Rating agency Fitch puts Belgium on the spot
13 March 2023
The US rating agency Fitch threatens to downgrade Belgium's very high credit rating because of the country's deteriorating public finances. De Tijd reported this on Monday.
Belgium's high budget deficit and rising public debt have caught the attention of Fitch, one of the three major rating agencies that assess the creditworthiness of governments and companies.
Fitch issued a warning on Belgium on Friday night after the markets closed. Although the country retains its AA rating - which refers to "very high credit quality" - Fitch says the rating outlook could drop from "stable" to "negative". This means the risk of a downgrade at a later review is increasing.
The US rating agency cites three reasons for the deterioration in the outlook over the past six months: persistently high budget deficits, an expected rise in public debt and the Belgian government's inability to restore sound public finances.
'The seven-party coalition government remains fragile, and consensus on improving public finances' sustainability is proving difficult. Moreover, recent pension and labour market reforms have not yielded tangible savings', Fitch noticed.
'With a general election due in 2024, the government is unlikely to take remedial action to reduce the budget deficit,' the rating agency added. Moreover, given Belgium's highly fragmented political landscape and history of protracted negotiations to form a government, we see a risk of a significant delay in fiscal consolidation, even if the European Union reintroduces fiscal rules.
Nevertheless, Fitch's warning increases the pressure on the Belgian government to adopt deficit-reducing measures during the budget review. We are taking this au sérieux,' said State Secretary for the Budget Alexia Bertrand (Open VLD) in a reaction.