Belgium’s sovereign credit rating was downgraded by Fitch Ratings on Friday over concerns over the public finances of the country.
The country’s Long-Term Foreign and Local Currency Issuer Default Ratings was lowered to ‘AA-‘ from ‘AA’, with stable outlooks.
The gross general government debt/GDP, forecast to be 107% of GDP in this year, is the highest among ‘AA’ category sovereigns, Fitch said. Further, persistent fiscal slippage moves back the first year with substantial debt reduction to 2019, two years later than previously projected by Fitch in November 2014, when the agency placed Belgium’s rating on Negative Outlook.
Fitch revised its general government budget deficit forecast for 2016 to 3.0 percent of GDP from 2.7 percent. In a November 2014 review, the figure was seen at 2.2 percent.
The rating agency also raised the 2017 deficit forecast to 2.2 percent of GDP, from 1.8 percent in the last review, and 1.3 percent in November 2014.
“Repeated slippage against government targets is negatively affecting fiscal policy credibility, and reduces confidence in the ability to meet future fiscal targets,” Fitch said.
“This partly reflects lower projected returns in a number of revenue measures relative to the government’s forecast.”
Beyond 2017, Fitch believes that the decentralized nature of the Belgian political system increases the challenge of achieving the consolidation targets for governments below the federal level. On the other hand, differences between the parties in the coalition government going into the 2018 local election and 2019 federal election further raise risks around the ability to achieve fiscal targets.
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