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      Scope completed a monitoring review of the Kingdom of Belgium
      FRIDAY, 31/03/2023 - Scope Ratings GmbH
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      Scope completed a monitoring review of the Kingdom of Belgium

      Monitoring review announcement

      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.

      © 2023 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Investor Services GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin.

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