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-/Negative; short-term local- and foreign-currency issuer ratings: S-1+/Stable) on 4 March 2024.

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-/Negative ratings are underpinned by the following credit strengths: i) a wealthy and diversified economy; ii) a strong market access and favourable debt profile, with long maturities and moderate funding costs; and iii) its sound external position bolstered by a net international creditor position.

The Belgian economy has been resilient with an estimated GDP growth of 1.4% in 2023 thanks to robust internal demand as private consumption benefited from the automatic indexation of wages and social benefits to higher inflation. For 2024, GDP growth is projected to moderate slightly at 1.0% as lower inflation supporting higher consumption is balanced by higher uncertainties related to the outcome of the June elections. The reduction of the headline government deficit, projected at 4.7% of GDP in 2024, unchanged from 2023, remains contingent on a stable government coalition. In a no policy change scenario, the fiscal deficit is expected to average 5.0% of GDP over 2024-28. This will drive a steady rise in government debt, from 105.4% of GDP in 2023 to 114.1% of GDP in 2028. Nonetheless, this debt increase is slightly below Scope’s previous projection of 118% given more favourable assumptions on funding conditions.

Belgium’s ratings are constrained by: i) elevated and rising public indebtedness given wide budget deficits amid substantial fiscal pressures from population ageing and limited prospects for material fiscal consolidation; ii) persistent governance challenges, including institutional rigidities and high political fragmentation and polarisation at the federal and regional levels, curbing the government’s capacity to address structural economic and fiscal pressures; and iii) structural economic challenges given declining productivity growth, lagging business dynamism and labour market bottlenecks.

The Negative Outlook reflects Scope’s view that risks to the ratings are skewed to the downside.

The ratings could be downgraded if, individually or collectively: i) Belgium’s fiscal outlook deteriorated resulting in a sustained increase of the public debt-to-GDP ratio; ii) Belgium’s growth outlook deteriorated over the medium-term; and/or iii) political instability were to worsen, further weighing on governance and the government’s capacity to implement credit-enhancing reforms supporting the economic and fiscal outlooks.

Conversely, the Outlooks could be revised to Stable if, individually or collectively: i) Belgium consolidates its public finances and stabilises its public debt-to-GDP ratio; and/or ii) structural reforms accelerate, strengthening the medium-term growth outlook.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 29 January 2024) 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 Thomas Gillet, Director.

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