Press Release

DBRS Morningstar Confirms the Kingdom of Belgium at AA (high), Trend Remains Negative

August 13, 2021

DBRS Ratings GmbH (DBRS Morningstar) confirmed the Kingdom of Belgium’s Long-Term Foreign and Local Currency – Issuer Ratings at AA (high) and maintained the Negative trend. At the same time, DBRS Morningstar confirmed the Kingdom of Belgium’s Short-Term Foreign and Local Currency – Issuer Ratings at R-1 (high) with a Stable trend.


The Negative trend continues to reflect DBRS Morningstar’s view that a combination of fiscal, economic and policy risks factors negatively affect Belgium’s ratings. Belgium, like most of its European peers has been substantially affected by the Coronavirus Disease (COVID-19) pandemic. The country has been particularly impacted last year, with the severity of the healthcare situation prompting the government to implement very stringent restrictions to contain the spread of the virus. These containment measures led the Belgian real gross domestic product (GDP) to contract by 6.3% in 2020, an unprecedented decline in modern history. Similarly, the scale of the economic shock and the wide-ranging support measures implemented by the Belgian authorities to limit the impact of the pandemic, translated into a very large fiscal deficit last year. The deficit represented 9.4% of Belgium’s GDP in 2020, increasing the country’s public debt-to-GDP ratio to 114.1% at the end of 2020 from 98.1% at the end of 2019.

While the deficit and debt deteriorations have been very significant in 2020, DBRS Morningstar points out that outturns have marginally outperformed earlier estimates of a deficit greater than 10% and a debt-to-GDP ratio greater than 115%. In addition, Belgium, in line with its European peers, has managed to keep the cost associated with its new debt at a very low level, reducing its overall interest expenditure further, despite the increase in debt stock. For 2021, real GDP growth is currently expected by the National Bank of Belgium (NBB) at 5.5%, which should allow the deficit to decline and the debt ratio to stabilise. While the gradual decline of the deficit remains the most likely scenario for DBRS Morningstar, uncertainty remains elevated. Over the short-term, negative healthcare developments and to a lesser extent capacity constraints could affect the Belgian recovery, while over the medium-term, policy reforms are likely to be necessary to bring down the country’s high debt level. On that note, DBRS Morningstar continues to consider that the seven-party coalition government remains fragile and that therefore, negotiating and delivering the necessary medium-to-long-term policy measures will likely remain a challenging task.

The pace of the country’s economic and fiscal recovery will remain critical for DBRS Morningstar’s analysis of Belgium’s creditworthiness over the next 12 months. The Negative trend continues to reflect a deterioration over the past year in Belgium’s “Fiscal Management and Policy”, “Debt and Liquidity” and “Economic Structure and Performance” building blocks as per DBRS Morningstar’s Global Methodology for Rating Sovereign Governments. The ratings continue to be supported by the country’s wealthy and diversified economy, its strong net external asset position and its robust and credible institutional framework. These credit strengths counterbalance the challenges associated with high public sector debt, relatively low potential output growth, and the economy’s exposure to external shocks given its small size and openness.

An upgrade of the ratings is unlikely in the near term. Over time, the ratings could be upgraded if a substantially improved budget position and sustained economic growth lead to a significant reduction in the public debt ratio. The trend could return to Stable if the economic recovery is stronger than anticipated, leading to a reduction in the fiscal deficit and government debt levels faster than currently expected. Conversely, the ratings could be downgraded if a deterioration in growth prospects or a deterioration in the budget position leads to a further worsening in the trajectory of the already high public debt.


The Impact of the Pandemic is Significant, but Economic Recovery is Ongoing

The COVID-19 pandemic and the measures taken to limit its spread prompted the Belgian economy to contract by a substantial 6.3% in 2020, its largest GDP decline in modern history. In 2021, despite new waves of infections reflecting new virus variants and an initially slow vaccine rollout, the Belgian economy has been much more resilient. Belgian GDP grew in Q1 by 1.1% (quarter-on-quarter, qoq) and in Q2 by 1.4% (flash estimate), a strong performance among European countries. These growth numbers have been supported by the softer restrictions needed to contain the virus this year as well as the pickup in the vaccination rollout in recent months.

Belgium is currently one of the best performers worldwide with regards to vaccination. As of 4 August 2021, 70% of the Belgian population had received at least one dose of the vaccine while 61% was fully vaccinated. Given the performance in the first five months of 2021 and the very strong consumer and business confidence indicators, the NBB revised in June its real GDP growth forecast to 5.5% for 2021. This represented a significant improvement compared to six months ago, when projections anticipated a growth of 3.5% for 2021. For 2022, the current NBB forecast anticipates growth of 3.3% in real GDP, before a normalisation of the growth rate to 1.6% in 2023. Belgium’s growth should be somewhat supported by the Next Generation EU (NGEU) funds, expected to help boost investment over coming years. Belgium is expected to receive close to EUR 6 billion from NGEU grants, of which EUR 1 billion should be disbursed this year. This direct support together with the expected spillovers to the private sector and from neighbouring countries should provide a marginal boost to growth and could support the delivery of reforms over the medium-term.

