concern, expected to reach 135% of GDP in 2024 and potentially rise to 138% by 2027. This high debt level limits the government's capacity to invest in growth-supporting initiatives.
The agency noted that Italy's debt-to-GDP ratio improved from 155% in 2020 to 134.8% in 2023, but it is projected to increase again in the coming years. The government, led by Prime Minister Giorgia Meloni, is under scrutiny for its fiscal management, with upcoming ratings from other agencies such as DBRS and Moody's expected to reflect the country's economic strategies and public account reliability.
