Moody’s agency downgrades Belgium’s credit rating

The US credit rating agency Moody’s has downgraded Belgium’s credit rating from Aa3 to A1, citing the country’s poor budgetary and economic outlook, reports RTBF.

Belgium’s downgrade from a high-quality grade to an intermediate one sends a message to investors who finance Belgium. Beyond the negative signal, it risks driving up interest rates.

Nevertheless, the country’s ranking perspective remains stable and is unlikely to drop further in the short term.

“After the downgrading of rating by Fitch last year, the decision by Moody’s does not come as a surprise unfortunately,” commented the cabinet of prime minister Bart De Wever (N-VA).

“It reiterates that further efforts are needed to restore international market confidence in our country’s financial health. It is a matter of responsibility to work on this thoroughly in the coming months,” it added.

Budget outlook, growth prospects and the Belgian institutional framework are the main reasons cited by Moody’s to justify its decision.

Firstly, it points to a significant deficit (around 5% of Belgian GDP) and a debt that continues to grow. Moody’s expects the debt to increase from 104% of GDP in 2024 to 116% by 2030. 

“The decision to downgrade Belgium’s rating to A1 reflects our conviction that the current government will not be able to implement sufficient measures to stabilise the debt burden.”

It highlights efforts made in 2025 which, in its view, remain insufficient to “compensate for the negative budgetary pressures resulting from the increase in interest payments, additional defense spending, persistent pressures related to demographic aging and the decline in revenues.” 

Adding to the increase in spending is a ‘modest’ growth outlook that could further deteriorate because Belgium “is vulnerable to a new energy price shock if the conflict in the Middle East persists and impacts natural gas and electricity prices, due to Belgium’s heavy reliance on energy imports and the widespread use of wage indexation in the economy,” said the agency.

Finally, it questions the political capacity of the Belgian federal government and its institutions to meet the budgetary challenge. 

“These political constraints are compounded by Belgium’s long-standing weakness in budgetary coordination between the different levels of government,” added Moody’s.

According to Bernard Keppenne, chief economist for CBC bank, the signal sent by Moody’s is striking. “The element that is highlighted and distinctly is this political paralysis in which Belgium has been operating for years. The current situation is unacceptable given the economic context in which we find ourselves.”

Photo: Aerial view of the Atomium, Belgium ©Visitbrussels