« Defense spending and reform of personal income tax will cancel savings »: why Fitch is so critical of Belgium and De Wever

« This was to be expected after the two negative advice that our country already received under the previous government. After that, a reduction will always follow. This again shows the urgency of the situation in which we find ourselves. » Prime Minister Bart De Wever (N-VA) saw the rating reduction in our country by Ratingbureau Fitch in his own words. And he also has a clear explanation: under the previous government, Vivaldi, the budget derailed.

And that is partly true. Under the government of former Prime Minister Alexander De Croo (Open VLD), Fitch had negative prospects on our country. But yesterday the rating agency effectively proceeded to a reduction in creditworthiness – for the first time since 2016. And that is not only due to Vivaldi. In her report, Fitch does start with the fact that « the budget position of Belgium has been structurally weakened in recent years ». To subsequently tap the parts to Arizona: « Existing odds in the budget are only partially tackled, while increased defense expenditure increases the pressure. »

Fitch estimates that the budget deficit will increase to 5.5 percent of GDP in 2025 and « is expected to remain around 5 percent in the medium term ». What is well above the average of countries with an A or AA rating (2.6 percent and 1 percent of GDP deficiency respectively). According to the rating agency, major culprits are the aging costs – which rise by 0.3 percent GDP annually. And the higher defense spending, which this year has been raised in one go from 1.3 percent to 2 percent GDP to get the NATO standard.

No trust

Within the federal government, the impending savings and reforms that Arizona is planning is always pointed out. « It is now the time to continue and carry out the reforms from the coalition agreement as quickly as possible, » says De Wever. But Fitch is also particularly critical for that. « The federal government is planting savings of 29.5 billion euros, spread until 2029. Fitch only partially takes these measures into account. » The reason? Overestimating payback effects.

But they actually have no confidence that the efforts will be made effectively. « Moreover, many savings only fall late in the legislature, which creates uncertainty, » writes the rating agency. « Some savings have not yet been laid down by law and measures such as Defense expenditure and the reform of personal income tax will partly cancel savings. » Followed by the most painful sense: « Belgium has had trouble implementing promised saving measures in recent years. »

Complex state structure

Another factor where Fitch attaches great importance is the rising debt ratio, which rises to 110 percent of GDP by the end of 2026. To a lesser extent, the « weakened institutional strength » and « political complexity » also plays a role. « Long -term government formations hinder timely budget reforms, » ​​it says. And the state structure is also being taken up. « Strong decentralization limits federal control. More than 80 percent of government debt is federal, but the share of regions and communities is growing. »

Reforms that are praised are limiting unemployment benefits to two years and the approach to the long -term sick. Negative indicators, on the other hand, are productivity, which has fallen under the EU average and the economic growth that would decrease from 1.2 percent to 0.8 percent according to Fitch. With a decreasing trade balance due to American input rates. There are other headaches due to high energy prices and high wage costs for companies.

Fitch is very clear in her report and also serves a perspective. Our rating could lower even further if the public finances are still deteriorating whether the competitiveness of companies is further affected. Increasing again makes our rating as « there is clear evidence that the debt ratio will fall in the medium term ». So work on the store for Bart De Wever’s arizonar regulation.