The low interest rates that the Netherlands currently pays on its government debts ensure that they remain sustainable. Partly for this reason, the credit rating of Netherlands remains at the highest possible rating (Aaa) despite the corona crisis, according to credit rating agency Moody’s in a survey. According to the credit bureau, the biggest challenge lies in the future: the Netherlands must be disciplined in reducing its debt when the pandemic is over.
In recent months, developed economies such as the Netherlands have borrowed much more money than usual to pay corona support and healthcare costs. For these countries, the ratio of debt to gross domestic product (GDP) will increase by an average of 19 percentage points this year, Moody’s calculations show. The credit rating agency further notes that this time government debt rose faster and was larger in magnitude than in the 2008 financial crisis. Canada, France, Italy, Japan, Spain, the United Kingdom and the United States are the countries with the largest increases in government bonds.
Rising debts normally lead to a considerably larger interest burden for the government. But because the interest rate is currently very low, that is not so bad. In addition, interest rates are expected to remain at that low level for a long time to come, Moody’s said. This gives the credit rating agency more confidence that the expanding debt mountain will remain sustainable for the time being.