Press Release

Morningstar DBRS Confirms the Kingdom of Belgium at AA, Stable Trend

January 26, 2024

DBRS Ratings GmbH (Morningstar DBRS) confirmed the Kingdom of Belgium’s Long-Term Foreign and Local Currency – Issuer Ratings at AA. At the same time, DBRS Morningstar confirmed Belgium’s Short-Term Foreign and Local Currency – Issuer Ratings at R-1 (high). The trend on all ratings is Stable.


The Stable trend reflects Morningstar DBRS’ view that Belgium’s credit fundamentals remain solid. The economy expanded at a faster pace than most other euro area economies in 2023, driven by robust domestic demand. At the same time, fiscal balances deteriorated with the general government budget deficit widening to an estimated 4.3% of GDP in 2023 from 3.5% in 2022 as the indexation of public wages and social benefits to inflation and increases in several social benefits have pushed up nominal spending levels. In the absence of additional fiscal consolidation measures, budgetary pressures are projected to increase gradually as a result of rising interest expenditures and ageing costs. The implementation of large fiscal consolidation measures has thus far been impeded by diverging fiscal policy objectives in the heterogenous seven-party government coalition. Looking ahead, Morningstar DBRS takes the view that the reinstatement of European Union (EU) fiscal rules is set to raise pressure on the government to step up fiscal adjustment efforts over the next years. This, in turn, should contain budgetary pressures and the increase in the public debt ratio in the medium-term. An important downside risk in this regard, however, is a potential policy gridlock in case the June 2024 national and regional elections aggravate the fragmentation of the domestic political landscape.

Belgium’s AA credit ratings are supported by its wealthy and diversified economy, its strong net external asset position, large household savings and high institutional quality. These credit strengths counterbalance the challenges associated with the economy’s exposure to external shocks given its small size and openness and the fragmentation of the political landscape between the main linguistic groups and across the political spectrum. While high public debt is an important credit weakness, debt affordability continues to benefit from a still moderate, albeit rising, interest burden as the pass-through of higher borrowing costs has been attenuated by comparatively long debt maturities.


An upgrade of the credit ratings could occur if the government narrows its budget deficit in a structural manner and the public debt ratio starts to follow a clear downward path. The credit ratings could be downgraded if growth prospects or fiscal balances deteriorate markedly and the increase in the public debt ratio is not contained over the medium-term.


Belgian Economy Grew at a Faster Pace Than Most European Peers in 2023

The Belgian economy registered comparatively strong growth over the past year on the back of robust domestic demand. The National Bank of Belgium (NBB) estimates real GDP to have expanded by 1.5% in 2023, compared with a growth rate of just 0.6% for the total euro area. Private consumption held up better than in most other euro area countries as household purchasing power was bolstered by the (time-delayed) indexation of wages to the health index, a measure of consumer price inflation. Furthermore, notwithstanding a decrease in housing investment, gross fixed capital investment rose by a large 5.4% as businesses stepped up investments in automation and green technologies. Looking ahead, NBB forecasts real GDP growth to decelerate moderately to 1.3% in 2024 and to 1.2% in 2025 as investment activity is projected to normalize. Furthermore, net exports are likely to be a drag on growth as robust domestic demand is projected to bolster import demand. In addition, wage indexation has led to a comparatively large increase in labour costs for Belgian exporters which, in turn, has weakened their external price competitiveness. In general, the credit profile is supported by the wealthy and diversified nature of the Belgian economy. At the same time, Belgium faces important structural challenges such as raising the economy’s comparatively low labour force participation rate which is essential for mitigating the detrimental impact of population ageing on labour supply.

