By Jan Hennop, AFP
THE HAGUE–The Netherlands on Friday dropped out of the exclusive club of AAA rated countries after Standard & Poor’s agency downgraded it to AA+, citing weakening growth prospects. The surprising downgrade leaves only three remaining countries in the 17-nation eurozone with the coveted top rating from all three of the world’s major agencies. S&P on Friday also upped Cyprus’ long-term rating to a B- and improved Spain’s BBB- negative outlook to stable.
“The downgrade reflects our opinion that the Netherlands’ growth prospects are now weaker than we had previously anticipated,” S&P wrote in a statement. The “real GDP (gross domestic product) per capita trend growth rate is persistently lower than that of peers in similarly high levels of economic development.” The long-term outlook for the Netherlands, the eurozone’s fifth-largest economy, remained stable. The world’s two other major ratings agencies, Fitch and Moody’s have so far maintained the lowland country’s rating at AAA. Earlier this month the Dutch central statistics office (CBS) said the economy slowly moved out of recession in the third quarter with growth of 0.1 percent. However, year-on-year the Dutch economy shrank by 0.6 percent, the CBS added. Explaining the downgrade, S&P specifically pointed to a drop in consumer spending, dampened by high household debt levels and falling property prices. Quoting Dutch Central Bank (DNB) figures, S&P said that 16.0 percent of all Dutch households in a country of 16.7 million people have mortgage debts higher than the values of their properties. The statistics office said in March that real disposable income last year for households in the Netherlands has fallen for the fifth year in a row, the longest run since 1982. “We do not anticipate that the real economic output will surpass 2008 levels before 2017,” S&P added. However, although less promising economic prospects “will make it more challenging for the government to achieve its fiscal targets, we believe the policy consensus in favor of containing public debt and deficits will be maintained,” the agency said.