Rating action

Scope Ratings GmbH (Scope) has today downgraded the Kingdom of Belgium’s long-term local and foreign currency issuer and senior unsecured debt ratings to A+, from AA-, and revised the Outlooks to Stable, from Negative. The short-term issuer ratings have been affirmed at S-1+ in foreign and local currency, with Stable Outlooks.

The downgrade of Belgium’s long-term ratings is driven by:

1. Persistent budget deficits and an increasingly uncertain fiscal consolidation path that underpins a steady rise in general government debt. The risk that the government’s saving plan is delayed or significantly watered down has materially increased due to heightened political tensions, social discontent and a challenging budgetary coordination with regional governments. High primary deficits, delayed budgetary efforts, spending pressures and moderate economic prospects underpin Scope’s projection of general government debt ratio increasing steadily to around 120% of GDP by 2030.
    
2. A more challenging political environment that undermines effective policymaking and increases the risk of legislative gridlocks and political instability. Since the June 2024 elections, the implementation of structural reforms has been delayed by protracted government coalition negotiations and extended discussions over budget planning. Missed budgetary deadlines, a fragmented federal parliament and a track record of political instability reduce the prospects for sustained policy measures needed to stabilise the general government debt trajectory.

The Stable Outlook on Belgium’s long-term rating reflects Scope’s view that risks stemming from increasingly challenging fiscal and political dynamics are balanced by a wealthy economy, favourable debt profile and sound external position.

Key rating drivers

Persistent budget deficits and an increasingly uncertain fiscal consolidation path underpin a steady rise in general government debt. The Arizona government coalition agreed on a reform package in July 2025 (the so-called “Summer Agreement”) centred on tax and labour market reforms, targeting savings of EUR 10bn (about 1.5% of GDP) and a reduction in the headline deficit from 5.4% of GDP in 2025 to about 4% in 2029. Despite stated commitments to fiscal prudence, Scope projects the general government deficit to average 5.4% of GDP between 2025 and 2030, against 4.5% in 2024.

Political disagreements within the coalition regarding proposed measures such as the increase in VAT for certain products and services, the suspension of automatic wage indexation and the increase in the retirement age, signal difficulties to advance the implementation of the “Summer Agreement”. Prime minister De Wever has prolonged negotiations among government parties until end-December, postponing the approval of the 2026 public finance bill and the implementation of structural reforms. A provisional 'twelve-month' emergency budget would, however, mitigate near-term risks related to protracted political negotiations.

Furthermore, growing social discontent towards the federal government’s policy agenda and a challenging budgetary coordination with regional governments significantly increase uncertainty on a sustained fiscal consolidation path in the coming years. Highly sensitive policy measures, especially around pension and unemployment benefit systems, have triggered nationwide strikes that complicate budgetary debates and increase pressure for political compromise, which would moderate the pace of planned budgetary adjustments. Similarly, reducing budget deficits in a highly decentralised fiscal system requires striking a political compromise between the federal and regional governments, which would weigh on the proposed policy agenda. Regional and community governments account for about 40% of general government spending, mainly around public sector wages for education and social protection.

Finally, spending pressures and moderate growth prospects constrain fiscal consolidation. Although the implementation of the pension and unemployment benefit reforms included in the government agreement could limit the rise in social security expenditures to less than 2% of GDP by 2070 (instead of 3.6%)¹, spending pressures related to defence (2.5% of GDP in 2034) and climate investment are expected to offset the gradual reduction of primary deficits. If implemented, the planned reduction of personal income tax by 2029 could also weigh on the fiscal trajectory², as will the steady rise in net interest payments, from 3.3% of revenue in 2024 to 5% on average by 2030. Resilient albeit moderate economic growth prospects and labour market bottlenecks further cloud the outlook for introducing far-reaching policy measures without triggering public protests. Real GDP is projected to grow by 1.1% in 2025 and 1.1% on average between 2026 and 2030.