The solid growth foreseen for 2021 would imply that Belgian GDP would come back to its pre-crisis level by the end of the year, months ahead of earlier estimates. The forecast remains nevertheless clouded by some uncertainty, particularly with regard to the healthcare situation and the potential emergence of new vaccine resistant variants.

The Labour Market Continues to Perform Well Thanks to Government Support

The Belgian labour market entered the COVID-19 crisis on a solid footing, with the unemployment rate having fallen at the end of 2019 to 5.4%, its lowest level in four decades. While the impact of the pandemic on the labour market could have been very significant, it has so far remained limited, supported by the temporary unemployment benefits scheme for workers as well as the replacement income scheme for the self-employed put in place by the national government. These schemes, together with the direct support measures provided to Belgian firms, prevented a substantial rise in job losses and are likely to have, at least for the time being, precluded a rise in structural unemployment due to the pandemic. At the end of June 2021, the Belgian unemployment rate reached 6.2%, only marginally higher than 18 months before. On the back of the economic recovery, current labour market signals are turning positive with a high number of job vacancies. Nevertheless, some uncertainty remains, particularly related to the potential rise in dismissals and corporate bankruptcies once government support is fully lifted.

The temporary unemployment scheme is currently scheduled to end on 30 September 2021. In line with current expectations from the NBB, the rise in unemployment after that date should remain muted. The unemployment rate is now expected at 6.0% in 2022, compared with earlier expectations of a rate increasing to close to 7.5%. Despite these positive signs, some labour market rigidities and skill mismatches remain in Belgium, including the high unemployment among non-EU immigrants and among young people. This, together with a still low effective retirement age, translates into relatively low participation rates, which continue to somewhat constrain Belgium’s GDP potential.

Public Finances Should Start to Gradually Improve This Year But They Are likely to Remain Under Pressure Over the Medium-Term

Belgium entered the COVID-19 crisis with less fiscal space than many of its European peers, given its already high government debt level. The country’s fiscal deficit at the end of 2019 represented 1.9% of GDP and was set to deteriorate in 2020 and 2021 without new fiscal measures being implemented. Given last year’s economic shock, the automatic stabilisers and the additional fiscal measures implemented by the government, Belgium recorded a large fiscal deficit at 9.4% of GDP in 2020.

This year, the economic recovery and the targeted and temporary characteristics of the fiscal measures implemented by the government to tackle the pandemic should prompt a decline in the deficit. Nevertheless, the need for additional restrictions and further support to the economy in the first half of 2021 imply that the deficit reduction will be relatively slow. The latest NBB projections continue to anticipate a deficit of 6.8% of Belgian GDP this year, before decreasing to 4.0% in 2022. While DBRS Morningstar sees positively the expected pace of the fiscal rebalancing over the next two years, significant uncertainty remains from 2023 onwards. In a no policy change scenario, the NBB anticipates that the deficit would widen again in 2023 to 4.5% of GDP, mainly reflecting the potential lasting effects of the coronavirus crisis on some sectors of the economy, such as a structurally higher level of healthcare expenditure.

Similarly, the government debt-to-GDP ratio increased sharply in 2020 to 114.1% from 98.1% in 2019. The NBB expects the debt ratio to stabilise around that level in subsequent years, reflecting the decrease in the deficit level and the rise in output. DBRS Morningstar’s focus will remain on the ability of Belgium to place its debt-to-GDP ratio on a firm downward trend over the medium-term, a key feature to support the country’s credit profile.

Debt Profile and Affordability Metrics Remain Very Strong

Despite the sharp deterioration in its debt levels recorded in 2020, DBRS Morningstar highlights that Belgium, in line with other European countries, has fully benefited from the low interest rate environment supported by the European Central Bank’s (ECB) asset purchase programmes and pandemic emergency purchase programme (PEPP), to continue to reduce its overall interest rate costs. The federal government interest expenditure represented a low 1.75% of GDP in 2020, down from 2.56% in 2015. The government expects interest costs to decrease further in coming years down to 1.2% of GDP by 2023, given the expected pickup in GDP and as bonds bearing higher cost mature while interest rates remain at a lower level for longer. DBRS Morningstar considers that despite the significant increase in the country’s debt metrics last year, Belgium’s debt affordability has remained very strong so far. Nevertheless, higher debt metrics, particularly when compared to some European peers as well as the expected weaker medium-term fiscal performance limit the country’s future shock absorption capacity even if the country’s current debt structure limits interest volatility.

Belgium maintains a sound public debt profile. The country extended the average life of its outstanding debt to more than 10.3 years as of July 2021, markedly longer than the 8.0 years recorded at the end of 2015. The country’s overall favourable public debt profile and sound debt structure continue to support DBRS Morningstar’s positive qualitative assessment of the ‘Debt and Liquidity’ building block.

