France 2026 growth forecast cut to 0.2% by Moody's

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Credit rating agency Moody's has halved its full-year GDP growth forecast for France to 0.2 percent, two weeks after reiterating its negative outlook as the government struggles t…

Credit rating agency Moody's has halved its full-year GDP growth forecast for France to 0.2 percent, two weeks after reiterating its negative outlook as the government struggles to cut its debt pile.

Even though it maintained its Aa3-Negative rating in late October, Moody's said in a report to clients Tuesday that "political uncertainty, higher bond yields and fiscal challenges have constrained growth in 2026".

The new outlook is below the government's own target of 0.5 percent, and comes as the Bank of France recently lowered its own forecast to 0.3 percent.

International investors are increasingly concerned about French public debt that stands at around 120 percent of GDP -- one of the highest levels in the eurozone and well above the EU limit of 60 percent.

At the same time, the country is facing fierce protests denouncing the surging cost of living and demanding higher spending on education and other public services.

Prime Minister Sebastien Lecornu is struggling to pass a deficit-cutting budget for 2027 in a Parliament where President Emmanuel Macron's centrists no longer hold a majority.

In a bid to defuse the protests, Lecornu said Monday that the minimum wage would be raised 1.6 percent to around 1,502 euros net a month -- far below union demands.

"This political instability, also visible in the current social tensions, risks hampering the French government's ability to address key policy challenges such as an elevated fiscal deficit, rising debt burden, and increase in borrowing costs," Moody's said in its October 27 report.

The French economy shrank 0.1 percent in the third quarter after stagnating in the second quarter, putting the country on the brink of recession.

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