Belgium’s rating depends on response to structural challenges – Moody’s

Belgium’s rating depends on response to structural challenges – Moody’s

Belgium’s rating could improve if it provides a conclusive response to major structural problems, particularly if it cuts its public debt more quickly or acts more decisively on reducing its deficits, the Moody’s agency stated on Monday in its annual credit outlook for 2018. On the other hand, the rating could be affected if the public debt is not progressively reduced.

In its latest report Moody’s gives Belgium an Aa3 rating with a stable outlook. Its credit profile reflects a “prosperous and diversified” economy bolstered by its central geographic location and “solid institutional framework,” the financial rating agency reported. It also underlined the “careful” conduct of budgetary policy by the Government.

Moody's forecasts a gradual reduction of the public debt to 99% of Gross Domestic Product (GDP) by 2020 thanks to relatively sustained nominal economic growth and a capacity to resolve primary surpluses in a sustainable manner. Belgium needs to find essential budgetary room for manoeuvre with regard to public spending, the rating agency adds.

However, any lasting deterioration of the budgetary situation and inability to reduce the debt in the medium term would however, lead to “tensions” on the rating, Moody’s warns. It adds that Belgium needs to remedy its “structural weaknesses” such as “the weak rate of activity” and “limited margins for manoeuvre” at the budgetary level.

Moody’s also revised slightly downward its real-growth forecast for 2018 and 2019 to 1.5%, a reduction of 0.3 and 0.2 percentage points.

Belgium’s growth model faces challenges in the medium term to maintain its competitiveness and increase the population’s level of activity, the rating agency stressed.

The structural reforms are aimed essentially at remedying these problems that continue in terms of competitiveness but also employment, it noted, adding that the pension reform begun in 2015 is essential for guaranteeing the long-term viability of the system.

The Brussels Times

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