Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations that may act as a lender of last resort.

Scope performs monitoring reviews to determine whether material changes and/or changes in macro-economic 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 rating’s 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 announces the result of each monitoring review on its website and/or on its subscription platform ScopeOne.

Scope completed the monitoring review for the Kingdom of Belgium (long-term local- and foreign-currency issuer and senior unsecured debt ratings of AA- and Negative Outlook; short-term local- and foreign-currency issuer ratings of S-1+ and Stable Outlook) on 1 July 2025.

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 ratings history can be found on scoperatings.com.

Key rating factors

For the updated rating report accompanying this review, please see here.

The Kingdom of Belgium’s long-term AA-/Negative rating is underpinned by: i) a wealthy, competitive and diversified economy; ii) a strong market access and favourable debt profile, with long maturities and moderate funding costs; and iii) a sound external position bolstered by a net international creditor position.

Belgium’s rating is constrained by: i) high and rising public debt given wide budget deficits amid uncertainties about fiscal consolidation plans and structural spending pressures; ii) persistent governance challenges, including institutional rigidities and high political fragmentation and polarisation at the federal and regional levels; and iii) structural economic challenges given slowing productivity growth and labour market bottlenecks.

Belgium’s fiscal outlook is clouded by large deficits and significant uncertainty surrounding its consolidation path. The government coalition is committed to fiscal prudence and submitted a seven-year fiscal-structural plan to the European Commission, which estimates the average annual direct deficit-reducing impact of around 0.7% of GDP over 2025-2031. The reduction of the deficit would be primarily driven by the planned reform of the pension and unemployment benefit systems, the improvement of the efficiency and quality of public spending, the enhancement of budget coordination between the different levels of government, and the higher taxation of the highest income households.

Although the ruling “Arizona” coalition holds a majority in parliament, advancing the government’s policy agenda is challenged by social protests, as reflected in recent strikes. The cost-of-living crisis has structurally increased spending given the indexation of wage and social benefits on inflation and the near-term economic environment remains moderately supportive to execute ambitious reforms.

Real GDP growth is projected to remain subdued, 0.9% in 2025 and 1.0% in 2026, after 1.0% in 2024. The outlook is clouded by geopolitical uncertainties and trade tensions. Although the United States is only the fourth largest export market, Belgium is deeply integrated into European trade. Over the medium term, real GDP growth is projected to be around 1.2% per year.

Moreover, the fiscal outlook faces spending pressures from higher ageing-related costs, rising interest payments, and public investment. Belgium requested the activation of the national escape clause to deviate from the maximum growth rates of net expenditure set under the EU economic governance framework in response to heightened geopolitical tensions. Defence expenditure is planned to increase from 1.3% in 2024 to 2.0% of GDP in 2025, and up to 3.5% of GDP over the medium term for core defence requirements as per the revised NATO target.

On that basis, balancing the announced measures and expected spending pressures, Scope expects the general government deficit to rise to 5.0% of GDP in 2025 and in 2026, from 4.4% in 2024, and to remain elevated at around 4.8% of GDP over the 2027-30 period. General government debt is projected to increase from 104.7% of GDP in 2024 to about 118% in 2030.

Compared to the pre-Covid debt levels, this would constitute an increase of about 20 percentage points over 10 years, one of the largest public debt increases among European peers, which, if materealised, would be credit negative. However, there remains some uncertainty as regards the likelihood of this adverse trajectory, not least given the government’s commitment to fiscal consolidation resulting in a more favourable projection of a stabilising debt-to-GDP ratio at around 107%.

The early execution phase of the government’s fiscal plan and implications for the public debt projections will thus be key to inform the rating trajectory. Public protests or forthcoming negotiations delaying or watering down the economic and budgetary reforms, in turn driving deficits and public debt, would be credit negative. Conversely, the swift implementation of the ambitious reform agenda resulting in greater confidence that the government debt-to-GDP trajectory will stabilize over the forecast horizon would be credit positive.

The Negative Outlook reflects Scope’s view that risks to the ratings are skewed to the downside over the next 12 to 18 months.

Downside scenarios for the ratings and Outlooks are (individually or collectively):

1. Weaker confidence in the implementation of economic and budgetary reforms, leading to a sustained increase in the government debt-to-GDP;
    
2. Weaker growth outlook, due, for example, to an external shock;
    
3. 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.

Upside scenarios for the ratings and Outlooks are (individually or collectively):

1. Greater confidence in the implementation of economic and budgetary reforms, raising the likelihood to stabilise the government debt-to-GDP over the forecast period;
    
2. A stable government coalition implements structural reforms, strengthening the medium-term growth outlook.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 27 January 2025) is available on 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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