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���������ֳ�-London-23 January 2013: ���������ֳ� has revised the Outlooks on the Kingdom of Belgium's ratings to Stable from Negative. At the same time the agency has affirmed the Long-term foreign and local currency Issuer Default Ratings (IDR) at 'AA'. ���������ֳ� has also affirmed Belgium's Country Ceiling at 'AAA' and Short-term foreign currency IDR at 'F1+'.

RATING RATIONALE
The rating actions reflect the following key factors:

- The government succeeded in reducing the budget deficit by around 1% of GDP in 2012 as planned, to 2.9% (���������ֳ�'s estimate), despite a contraction in real GDP, which ���������ֳ� estimates at 0.4%. Additional contingency measures adopted in March, July and October helped keep the budget on track and highlighted the government's commitment to meet its targets.

- Belgium's rating is underpinned by its diversified economy, high income per capita and solid institutions. The robust external sector is supported by a net foreign asset position.

- Fiscal financing conditions have eased significantly since ���������ֳ�'s previous review in January 2012. The risk premium on the Belgian sovereign has declined and access to markets was not impaired at any time over 2012. Spill-over effects from the banking sector and the eurozone crisis have been contained and tail risks in the eurozone have eased.

- ���������ֳ� estimates that public debt - Belgium's main rating weakness - has peaked in 2012/2013 at fractionally under 100% of GDP, earlier and only moderately higher than in France and the UK (both rated 'AAA'/Negative). The agency projects the public debt-to-GDP ratio to decline to 79% by 2021 under its baseline scenario and debt dynamics are relatively robust to stylised shocks, mainly owing to the relatively favourable budgetary starting point in 2012 (a primary surplus of 0.7% of GDP).

- Another key weakness of Belgium's sovereign credit profile is the contingent liability from the banking sector. In 2012, the state had to inject capital of EUR2.9bn (0.8% of GDP) into Dexia for the second time since the start of the crisis (EUR3bn was injected in 2008) and provide additional guarantees covering Dexia's debt (these guarantees are projected to reach around EUR35bn in 2013). ���������ֳ� does not expect additional capital injections into Dexia in 2013. However, the group still has a large portfolio of residual assets including peripheral eurozone government bonds, which are being run down and could lead to further impairments and/or write-downs in the medium term. The other major Belgian banking groups are in a better situation and benefit from good asset quality and improving funding profiles. For example, in 2012 KBC Group repaid EUR3.5bn (plus a 15% premium) of the hybrid capital received from the state.

- Labour costs in Belgium have outpaced those of its three main trading partners (Germany, France and the Netherlands) causing losses in external competitiveness. In ���������ֳ�'s view, the wage indexation mechanism will continue to create substantial increases in unit labour costs. The recent amendment to the competition act and the changes to consumer price index basket do not address the competitiveness gap. Moreover, inefficiencies in the domestic energy market have resulted in higher inflation relative to the main trading partners.

RATING SENSITIVITIES
The main factors that could lead to a negative rating action are:
- A sizeable increase in banking system support, for example caused by a further deterioration in the credit quality of Dexia's residual assets, with a knock-on effect on public debt dynamics.
- Material slippage against fiscal targets resulting in a rising public debt ratio.
- A prolonged political standstill following the 2014 elections.
- A loss of competitiveness that adversely affects growth and the current account position over the medium term.

���������ֳ� does not see any strong upward rating pressure in the near term. The main factor that could lead to a positive rating action is:
- Over the medium term, a sustained decline in the public/debt GDP ratio.

KEY ASSUMPTIONS
���������ֳ� assumes the Belgian authorities will maintain a tight fiscal stance through the period leading up to the national and regional elections in mid-2014. Therefore the agency does not assume a marked pre-election increase in public spending.

In its debt sensitivity analysis, ���������ֳ� assumes a trend real GDP growth rate of 1.5%, GDP deflator of 2% and a gradual decrease in the headline deficit towards balance in 2018/19. Under these assumptions, public debt declines from its current level to 79% of GDP in 2021.

���������ֳ�'s estimate for the general government deficit of 2.9% of GDP in 2012 assumes that the recent capital injection in Dexia (0.8% of GDP) is treated as a financial transaction. However, Eurostat may classify the Dexia recapitalisation as a capital transfer, which would bring the deficit to 3.6% of GDP. A final decision will be made in April.

Belgium's growth outlook is sensitive to conditions in its main trading partners. ���������ֳ�'s forecast of mild growth of 0.2% in 2013 and resumption of an export-driven recovery from mid-2013 is based on the assumption that the recession in the eurozone proves to be shallow and short, followed by modest economic recovery.

���������ֳ� assumes there will be progress in deepening fiscal and financial integration at the eurozone level in line with commitments by eurozone policy makers. It also assumes that the risk of fragmentation of the eurozone remains low.

Contact:
Primary Analyst
Michele Napolitano
Director
+44 20 3530 1536
���������ֳ� Rating Limited
30 North Colonnade
London E14 5GN

Secondary Analyst
Douglas Renwick
Senior Director
+44 20 3530 1045

Committee Chairperson
Ed Parker
Managing Director
+44 20 3530 1176

Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22, Email: francoise.alos@fitchratings.com; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com.

Additional information is available on . The ratings above were unsolicited and have been provided by ���������ֳ� as a service to investors.

Applicable criteria, 'Sovereign Rating Methodology', dated 13 August 2012, are available at .

Applicable Criteria and Related Research: