Scope Ratings reviews its ratings either yearly, or at least every six months in the case of sovereigns, sub-sovereigns and supranational organisations. Scope performs monitoring reviews to determine whether outstanding ratings remain proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodology/ies, latest developments, and the rated entity’s financial and operational aspects relative to similarly-rated peers; or through targeted reviews on an individual credit. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the Kingdom of Belgium (AA/Negative; S-1+/Stable) on 21 January 2021, incorporating the update from the sovereign methodology. The review resulted in no action on the assigned ratings. This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

Key rating factors

Belgium’s AA/Negative ratings are supported by a wealthy and diversified economy, a favourable debt profile and strong market access, macroeconomic stability, and a strong external position. However, these supportive factors are counterbalanced by the challenges of fiscal slippage, high and increasing public debt levels and weakening longer-term economic prospects. The government has provided direct fiscal support on top of liquidity-support measures to mitigate the economic knock-on effects due to the Covid-19 pandemic. While appropriate, these counter-cyclical budgetary measures are also leading to a sharp deterioration in fiscal fundamentals. The Negative Outlook reflects Scope’s view that risks to the ratings are tilted to the downside over the next 12 to 18 months. The ratings could be downgraded if: i) policy inertia weakens public finances further; ii) productivity growth remains negative due to a lack of structural reform; and/or iii) the external position deteriorates. Conversely, the Outlook could be revised back to Stable if: i) a return to fiscal consolidation places the public debt-to-GDP ratio on a steady downward path; ii) potential growth increases on the back of structural reforms; and/or iii) the economy benefits from a significant recovery in external demand.

For the updated scorecards accompanying this review, click here.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Rating Methodology: Sovereign Ratings, 9 October 2020) is available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Thibault Vasse, Analyst.

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