The Netherlands had the outlook on its top credit rating cut to negative by Fitch Ratings as the Dutch economy suffers from a deepening housing slump and persistent bank system woes, Businessweek reported.
The ratings company maintained the country’s grade at AAA while removing its designation as stable, according to a statement released yesterday in London. As reasons for the move, it cited the level of public debt, problems at some Dutch banks, and a property-market slump which may shave a total of 25 percent off values from their peak.
“The outlook revision to negative from stable reflects Fitch’s view that the leveraged Dutch economy has suffered a number of shocks,” it said in the statement.
Investors often ignore ratings, evidenced by the rally in Treasuries after the U.S. lost its top grade at S&P in 2011. The action by Fitch comes days after the country took control of its fourth-biggest lender, SNS Reaal NV (SR), for 3.7 billion euros ($5 billion). While that alone isn’t enough to trigger a downgrade, Fitch said the move will add 1.6 percentage points to public debt this year, reaching a total of 74.4 percent of gross domestic product.
“The government’s multi-year fiscal consolidation plan is challenged by the difficult economic conditions,” Fitch said. “As highlighted by last week’s nationalisation” of SNS, “some banking system problems persist, with three of the four major banks having faced severe financial difficulties and needing external support since 2008.”
Fitch said the Dutch government probably won’t adopt additional fiscal measures and it therefore expects a general government deficit of 4 percent of GDP in 2013. There are still sufficient reasons to support the current sovereign rating, Fitch said.
“The sovereign rating is underpinned by the country’s flexible, diversified, high value-added and competitive economy as well as the current account surpluses and positive net international investment position,” the ratings company said.
