Belgium Has Credit Rating Cut by Fitch as Deficit Seen Rising

(Bloomberg) -- Fitch Ratings cut Belgium’s credit rating for the first time in almost five years as the government struggles to reach its goal of returning to a balanced budget.

In a statement Friday, Fitch announced a one-step reduction to AA- from AA. That’s equivalent to Belgium’s credit score of Aa3 at Moody’s and one step below the AA rating assigned by Standard & Poor’s. The outlook on the rating is stable, Fitch said.

Fitch said it raised its forecast for Belgium’s 2016 budget deficit to 3 percent of gross domestic product, from 2.7 percent in its previous review. Gross public debt, seen at 107 percent percent of GDP in 2016, is the highest among sovereigns in the AA group, according to the ratings company.

Delivering on a pledge of bringing down Europe’s highest labor taxes, Prime Minister Charles Michel’s government is struggling to finance the reduction amid higher security expenditure following the March terrorist attacks in Brussels.

Additional uncertainty comes from the potential impact of the U.K.’s decision to leave the European Union, with the Belgian economy being more exposed to U.K. demand than most of its EU peers.