Government Budget Deficit is Projected to Continue to Widen In the Absence of Large Fiscal Consolidation Measures

Fiscal balances deteriorated over the past year, notwithstanding comparatively strong economic growth dynamics. NBB estimates the general government budget deficit to have widened to 4.3% of GDP in 2023 from 3.5% in 2022. This deterioration was driven by an upswing in primary current expenditure which rose by a large 6.9% year-on-year during the first nine months of 2023 as the indexation of public sector wages and social benefits to inflation, increases in several social benefits and rising age-related costs have pushed up nominal spending levels. Moreover, fiscal pressures in 2023 were aggravated by a slowdown in tax revenue growth which partly resulted from the indexation of personal income tax brackets to high inflation last year. Looking ahead, fiscal pressures are projected to continue to increase over the next years. Based on current policy settings, NBB forecasts the general government budget deficit to widen to 4.4% of GDP in 2024 and 4.8% in 2025 related to rising interest expenditures and increasing ageing costs. The High Council of Finance projects ageing-related budgetary costs (e.g. pensions, health care) to increase by 1.8% of GDP between 2022 and 2028.

In the medium-term, the budget deficit is projected to continue to increase in the event the government does not adopt additional fiscal consolidation measures. In a no-policy-change scenario, the IMF forecasts the headline budget deficit to rise to 5.4% by 2028. In addition, the primary deficit would be 2.3 percentage points of GDP larger than the debt stabilizing primary balance. While the adoption of large fiscal consolidation measures in previous years had been impeded by diverging views on fiscal policy within the heterogenous seven-party coalition government, maintaining the current path of fiscal policy is likely to become an increasingly untenable policy option for the new Belgian government given the reinstatement of EU fiscal rules. Belgium’s fiscal adjustment needs for complying with new EU fiscal rules are very large both from a cross-country and a historical perspective. Morningstar DBRS takes the view that the large fiscal adjustment needs under EU fiscal rules are set to raise pressure on the new Belgian government after the June 2024 elections to adopt far-reaching consolidation measures.

High Public Debt Stock Is Important Credit Weakness but Debt Affordability Benefits From Still Moderate Interest Burden

Government debt is high and - based on current policy settings - projected to increase moderately over the next years. NBB forecasts general government debt to rise from 104.3% of GDP at end 2022 to 107.2% at end 2025 stemming from large government budget deficits and a deceleration in nominal GDP growth owing to a slowdown in inflation. However, debt affordability continues to benefit from a moderate interest burden. While the recent increase in nominal interest rates is projected to raise interest expenditure to a still moderate 2.2% of GDP in 2025 from 1.5% in 2022, the interest burden is forecast to remain lower than during much of the past decade, as interest expenditure averaged 2.7% of GDP between 2010 and 2021. The pass-through of the recent increase in government borrowing costs on interest payments is attenuated by a comparatively long average tenor of government debt. The average maturity of the central government debt was 10.4 years in December 2023 up from 8.0 years in December 2015, as the government extended debt maturities in previous years in order to lock-in historically low rates.

High Institutional Strength but Potential Polarization of Domestic Political Landscape Is an Important Downside Risk For Policymaking

Belgium’s credit ratings are supported by a high institutional strength as the country is characterised by a high rule of law, low levels of corruption and stable political and economic institutions. At the same time, the domestic political landscape is fragmented between the main linguistic groups (Flemish and Walloon) and across the political spectrum. This, in turn, has delayed government formation after previous elections. The heterogenous political composition of the current government has also impeded the implementation of structural reforms, particularly with regard to fiscal policy (e.g. tax reform, fiscal consolidation). In terms of the June 2024 general elections, Morningstar DBRS notes that current polling points to a further polarization of the political landscape which might complicate reaching consensus in important policy areas. While not considered the most likely outcome, a potential political gridlock constitutes an important downside risk for policymaking. Overall, the deep and structural political divisions in the country, leading to lengthy processes of government formation and complicating the adoption of structural reforms, weigh negatively on Morningstar DBRS’ qualitative adjustment in the ‘Political Environment’ building block assessment.

Current Financial Condition of Banking Sector is Strong But Headwinds Have Increased

The current financial condition of the domestic banking sector is strong. The banking sector has strong capital buffers with an average Tier 1 capital ratio of 18.1% at end-September 2023. Furthermore, the sector-wide NPL ratio stood at a low 1.5% at end-September 2023. Looking ahead, pockets of vulnerability for asset quality might arise from the increase in interest rates and the accompanying cooling in real estate markets. The exposure of Belgian banks to commercial and residential real estate is higher than in most other euro area economies. This, however, is partly mitigated by the fact that the increase in Belgian housing prices has been less pronounced over the past years than in several other countries. Furthermore, the repayment capacity of most mortgage borrowers is supported by large household assets. The aggregate net worth of households (excl. pension entitlements) in Belgium stood at a large 187% of GDP in June 2023 compared to an average of 122% for the euro area.

