Belgium’s credit rating has been downgraded by Standard & Poor’s, but financial markets are not expected to react immediately, according to Debt Agency Director Jean Deboutte.
Deboutte warned that Belgium cannot sustain a budget deficit of 5% for several years without facing renewed pressure. Standard & Poor’s announced the downgrade late on Friday, after similar moves by Fitch and Moody’s. The decision reflects concerns over Belgium’s ability to repay its debts and could put upward pressure on interest rates.
The impact on markets, however, is expected to remain minimal in the short term. “That reaction has already happened over the past two years. The markets saw it coming, and the outlook has not changed,” Deboutte explained.
For some time, interest repayment costs have been rising again after years of low rates. This is straining government efforts to reduce primary expenditures, which exclude interest payments. Adding to the challenge, government revenues have slightly declined.
Belgium recorded a budget deficit of 5.2% of its GDP last year, the highest in the eurozone. This far surpasses the 3% threshold set by EU guidelines. At the end of 2022, Belgium’s national debt stood at 107.9% of GDP. While countries like Greece, Italy, and France carry even heavier debt burdens, Belgium’s debt has been increasing the fastest.
Deboutte does not anticipate another downgrade by the rating agencies this year or next. However, he stressed the importance of taking action now. “We must stabilise the situation and ideally aim to reduce the deficit further. Even lowering it to 4% could quickly lead to reduced interest rates,” he said.
