France’s borrowing costs surged above 5 percent on Wednesday, marking a resurgence to levels not seen since 2002, amid ongoing social unrest and economic uncertainty. The country is confronting its most intense urban riots in years and preparing for additional protests, with a general strike scheduled for November 5.

Trading on Wednesday saw the spread between 10-year French and German government bonds widen to 1.57 percentage points, approaching a recent peak recorded on October 2. At that time, concerns over France’s political deadlock and its ability to pass the 2027 budget had unsettled markets. Analysts suggest that this pressure on French bonds is likely to persist in the near term, reflecting growing investor unease driven by both domestic turmoil and international factors.

Stephane Colliac, senior economist at BNP Paribas, indicated that the market response demonstrates a clear impact of deteriorating sentiment, forecasting that this trend will continue in the coming weeks. “It is very likely that we will see these kinds of levels again,” he said, noting that market adjustments have been swift and sensitive to ongoing developments.

The unrest follows a backdrop of pessimistic public sentiment, with polls conducted prior to the recent riots already showing increasing uncertainty about France’s economic prospects. The Banque de France’s latest business climate indicator also pointed to heightened market apprehension. Further demonstrations are planned in the coming days, fueling concerns about sustained instability.

The financial toll of the unrest is beginning to emerge. An initial estimate by research firm Morningstar put insured losses at under €1.2 billion (approximately HK$10.5 billion). However, Charlotte de Montpellier, senior economist at ING, suggested that the actual economic costs are likely far higher. Drawing on data from the 2018 yellow vest protests, which resulted in €217 million in insured damages but caused roughly €2 billion in losses to shopping centers and another €850 million to hotels, restaurants, and cafes, de Montpellier stressed more extensive economic disruption beyond insured losses. Tourism also suffered, with a reported 2.5 percent decline in visitor numbers during the first quarter of 2019 following those earlier protests.

The combination of rising borrowing costs, weakening confidence, and persistent social unrest is expected to weigh on France’s economic outlook. Growth projections for 2026 and 2027, already modest at 0.3 percent and 0.6 percent respectively, face further downward pressure. The political environment remains fraught as France’s hung parliament struggles to agree on the 2027 budget, with opposition parties criticizing the government’s handling of the crisis.

Meanwhile, credit rating agency Moody’s is scheduled to review France’s sovereign rating today, maintaining a negative outlook that reflects growing concerns about the country’s fiscal and political stability amid the ongoing unrest.