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Press Release: S&PGR Reports On French LRGs' Budgetary Prospects

10 Oct 2017 8:01 am
 
 
The following is a press release from Standard & Poor's: 
 
     -- In 2016, and for the second year in a row, France's LRGs were a major 
contributor to the reduction in the general government deficit, thanks to 
strong budgetary results that were better than we expected. 
     -- We consider that financial trends in the French LRG sector will be 
more favorable through to year-end 2018 than we previously forecast, on 
account of relatively fast-growing operating revenues and LRGs' strong grip 
over operating expenditures. 
     -- We could see some volatility in the sector after 2018, owing to 
institutional and cyclical uncertainties. 
     -- French LRGs continue to enjoy access to external funding at 
competitive costs, with record-low rates for short-term funding. 
 
PARIS (S&P Global Ratings) Oct. 10, 2017--French local and regional 
governments (LRGs) made a strong contribution to the 0.2 percentage point 
reduction in the general government deficit in 2016, despite cuts in central 
government transfers for the third year running. 
 
According to a report published today by S&P Global Ratings titled "French 
Local And Regional Governments' Budgetary Prospects Should Continue To Improve 
Following Outperformance In 2016," the consolidated budget outturns of French 
LRGs--that is, cities, intercities, departments, and regions--were better than 
S&P Global Ratings' forecasts in February this year. 
 
LRGs slightly increased their operating balance to 14.5% of operating revenues 
from 13.9% in 2015. At the same time, they posted a consolidated surplus after 
capital accounts of 0.9%, compared to our forecast of a deficit of slightly 
more than 1.0% of total revenues. 
 
The following three factors led to the stronger budgetary performance in 2016: 
     -- A 0.5% increase in operating revenues from 2015, despite state 
transfer cuts, compared to our expectation of 0.1% growth. This was the result 
of growing fiscal revenues, including in particular 8% growth in departments' 
property transfer fees; 
     -- A tight grip on spending, resulting from French LRGs' close budgetary 
monitoring. LRGs reported a 0.2% drop in operating expenditures from 2015, 
compared to our February 2017 estimate of 1.0% growth; and 
     -- A drop in capital spending of more than 3% compared to 2015, whereas 
we had anticipated a slight recovery. Consolidated capital expenditure is now 
close to EUR45 billion after falling below EUR50 billion in 2015. 
 
We expect that the budgetary upswing will continue, and as such, have revised 
upward our expectations for French LRGs' budgetary prospects for 2017 and 
2018. We now forecast that their consolidated operating balance should average 
about 15% of their operating revenues for 2017-2018, compared to our previous 
forecast of a gradual reduction to less than 13% of operating revenues in 2018. 
 
Underlying the more favorable trend we see for French LRGs' budgetary 
prospects for 2017 and 2018 are our expectations of higher operating revenues 
and lower operating expenditures (opex). Higher operating revenues reflect 
higher actual figures in 2016, and relatively buoyant fiscal revenues. 
 
Our expectation of lower opex reflects lower actual figures in 2016. In 
2017-2018, we expect that French LRGs will tightly control growth of 
opex--especially with regard to goods and services and personnel--and as 
spending related to the minimum income benefit for the poor decelerates 
quickly and lower interest rates reduce financial costs. 
 
Only a rating committee may determine a rating action and this report does not 
constitute a rating action. 
 
The report is available to subscribers of RatingsDirect at 
www.globalcreditportal.com and at www.spcapitaliq.com.  If you are not a 
RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 
212-438-7280 or sending an e-mail to research_request@spglobal.com. Ratings 
information can also be found on the S&P Global Ratings' public website by 
using the Ratings search box located in the left column at 
www.standardandpoors.com.  Alternatively, call one of the following S&P Global 
Ratings numbers: Client Support Europe (44) 20-7176-7176; London Press Office 
(44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; 
Stockholm (46) 8-440-5914; or Moscow (7) 495-783-4009. 
 
Primary Credit Analysts: Ghita Lamriki, Paris +33144206709; 
                         ghita.lamriki@spglobal.com 
                         Christophe Dore, Paris (33) 1-4420-6665; 
                         christophe.dore@spglobal.com 
                         Romuald Goujon, Paris (33) 1-4475-2547; 
                         Romuald.Goujon@spglobal.com 
                         Loic Le Mercier, Paris; 
                         loic.lemercier@spglobal.com 
                         Mehdi Fadli, Paris (33) 1-4420-6706; 
                         mehdi.fadli@spglobal.com 
Research Assistant: Leo Renaudin, Paris +33144206704; 
                    leo.renaudin@spglobal.com 
 
 
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All rights reserved. 
 
 

(END) Dow Jones Newswires

October 10, 2017 04:01 ET (08:01 GMT)
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