Belgium’s central bank, the NBB, has warned the next federal government will have to make cuts or generate fresh income to the tune of over 10 billion euros just in order to stabilise the budget deficit. However, it’s not all doom and gloom, the Belgian economy grew more than the European average last year.
The bank assumes the budget deficit will remain high: 4.3 per cent of gross domestic product (GDP) in 2023, 4.4 per cent in 2024 and 4.8 and 5.2 per cent in 2025 and 2026.
Public debt is projected to rise to over 109 per cent of GDP by 2026. "Unsustainable," says the bank. The central bank's projections are "under unchanged policies" i.e. if the government does not change matters. NBB governor Pierre Wunsch believes the government will intervene . "If we do nothing, we will hit a wall," he warns.
Intervention probably equals savings or cuts and these will be significant: "Just to stabilise the deficit, 10 billion euros must be saved over the next five years, or 2 billion euros a year".
The National Bank adds that Belgium is one of the few countries in the eurozone that does not see its budget deficit shrink. "Together with Slovakia, France and Italy, we form a group of countries that are struggling to get public finances under control," Wunsch notes.
Economic growth
The budget deficit is the pain point of the Belgian economy but there is also good news: the Belgian economy grew by 1.5 per cent last year. Belgium is doing better than the European average.
In part, this is due to the automatic indexation of wages. It’s a system that is unique in Europe and which allows Belgians' spending power to remain unchanged. Companies are also supporting growth. They are investing heavily, often in digitalisation, because they struggle to find staff.