France faces significant uncertainty over the passage of its 2027 budget as political divisions and the approaching presidential election could hinder efforts to reduce the country’s fiscal deficit, Moody’s Ratings has warned.

The ratings agency said on Friday that persistent political fragmentation could make it difficult for the French government to implement measures needed to strengthen the country’s public finances.

Moody’s is scheduled to review France’s Aa3 sovereign credit rating on October 23. The rating currently carries a negative outlook, indicating continued downside pressure.

The agency said its assessment would focus on whether France’s political institutions have the capacity to address major policy challenges despite divisions within Parliament.

“The ability of France’s institutions to tackle its key policy difficulties despite the political fragmentation in parliament is the key factor we are assessing for the resolution of the negative outlook,” Moody’s said in a note.

The warning came a day after the French government unveiled its proposed 2027 budget, as authorities continue to face pressure to bring down the country’s deficit.

Moody’s said the approaching presidential election could further complicate efforts to implement fiscal measures, with political divisions likely to persist beyond the election period.

The agency added that there were currently limited indications that France would resolve its fiscal challenges in the near term.