Belgium: Stable rating, unresolved fiscal challenges

Belgium’s stable AA- sovereign rating masks fiscal risks that will persist unless coalition parties agree on credible savings and deliver a 2027 budget.

• S&P affirmed Belgium’s AA- rating with a stable outlook, making it the only one of the three major rating agencies to keep Belgium in the double-A category.
• The rating is supported by Belgium’s resilient, diversified economy and the Federal Debt Agency’s strategy of extending debt maturities, but the deficit is still expected to remain above 5% of GDP and the debt-to-GDP ratio is not stabilising.
• S&P doubts that the federal government can finalise its 2027 budget on time, following the delayed approval of the 2026 budget in March 2026.
• Coalition parties had agreed to negotiate a €10bn savings package over three years, but talks stalled over a proposed VAT increase and disagreements on emergency measures, including freezing automatic income indexation.
• The parties rejected Prime Minister Bart De Wever’s proposals to focus first on the 2027 budget or adopt a fallback package, although they have resumed negotiations on the full savings plan.

Takeaway: A timely agreement would provide a 2027 budget and fiscal roadmap and reassure bond markets, while prolonged deadlock could undermine government credibility and intensify pressure in an already nervous sovereign-bond market.