Fitch lowers Belgium's credit rating outlook from 'stable' to 'negative'

Rating agency Fitch lowered the outlook for its credit rating for Belgium to "negative" from "stable", citing the increasing cost of an ageing population and automatic wage indexation. Earlier this year, a report by Belgium's own Central Economic Council (CEC) had already called the country's budgetary situation "alarming" and "clearly untenable".

However, Fitch does retain Belgium's 'AA-' credit rating. The outlook downgrade from stable to negative means that a downgrade of the country's credit rating is also possible.

Among other things, the credit rating agency refers to the government budget deficit, which is expected to rise to 5.2 per cent in 2023. In contrast, the median budget deficit in countries with an AA rating is a mere 1.5 per cent. According to the rating agency, public debt may rise to 107 per cent of GDP by 2024. This is more than twice the median in the AA rating.

Furthermore, Fitch refers to the "fragile" federal government coalition. "In our view, it is unlikely that the government will take measures to reduce the fiscal deficit, given the upcoming federal parliamentary elections in 2024," Fitch added.

A report by Belgium's Central Economic Council (CEC) already called the country's budgetary situation "alarming" and "clearly untenable" early this year. European indicators, as well, have shown that Belgium needs to make heavy adjustments to stabilise its finances.

Only two weeks ago, on 23 February, Belgium's Federal Planning Bureau warned that given an unchanged policy, government deficits are likely to reach 5.7 and 5.4 per cent of GDP this year, up sharply from 4 per cent in 2022. Without policy changes, the Planning Bureau expects Belgium's public debt to reach 119 per cent of GDP by 2028. In the third quarter of last year, Belgium already recorded the largest deficit among eurozone countries, with 5.1 per cent of its GDP.




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