**According to the rating agency, Flanders no longer deserves a higher rating than Belgium, given the budgetary outlook.**
One year after Moody’s warned of a cut, the cut is now a fact: the credit score for Flanders goes from Aa2 to Aa3.
To be clear: that is a score that is still consistent with the label ‘top debtor’, so that Flanders – also in view of the ultra flexible policy of the European Central Bank – does not immediately have to fear a higher interest rate on fresh debt issues. Flanders’ access to the credit markets is unquestionable, as the record issuances of 7.5 and 4 billion in 2020 and 2021 respectively illustrate,” states Moody’s analyst Matthieu Collette in a statement.
But the cut is nevertheless symbolically important: for the first time in years, Flanders no longer has a better credit score than the parent ‘sovereign state’, i.e. the Kingdom of Belgium. A fact that the previous Flemish budget minister, Bart Tommelein, regularly boasted about. At the end of November, Moody’s maintained Belgium’s rating at Aa3.
The downgrade reflects the long-term impact that the corona crisis will have on Flemish finances, which no longer justify a higher rating than the sovereign state above,’ writes Collette.
After a blood-red 2021 – with a budget deficit estimated by the rating agency at 19 percent of revenues – Flanders is expected to face a deficit of 5 to 10 percent of revenues in the coming years as well. The result: a mountain of debt that will amount to 85 per cent of revenues by 2024, almost double the 43 per cent at the end of 2019.
The reason? The Flemish government is now living on a bigger footing with structurally higher expenditure, while the revenues are linked to at best sedentary growth in the coming years. Moody’s: ‘The economy and thus revenues will return to lower growth potential, while spending is higher due to higher public investments.’
**Wallonia**
There is one relative consolation: Flanders is doing better than French-speaking Belgium. Moody’s also downgraded the rating of Wallonia and the French-speaking Community, to A3 and A2 respectively. The credit score of Wallonia remains three steps below that of Flanders.
The assessment of Walloon finances is dry but sharp: ‘Moody’s expects Walloon debt to rise to an unprecedented 236 percent of revenues by the end of 2021, from 176 percent at the end of 2019’.
The rating agency also notes that Wallonia’s €7.6 billion recovery plan will further increase the debt mountain. Especially since only one fifth of that expenditure is ‘budget neutral’, via support from the European Recovery Fund (RRF).
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**According to the rating agency, Flanders no longer deserves a higher rating than Belgium, given the budgetary outlook.**
One year after Moody’s warned of a cut, the cut is now a fact: the credit score for Flanders goes from Aa2 to Aa3.
To be clear: that is a score that is still consistent with the label ‘top debtor’, so that Flanders – also in view of the ultra flexible policy of the European Central Bank – does not immediately have to fear a higher interest rate on fresh debt issues. Flanders’ access to the credit markets is unquestionable, as the record issuances of 7.5 and 4 billion in 2020 and 2021 respectively illustrate,” states Moody’s analyst Matthieu Collette in a statement.
But the cut is nevertheless symbolically important: for the first time in years, Flanders no longer has a better credit score than the parent ‘sovereign state’, i.e. the Kingdom of Belgium. A fact that the previous Flemish budget minister, Bart Tommelein, regularly boasted about. At the end of November, Moody’s maintained Belgium’s rating at Aa3.
The downgrade reflects the long-term impact that the corona crisis will have on Flemish finances, which no longer justify a higher rating than the sovereign state above,’ writes Collette.
After a blood-red 2021 – with a budget deficit estimated by the rating agency at 19 percent of revenues – Flanders is expected to face a deficit of 5 to 10 percent of revenues in the coming years as well. The result: a mountain of debt that will amount to 85 per cent of revenues by 2024, almost double the 43 per cent at the end of 2019.
The reason? The Flemish government is now living on a bigger footing with structurally higher expenditure, while the revenues are linked to at best sedentary growth in the coming years. Moody’s: ‘The economy and thus revenues will return to lower growth potential, while spending is higher due to higher public investments.’
**Wallonia**
There is one relative consolation: Flanders is doing better than French-speaking Belgium. Moody’s also downgraded the rating of Wallonia and the French-speaking Community, to A3 and A2 respectively. The credit score of Wallonia remains three steps below that of Flanders.
The assessment of Walloon finances is dry but sharp: ‘Moody’s expects Walloon debt to rise to an unprecedented 236 percent of revenues by the end of 2021, from 176 percent at the end of 2019’.
The rating agency also notes that Wallonia’s €7.6 billion recovery plan will further increase the debt mountain. Especially since only one fifth of that expenditure is ‘budget neutral’, via support from the European Recovery Fund (RRF).
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