Ability to Deliver Policy Measures Will be Key for the Relatively Fragile Coalition Government

Belgium’s institutions are robust, but forming a federal government has often proved difficult given existing frictions between the main linguistic groups (Flemish and Walloon) and the distribution of power between federal and regional levels. The federal elections held in May 2019 brought about a more fragmented federal parliament which took 493 days to form a new coalition government in October 2020. DBRS Morningstar considers that the current seven-party coalition government led by Mr De Croo is likely to remain fragile going forward. The government’s ability to implement key policy measures and reforms will be critical for Belgium to deliver on a gradual rebalancing of its public finances over the medium-term.

DBRS Morningstar considers that the measures taken by the new government to curb recent waves of infections in the country, including the vaccination rollout, have been effective. Nevertheless negotiating and implementing the necessary medium and long-term policy measures is likely to prove a more challenging task. The deep and structural political divisions in the country, leading to lengthy processes of government formation and policy uncertainty weigh negatively on DBRS Morningstar’s qualitative assessment of the ‘Political Environment’ building block.

The Banking Sector Remains Strong and Well Positioned to Weather the COVID-19 Fallout

The Belgian banking sector entered the crisis with a generally resilient position. While low interest rates have weighed on banks’ interest margins in recent years, Belgian banks remain well capitalised, with liquidity levels well above the minimum requirements and a sound asset quality. Despite the deterioration in banks’ operating environment in 2020 the full impact on asset quality has so far remained limited. While uncertainty remains, the relatively low exposure to sectors most affected by the pandemic and the sound starting position of the banking sector underpin its capacity to absorb potential future losses. So far, and thanks to the government’s policy response, total non-performing loans (consolidated data) have remained low for the Belgian banking sector, at 1.9% of assets as of March 2021, below the level recorded in recent years. In addition, Belgian prudential authorities have released EUR 6 billion of capital buffers for Belgian banks since the beginning of the crisis in order for the sector to build up provisions, continue its ongoing lending activities and provide sustainable solutions to borrowers facing difficulties. At the end of March 2021, Belgian banks had around EUR 22 billion of usable (free) capital, substantially higher than the EUR 15 billion at the end of 2019.

Overall, risks to financial stability remain moderate, although private sector debt, particularly mortgages have continued to increase since the beginning of 2020. Increasing household demand for house purchases contributed to a steady rise in house prices. The NBB’s model suggests that the residential real estate market had an average level of overvaluation of 14% in 2020. These factors, together with the GDP decline last year, have resulted in marginally higher household debt, at close to 68% of GDP at the end of 2020, up from 62% at the end of 2019.

To address the potential build-up of vulnerabilities in the real estate market, the NBB has made use of its macroprudential policy in recent years. Intended to address the deterioration in mortgage lending standards, the NBB adopted supervisory expectations for Belgian mortgage loans, with recommendations on loan-to-value (LTV) limits and limits for pockets of risk. Following these recommendations, LTVs above 90% at origination decreased throughout 2020 while similarly, the share of new mortgage loans with maturities at origination greater than twenty years was also successfully reduced.

Belgium’s Net External Asset Position Remains Significant

Belgium is a strong external creditor, which provides a buffer against external shocks. Averaging 48% of GDP over the past five years, Belgium’s net international investment asset position is one of the highest in Europe. Belgium’s current account remained close to equilibrium in recent years with a small deficit of 0.2% of GDP in 2020 expected to remain inferior to 1% of GDP over the 2021-23 period by the NBB. While Belgium is a small economy, its extensive trade linkages throughout Europe continue to support DBRS Morningstar’s positive qualitative assessment of the ‘Balance of Payments’ building block.


A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at

For more information on the Rating Committee decision, please see the Scorecard Indicators and Building Block Assessments.


For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

All figures are in euro (EUR) unless otherwise noted. Public finance statistics reported on a general government basis unless specified.

The principal methodology is the Global Methodology for Rating Sovereign Governments (July 9, 2021). Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021).

The sources of information used for this rating include the Ministry of Finance (Stability Programme for Belgium 2021-2024), National Bank of Belgium (Financial Stability Report 2021, Economic Projections for Belgium June 2021), Belgian Debt Agency (Updated 2021 financing requirements and funding plan), the European Commission (Analysis of the Recovery and Resilience Plan of Belgium June 2021), the Belgian statistical office (Statbel), OECD, ECB, Eurostat, IMF, World Bank, UNDP, BIS, Haver Analytics. The Social Progress Imperative (2020 Social Progress Index), Vision of Humanity (Institute for Economic and Peace: 2020 Global Peace Index). DBRS Morningstar considers the information available to it for the purposes of providing this rating to be of satisfactory quality.

With respect to FCA and ESMA regulations in the United Kingdom and European Union, respectively, this is an unsolicited credit rating. This credit rating was not initiated at the request of the issuer.

With Rated Entity or Related Third Party Participation: YES
With Access to Internal Documents: NO
With Access to Management: NO

DBRS Morningstar does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are under regular surveillance.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage:
The sensitivity analysis of the relevant key rating assumptions can be found at:

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Nicolas Fintzel, Senior Vice President, Global Sovereign Ratings
Rating Committee Chair: Nichola James, Managing Director, Co-Head of Sovereign Ratings, Global Sovereign Ratings
Initial Rating Date: November 11, 2011
Last Rating Date: February 12, 2021

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