Belgium’s general government debt is thus projected to steadily increase from 105% of GDP in 2024 to about 120% by 2030, an increase of 23 percentage points relative to 2019. Scope’s baseline scenario assumes that the ongoing negotiations with the European Commission on a EUR 140bn loan to Ukraine financed from immobilised Russian assets will not materially impact Belgium’s public finances.

A more challenging political outlook undermines effective policymaking and increases the risk of legislative gridlocks as well as political instability. Scope viewed the political landscape that resulted from the June 2024 federal elections as more conducive to advance fiscal consolidation measures thanks to a narrower governing coalition and improved alignment between federal and regional levels. However, heightened political tensions within the ruling coalition and large public protests have hindered the implementation of the government’s saving plan and cloud the prospects for ambitious and sustained reforms over the coming years.

Politically sensitive reforms of the welfare system are expected to continue testing the resilience of the current or any future government’s coalition. The Arizona coalition formed in February 2025 holds a narrow majority in the federal parliament (55% of the seats) that gives each coalition member strong power to leverage its participation in the government. Although not Scope’s baseline, the risk of early federal elections has increased with the prime minister threatening to resign in response to budgetary deadlocks. A breakdown of the ruling coalition would likely lead to lengthy negotiations to form a new federal government and delay the implementation of structural reforms.

Furthermore, high political fragmentation and polarisation raise uncertainty surrounding the cooperation across federal and regional levels and increase the risk of legislative gridlocks. Striking a political compromise to advance far-reaching reforms is challenged by the absence of hierarchy between federal, regional and community governments. Although the Arizona coalition can count on political support in Wallonia and Flanders, no government has yet been formed in the Brussels-Capital region since the 2024 elections. Finally, any early election would likely result in an equally fragmented parliament, further clouding the prospects for sustained reforms.

Credit rating strengths: a wealthy and resilient economy, favourable debt profile, and sound external position.

Belgium’s credit ratings are supported by a wealthy, competitive and highly diversified economy driven by high value-added sectors. Strong economic recovery from the Covid crisis and economic growth prospects outperforming most rating peers signal resilience against domestic uncertainties and external shocks. Private consumption is a key growth driver thanks to wage indexation, lower inflation, an unemployment rate below its long-term average and strong net financial wealth of households. A diversified export base also supports economic resilience in a context of global trade uncertainties. Even so, more challenging fiscal and political outlooks and uncertain supply-side reforms are downside risks.

Belgium benefits from a favourable debt profile underpinned by its long average maturity, providing cushion against higher interest rates and delays in budgetary consolidation. The amortisation of long-term debt amounts to EUR 30.7bn on average between 2026 and 2030, or around 5% of 2025 GDP, which contains gross borrowing requirements, which Scope estimates at around 20% of GDP on average over the period. The debt profile is further strengthened by moderate funding costs, euro-denominated debt, holdings by the National Bank of Belgium, and a large investors base.

Finally, Belgium displays a large net international creditor position, moderate current account deficits, and a favourable external debt structure. This mitigates risks stemming from high gross external debt and weakening competitiveness, due to slowing productivity gains and high labour costs, especially in the manufacturing sector. The diversification of export industries and diversified export markets also support external resilience.

Rating-change drivers

The Stable Outlook reflects Scope’s view that risks to the ratings are balanced over the next 12 to 18 months.

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; and/or
    
2. A stable governing coalition implements structural reforms, strengthening the medium-term growth outlook.

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

1. Weaker fiscal outlook, for example due to delays in the implementation of economic and budgetary reforms, leading to a higher-than-projected increase in the government debt-to-GDP;
    
2. An escalation of political instability, further weighing on governance and reducing the government’s capacity to implement reforms supporting the economic and fiscal outlooks; and/or
    
3. A weaker growth outlook, for example due to an external shock.

Sovereign Quantitative Model (SQM) and Qualitative Scorecard (QS)

Scope’s SQM, which assesses core sovereign credit fundamentals, signals a first indicative credit rating of ‘a+’ for Belgium. Under Scope’s methodology, the indicative rating receives 1) a one-notch positive adjustment from the methodological reserve-currency adjustment; and 2) no negative adjustment from the methodological political-risk quantitative adjustment. On this basis, a final SQM quantitative rating of ‘aa-’ is reviewed by the Qualitative Scorecard (QS) and can be changed by up to three notches depending on the size of the Belgium’s qualitative credit strengths or weaknesses compared against a peer group of sovereign states.

Scope has identified the following QS relative credit strengths for Belgium: i) macroeconomic stability and sustainability; and ii) debt profile and market access. Conversely, the following credit weaknesses have been identified in the QS: i) growth potential and outlook; ii) fiscal policy framework; iii) long-term debt trajectory; and iv) governance factors.

Combined relative credit strengths and weaknesses generate a one-notch negative adjustment and signal a A+ long-term credit ratings for Belgium.

A rating committee has discussed and confirmed these results.

Factoring of environment, social and governance (ESG)

Scope explicitly factors in ESG issues in its ratings process vis-à-vis the sovereign-rating methodology’s stand-alone ESG sovereign-risk pillar, which holds a significant 25% weighting under the quantitative model (SQM) and 20% weight under the methodology’s qualitative overlay (QS).

Environmental factors are explicitly considered in the ratings process via an environment sub-category of the ESG sovereign risk pillar. The economy is more carbon intensive than credit rating peers and environmental performance is penalised by elevated level of greenhouse gas emissions per capita, similarly to other advanced economies. Belgium‘s vulnerability to natural disasters is low within an international context and the country published in 2022 an enhanced green bond framework aligned with ICMA principles and EU Taxonomy. However, the political fragmentation weighs on the ability to materially advance the National Energy and Climate Plan to achieve climate neutrality by 2050. This drives Scope’s ‘neutral’ qualitative assessment.

Socially factors are captured under the sovereign methodology in the SQM via accounting for the economy’s increasing old-age dependency ratio, low labour force participation rates, and comparatively low-income inequality. Belgium has also strong social safety nets and inclusion policies alike other credit rating peers, which balance skills mismatches and regional inequalities. This drives Scope’s ‘neutral’ qualitative assessment.

Under governance factors, Belgium scores strongly, in line with that of credit rating peers according to the World Bank’s Worldwide Governance Indicators under the SQM. However, lengthy negotiations to form government coalitions and a track record of political instability led to policy inertia and challenging decision-making processes in recent years, leaving structural weaknesses partially unaddressed. This reflects trends in political fragmentation and polarisation, which are exacerbated by a decentralised government structure. This drives Scope’s ‘weak’ qualitative assessment.

Rating Committee
The main points discussed by the rating committee were: i) domestic economic risk; ii) public finance risk; iii) external economic risk; iv) financial stability risk; v) ESG-related risk; and vi) rating peers.

Rating driver references
1. Belgian Debt Agency, Presentation to Investors, October 2025
2. Bureau fédéral du Plan, Perspectives économiques 2025-2030, June 2025

Methodology
The methodology used for these Credit Ratings and/or Outlooks, (Sovereign Rating Methodology, 27 January 2025), is available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The model used for these Credit Ratings and/or Outlooks is (Sovereign Quantitative Model (ex CVS Model) version 4.1), available in Scope Ratings’ list of models, published under scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With Rated Entity or Related Third Party participation        NO
With access to internal documents                                     NO
With access to management                                              NO
The following substantially material sources of information were used to prepare the Credit Ratings: public domain.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlooks and the principal grounds on which the Credit Ratings and/or Outlooks are based. Following that review, the Credit Ratings and/or Outlooks were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlooks are UK-endorsed.
Lead analyst: Thomas Gillet, Director
Person responsible for approval of the Credit Ratings: Giacomo Barisone, Group Managing Director
The Credit Ratings/Outlooks were first released by Scope Ratings in January 2003. The Credit Ratings/Outlooks were last updated on 24 January 2025.

Potential conflicts
See scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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