Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the Kingdom of Belgium (AA-/Stable; S-1+/Stable) on 26 April 2022.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

Belgium’s AA-/Stable ratings are supported by a wealthy and diversified economy, a favourable debt profile and strong market access, and a sound external position. At the same time, high and increasing public debt level combined with structural pressures on fiscal fundamentals due to ageing-related costs, lagging productivity growth, labour market rigidities and weak business dynamism are rating challenges. Belgium experienced a historic recession in 2020 due to the Covid-19 crisis. Extensive fiscal support cushioned the impact on households as well as firms and has largely avoided structural damage to the economy. These counter-cyclical budgetary measures are appropriate and ECB policy support has mitigated the upward pressures on Belgium’s interest payment burden but they have also led to a sharp deterioration in fiscal fundamentals. The Russia-Ukraine conflict is slowing down the recovery but Belgium’s direct exposure to these economies is limited. After a short-term decline, public indebtedness is expected to remain on an upward trajectory despite the recovery that is now underway as rising social expenditure is expected to widen the deficit longer-term. Scope expects policy making at the national level to remain hindered by political polarisation and fragmentation in regional and federal parliaments as well as by the fragile seven-party governing coalition.

The Stable Outlook reflects Scope’s view that risks to the ratings are balanced over the next 12 to 18 months. The ratings/Outlooks could be downgraded revised to Negative if, individually or collectively: i) Belgium’s growth outlook deteriorates meaningfully over the medium-term; ii) the country’s fiscal performance deteriorates substantially, resulting in a persistent increase in public debt levels; and/or iii) political instability emerges, weighing upon governance and the government’s capacity to implement credit-enhancing structural reform. Conversely, the ratings/Outlooks could be upgraded if, individually or collectively: i) Belgium places public debt on a firm downward trajectory; and/or ii) structural reforms accelerate and successfully strengthen the medium-term growth outlook.

For the updated report accompanying this review, click here.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Sovereign Ratings, 8 October 2021) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Thibault Vasse, Senior Analyst.

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