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French Regions: Strong 2022 Fiscal Results Should Allow Them To Weather 2023 Financial Challenges

Following the release in the last quarter of 2022 by French regions of their budgetary plans for 2023 which include 2022 fiscal result estimates, DBRS Morningstar takes the view that the regions were able to maintain a solid budgetary performance and a very moderate debt level last year, on a consolidated basis. DBRS Morningstar believes this strong 2022 financial position will give French regions the capacity to cope with 2023 financial challenges, especially the impacts of inflation on their budgets, but also rising interest rates.

Key highlights include:
• French regions maintained a solid budgetary performance last year and kept strong debt metrics at year-end 2022.
• French regions will face financial challenges in 2023 due to the context of high inflation which is expected to financially impact their transport and education responsibilities as well as staff costs.
• The regions' strong starting financial position, tight budget control in general and the continued expected growth of VAT proceeds should allow them ride out the storm.

“French regions face a challenging 2023 with the full impact of inflation on their operating budgets, especially their transport and education responsibilities as well as staff costs,” said Mehdi Fadli, Senior Vice President in the Global Sovereign Ratings Group. “Nevertheless, French regions’ strong financial position at year-end 2022, tight budget control in general and the continued expected growth of VAT proceeds should allow them to ride out the storm.”