Fitch Ratings has warned that political instability in France has worsened following the 2024 snap elections and the collapse of the Barnier government due to disagreements over the 2025 budget bill. “The current center-right coalition, led by Prime Minister Bayrou, does not have an absolute majority in the deeply divided National Assembly, making economic and fiscal policymaking more challenging,” the agency stated.
Fitch predicted that France is likely to hold new elections in the second half of the year, adding that the outcome and its economic implications remain highly uncertain. The agency also highlighted that increased defense spending, which currently accounts for 2.1 percent of GDP, will add further strain on the country’s fiscal situation.
The French government’s deficit reduction strategy is based on a projected economic growth rate of 0.9 percent for the year. However, earlier this week, France’s central bank revised its forecast downward, lowering its 2025 growth estimate to 0.7 percent. This revision casts doubt on the government’s ability to meet its deficit reduction targets.
On Friday, Fitch also cut its growth forecast for France, now expecting only 0.6 percent expansion this year—down from its previous estimate of 1.2 percent.
The credit rating agency had already downgraded France’s economic outlook in October 2024, shifting it from “stable” to “negative” due to the country’s rising debt levels.
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