In terms of bank loans to non-financial corporates, Morningstar DBRS notes that the share of Stage 2 loans in total gross loans increased to 17.3% at end-September 2023, from 13.0% at end-2019. These loans could present a risk to asset quality in the future, as part of these loans could translate into NPLs. This applies particularly in view of the recent increase in interest rates and the upswing of companies’ wage bills on the back of wage indexation, as these factors might weaken the repayment capacity of some companies. Morningstar DBRS takes a conservative approach to the financial risks faced by the banking sector and applies a negative qualitative adjustment to the ‘Monetary Policy and Financial Stability’ building block assessment.

External Finances Benefit From a Large Net External Asset Position

External finances recovered from the energy price shock over the course of last year. NBB estimates the current account balance to have posted a surplus of 0.1% of GDP in 2023 after a deficit of 1.0% in 2022 as the decline in global energy prices lowered the economy’s energy import bill. Furthermore, external finances benefitted from rising inflows of investment income as the increase in global interest rates – in tandem with the economy’s large net external creditor position - raised primary income surpluses. However, NBB forecasts the current account balance to turn into modest deficits of 0.1% in 2024 and of 0.5% in 2025 as the comparatively strong increase in Belgian labour costs is projected to impair international price competitiveness of the Belgian export sector. Despite the projected modest deterioration in the current account balance, Morningstar DBRS continues to view Belgium’s external position as strong due to its large net external creditor position. Belgium’s net international investment position amounted to 62.4% of GDP in September 2023, which is one of the highest among EU countries. This creditor position results primarily from large net assets in portfolio investment (37.6% of GDP) and direct investment (29.1%). While Belgium is a small economy, its extensive trade linkages throughout Europe continue to support Morningstar DBRS’ positive qualitative adjustment of the ‘Balance of Payments’ building block assessment.


There were no Environmental, Social or Governance factors that had a relevant or significant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024)

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


All figures are in Euros 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 (06 October 2023) In addition, Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings in its consideration of ESG factors.

The credit rating methodologies used in the analysis of this transaction can be found at:

The sources of information used for these credit ratings include Belgium Ministry of Finance (Draft Budgetary Plan Belgium 2024, October 2023), Belgian Debt Agency (The 2024 Gross Borrowing Requirements & Funding Plan, December 2023), National Bank of Belgium (Economic Projections for Belgium – December 2023; Financial Stability Report 2023), High Council of Finance (Study Committee on Ageing: Annual Report 2023, July 2023), Statbel, Eurostat, European Commission (Commission Opinion on the Draft Budgetary Plan of Belgium, 21 November 2023; European Economic Forecast, Autumn 2023), European Central Bank, OECD (Housing Prices), BIS, IMF (World Economic Outlook October 2023; International Financial Statistics; Belgium: 2023 Article IV Consultation, December 2023; Belgium: Selected Issues, December 2023), World Bank, International Energy Agency, European Environment Agency (EEA Effort Sharing Decision Dataset, October 2023), Social Progress Index, Global Peace Index, Haver Analytics. Morningstar DBRS considers the information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

With respect to FCA and ESMA regulations in the United Kingdom and European Union, respectively, these are unsolicited credit ratings. These credit ratings were 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

Morningstar DBRS 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.

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

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see

The sensitivity analysis of the relevant key credit rating assumptions can be found at:

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Yesenn El-Radhi, Vice President, Credit Ratings, Global Sovereign Ratings
Rating Committee Chair: Nichola James, Managing Director, Credit Ratings, Co-Head of Global Sovereign Ratings
Initial Rating Date: November 11, 2011
Last Rating Date: August 04, 2023

For more information on this credit or on this industry, visit