Moody’s has maintained Belgium’s credit rating at Aa3 with a negative outlook, the agency announced on Friday evening.
The Aa3 rating reflects a “very low” credit risk, making it the second-highest category, but the ‘3’ indicates Belgium is at the lower end of this tier. A downgrade could lead to higher borrowing costs for Belgium as it finances budget deficits.
In June, Fitch downgraded Belgium’s creditworthiness, sparking fears that Moody’s might follow suit, especially after it had revised Belgium’s outlook to negative about a year ago. However, Moody’s decided against a downgrade, noting that the government of Prime Minister Bart De Wever has prioritised structural reforms to address persistent challenges such as low employment, an ageing population, and increasing budget deficits.
Despite this, Moody’s highlighted Belgium’s high debt levels as its primary challenge. The negative outlook was retained due to concerns about the government’s ability to implement measures necessary to stabilise public debt.
Should effective action be taken, Moody’s may shift to a stable outlook. Improved coordination of fiscal policies across government levels and structural reforms to tackle low employment could also contribute positively.
The agency warned, however, that a sustained weakening of Belgium’s competitiveness, due to recent wage hikes or high energy costs, could weigh negatively on the credit score. Additionally, geopolitical risks pose potential threats to Belgium’s financial standing.
“The reforms already implemented are appreciated and have bought us some time,” said Prime Minister Bart De Wever’s office in response. “However, new efforts are clearly needed to improve the fiscal balance significantly by the end of this legislative term, and we are actively working on those.”
