11 Jul 2014
Fitch revises Netherlands outlook to stable; ratings affirmed at AAA
FXStreet (San Francisco) - Fitch Ratings announced its decision to revised up Outlook on The Netherlands from Negative to Stable. The Agency affirmed sovereign rating at AAA.
Fitch affirms that public finances has improved strongly regarding its previous analysis. Debt to GDP ratio inside AAA levels.
Key quotes:
Outlook for public finances has improved markedly since Fitch's previous review due to lower fiscal deficit forecasts and improved growth projections. Fitch estimates that gross general government debt will peak at 75% of GDP in 2014. This is earlier and at a lower level relative to our previous rating review in January 2014, which forecast a peak at 80% of GDP in 2018-19.
In Fitch's view, public debt dynamics are within the tolerance of a 'AAA' rating. We consider 80%-90% (ie, within this range, not at 90%) is normally the upper limit of (projected) public debt/GDP compatible with retaining a 'AAA' rating.
Fiscal performance in 2013 exceeded Fitch's expectations. The general government deficit stood at 2.5% of GDP, below Fitch's estimate at the time of the last rating review (3.3% of GDP). Fitch expects the deficit to decline to 2% of GDP by 2015.
The Dutch economy is gradually recovering. Although real GDP declined by 0.6% qoq in 1Q14 (0% on an annual basis), the figures were distorted by one-off factors. GDP components and subsequent high-frequency indicators point to a broad-based gradual recovery. Fitch has revised upwards its forecasts for real GDP growth to 0.7% in 2014 and 1.4% in 2015 (from 0% and 1%).
House prices bottomed out in 2H13, earlier than Fitch's previous baseline (mid-2014). Household consumption in the Netherlands was exceptionally weak in 2011-13 as high levels of mortgage debt, coupled with high loan-to-value ratios, made Dutch households particularly sensitive to swings in house prices.
Fitch affirms that public finances has improved strongly regarding its previous analysis. Debt to GDP ratio inside AAA levels.
Key quotes:
Outlook for public finances has improved markedly since Fitch's previous review due to lower fiscal deficit forecasts and improved growth projections. Fitch estimates that gross general government debt will peak at 75% of GDP in 2014. This is earlier and at a lower level relative to our previous rating review in January 2014, which forecast a peak at 80% of GDP in 2018-19.
In Fitch's view, public debt dynamics are within the tolerance of a 'AAA' rating. We consider 80%-90% (ie, within this range, not at 90%) is normally the upper limit of (projected) public debt/GDP compatible with retaining a 'AAA' rating.
Fiscal performance in 2013 exceeded Fitch's expectations. The general government deficit stood at 2.5% of GDP, below Fitch's estimate at the time of the last rating review (3.3% of GDP). Fitch expects the deficit to decline to 2% of GDP by 2015.
The Dutch economy is gradually recovering. Although real GDP declined by 0.6% qoq in 1Q14 (0% on an annual basis), the figures were distorted by one-off factors. GDP components and subsequent high-frequency indicators point to a broad-based gradual recovery. Fitch has revised upwards its forecasts for real GDP growth to 0.7% in 2014 and 1.4% in 2015 (from 0% and 1%).
House prices bottomed out in 2H13, earlier than Fitch's previous baseline (mid-2014). Household consumption in the Netherlands was exceptionally weak in 2011-13 as high levels of mortgage debt, coupled with high loan-to-value ratios, made Dutch households particularly sensitive to swings in house prices.