UPDATE 1-Fitch revises Belgium's credit outlook to stable

Wed Jan 23, 2013 1:43pm EST

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BRUSSELS, Jan 23 (Reuters) - Credit ratings agency Fitch has revised its outlook for Belgium's sovereign debt to stable from negative, maintaining its rating at AA, two notches below the top rating.

Fitch said on Wednesday that the move reflected the budget consolidation work done by the Belgian federal government.

"Fitch assumes the Belgian authorities will maintain a tight fiscal stance through the period leading up to the national and regional elections in mid-2014," the agency said in a statement.

The country suffered downgrades in late 2011, when Belgium's political parties were locked in talks to form a federal government for 541 days and markets were concerned about the sustainability of its sovereign debt which is nearly as high as its annual economic output.

Belgium said earlier in January that its 2012 deficit was 2.96 percent of gross domestic product (GDP), above the 2.8 percent target it had initially set for the year but within the 3 percent mandated by European Union rules.

The country made savings of 14.5 billion euros ($19.3 billion) to bring the deficit down from 3.7 percent of GDP in 2011, and aims to reduce the deficit further to 2.15 percent of GDP this year with a 3.4 billion euro package.

Belgium, which is the euro zone's sixth largest economy, plans a balanced budget by 2015.

Its central bank forecasts the economy to stagnate in 2013, with Fitch expecting slight growth of 0.2 percent.

The country's debt level increased to 99.7 percent of GDP in 2012, the budget ministry said, up from 97.8 percent in 2011.

Fitch said it expected the public debt-to-GDP ratio to decline to 79 percent by 2021 adding that debt dynamics were relatively robust.

Worries over Belgium's sovereign debt have subsided and the country has seen its borrowing costs over 10 years decline to record lows of 2.252 percent in November 2012 from close to 6 percent in late 2011.

Standard & Poor's also has a AA rating on Belgium but with a negative outlook. Moody's Investors Service rates the country one notch lower at Aa3 with a negative outlook.

Belgium's finance ministry had no immediate comment on Fitch's decision. (Reporting by Robert-Jan Bartunek; editing by Ron Askew)

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