Credit rating agency Fitch Ratings has maintained Belgium’s credit rating at AA-. However, without fiscal efforts, this rating may face a downgrade in the future.
In a recent report released last Friday, Fitch preserved Belgium’s rating. Despite this, the future outlook remains negative, suggesting the possibility of a creditworthiness downgrade.
The agency praised Belgium’s prosperous and diverse economy and strong banking sector. But it warned of “very high and rising” government debt and a complex political and institutional context that complicates austerity efforts, which are viewed less favourably. The negative outlook reflects the risk that long-term budgetary efforts may prove inadequate.
Fitch noted that the formation of the government appears to be proceeding more swiftly than in previous negotiations. Despite this, the agency stated that the parties still face significant challenges, which could prolong negotiations and delay fiscal measures.
Without a credible approach to managing debt, Fitch warned that a future rate cut is not to be discounted. Additionally, rising labour costs leading to a decrease in company competitiveness and a threat to Belgian growth could also result in lower creditworthiness.
The ratings assigned by international credit rating agencies like Fitch are crucial. They play a critical role in determining a country’s ability to borrow money easily in international markets. Hence, a lower rating is bad news for the treasury.
