Dutch, Belgian Outlooks Raised to Stable by Moody’s

Moody’s raised its credit-rating outlooks on the Netherlands and Belgium to stable from negative, citing improved finances in both countries.

The Dutch outlook improved in part because of the reduced risks it will have to contribute to support other euro-area countries, especially Italy or Spain, Moody’s said. For Belgium, Moody’s cited decreased chances the government will have provide more support for the country’s banks. It affirmed the Aaa rating for the Netherlands and the Aa3 grade for Belgium.

“Signs that the Netherlands’ own domestic vulnerabilities -- specifically the weak growth outlook, high household indebtedness, and falling house prices -- have peaked and are likely to evolve in a positive direction” helped lift the outlook, the rating company said in its statement on the Netherlands late yesterday.

Belgian lenders’ “asset quality should improve going forward as the Belgian economy is expected to recover” and as banks “re-focus on the domestic market,” Moody’s said in a separate statement.

Moody’s has raised ratings or outlooks for euro-area economies in recent weeks, pointing to signs such as progress in overhauling their economies, healthier banking systems and improved outlooks for gross domestic product growth. It raised Spain’s rating on Feb. 21, and it switched the outlooks for Germany, Austria and Luxembourg to stable from negative on Feb. 28. In January, Standard & Poor’s took Portugal’s rating off “Creditwatch,” reducing the risk of a downgrade.

Accelerating Growth

Last year, the Netherlands exited its third economic recession since the global financial crisis started in 2008. Gross domestic product grew 0.7 percent in the fourth quarter, the most since 2010, when Greece and Ireland received international bailouts.

Belgium’s economy grew 0.5 percent in the fourth quarter, the fastest pace since the first quarter of 2011, paced by a recovery in consumer and business spending. Growth in Belgium’s economy, sixth-biggest in the euro region, will accelerate to 1.1 percent this year from 0.2 percent last year, the National Bank of Belgium forecast in December.

The Netherlands’ improving fiscal situation will lead to its debt-to-GDP ratio peaking in 2015, and Belgium should be able to reverse the rising ratio at about 100 percent this year or next, Moody’s said.

Dutch Outlook

The Dutch economy, the euro-area’s fifth-largest, is expected to grow 0.75 percent this year and 1.25 percent next year, driven by exports and investments, the government’s planning agency CPB said on March 4. It sees the country’s budget deficit at 2.9 percent of GDP this year, narrowing to 2.1 percent in 2015.

Investors routinely ignore ratings companies’ decisions. In almost half the instances, yields on government bonds fall when a rating action by Moody’s and rival Standard & Poor’s suggests they should climb, or they increase even as a change signals a decline, according to data compiled by Bloomberg on 314 upgrades, downgrades and outlook changes going back as far as the 1970s. When S&P downgraded the U.S. government in August 2011, bonds rose and pushed Treasury yields down to records.

The Netherlands in November lost its highest ranking with S&P, which cited weaker growth prospects. While the nation still holds a AAA rating at Fitch, that rating company has a negative outlook on the grade.

Belgium’s Aa3 rating is fourth-highest on the Moody’s scale, while S&P and Fitch give it their third-highest score, AA, both with stable outlooks.

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