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.

Scope completed the monitoring review for the Kingdom of Belgium (long-term local- and foreign-currency issuer and senior unsecured debt ratings: AA-/Stable; short-term local- and foreign-currency issuer ratings: S-1+/Stable) on 28 March 2023.

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.

For the updated rating report accompanying this review, click here.

Key rating factors

The Kingdom of Belgium’s long-term AA-/Stable ratings are underpinned by the following credit strengths: i) a wealthy and diversified economy; ii) a favourable debt profile and strong market access, with long maturities and low funding costs; and iii) its sound external position bolstered by a net international creditor position and a favourable external debt structure. 

The Belgian economy has displayed broad resilience to the fallout from the Ukraine war, experiencing economic growth of 3.1% in 2022. This comparatively robust performance largely reflects strong carry-over effects from the previous year as well as the positive impact of the country’s automatic wage indexation to inflation and government support measures for household consumption. Budgetary support to counter the cost-of-living crisis came at an estimated fiscal cost of 1.3% of GDP. Still, the headline government deficit improved to an estimated 3.9% of GDP in 2022 (down 1.7pp from the previous year) while the debt-to-GDP ratio declined to an estimated 105% of GDP (down 4.2pp) amid strong nominal growth. Looking ahead, fiscal metrics will resume a gradual deteriorating trend amid moderate economic growth, sustained primary deficits and rising borrowing costs, which will weigh on the country’s credit fundamentals if not addressed.

Belgium’s ratings are constrained by: i) high and rising public debt; ii) structural fiscal pressures related to an ageing population weighing on the budget balance and limiting prospects of material fiscal consolidation; and iii) structural economic weaknesses such as declining productivity growth, lagging business dynamism and labour market bottlenecks.

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 if, individually or collectively: i) Belgium’s growth outlook deteriorated over the medium-term; ii) fiscal deficits remain large and result in a persistent and significant increase in public debt; and/or iii) political instability were to weigh on governance and the government’s capacity to implement credit-enhancing reform supporting the economic and fiscal outlooks.

Conversely, the ratings/Outlooks could be upgraded if, individually or collectively: i) fiscal consolidation places public debt on a firm downward trajectory; and/or ii) the medium-term growth outlook improves materially, for instance thanks to effective structural reform.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 27 September 2022) 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, Associate Director.

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