Fitch Ratings recently made notable adjustments in its assessments of European countries, notably upgrading Portugal’s credit rating while downgrading France and Belgium. The amendments address all countries’ new economic realities, especially regarding increases in public debt and changes to expected growth rates.
Nonetheless, Fitch forecasts a robust decline in Portugal’s public debt. They expect it to continue to fall—from 134.1% of GDP in 2020 to 96.4% in the first quarter of this year. The agency does not believe this trend will change any time soon. Their projections show that by the end of 2027, Portugal’s public debt will fall to 88.4%. While Fitch does expect the country to incrementally lower the level of public debt, it’s a slow path for the country. They point to prudent fiscal stewardship as the driving force for their recent upgrade from A to A+ with a stable outlook.
Portugal’s Positive Trajectory
Fitch was the last of the big three agencies to upgrade Portugal’s credit rating. This ruling is a big recognition of the country’s serious commitment to controlling its public debt responsibly. The agency praised Portugal’s remarkable turnaround in the form of lowering public debt. It dropped from an eye-popping 134.11% in 2020 to just 96.44% as of early 2023. This trajectory marks a remarkable change of fortune for the country, which was in the depths of fiscal disaster not too long ago.
While this is indeed a rosy picture, Fitch warns that the reduction in public debt will come at a slow rate. The agency would like us all to believe that the country is headed in the right direction. It calls for continued vigilance and prudent fiscal policies to keep this momentum going. This forecasted decline to 88.4% by 2027 highlights the crucial importance of continued economic expansion and diligent budgetary practices.
The stable outlook Fitch assigned means they are sure that Portugal will be able to overcome bumps in the road that may lie ahead. Today the government is pursuing reforms with vigor and dealing head on with fiscal challenges. This should help build investor confidence in Portugal’s improving economic prospects.
France Faces Credit Downgrade
Fitch recently downgraded France’s credit rating from AA- to A+, on the grounds, principally, of increasing levels of public debt. As a main reason, the agency forecasts a steep increase in France’s debt-to-GDP ratio. It will jump from 113.2% of GDP in 2024 to an incredible 121% by 2027. This unplanned increase is shocking and symptomatic of deeper problems with France’s fiscal sustainability.
Fitch’s rationale for the downgrade was the country’s high and increasing debt-to-GDP ratio. We are running unprecedented risks to economic stability with this financial situation. The agency expects France’s deficit ratio to remain well above the EU limit at around 5.5% of GDP this year. They hope for it to break that ceiling in both 2026 and 2027. As these deepening deficits continue to mount, concerns grow over whether France can reestablish long-term fiscal sustainability.
Fitch has seen France’s high underlying growth, and broader challenges. They predict a paltry 0.6% growth rate in 2025, 0.9% in 2026, and 1.2% in 2027. These modest growth projections further underscore the pressures France faces in its struggle to restart its economy under the weight of rising debt burdens.
Broader Implications for European Credit Ratings
In June, Fitch downgraded France and Belgium with a negative outlook to A+. Beyond central banks, such a move would demonstrate how attitudes towards fiscal prudence are shifting across Europe. Meanwhile, S&P recently upgraded Spain’s rating from A to A+, indicating a more favorable view toward that nation’s economic prospects compared to its neighbors.
Fitch has just downgraded France’s credit rating. In parallel, S&P and Moody’s have so far maintained the country at much higher ratings of AA- and Aa3, respectively. The gap between the various ratings agencies serves to highlight conflicting views regarding the state of France’s economic malaise and chances of recovery.
Fitch is expected to review France’s credit rating in the next few weeks. Investors and analysts alike have been speculating on this announcement, expected on or about October 25, or November 28 at the latest.