Brussels (Brussels Morning) – The Belgian budget will be 4.4 per cent in the red by the end of this year, and if policy remains unruffled, it will record a deficit of 4.7 per cent by the end of next year. This is what the European Commission anticipates in its new economic forecasts. The government debt will increase from 105.0 per cent in 2024 to 106.6 per cent in 2025.
It was already understood that Belgium had ended 2023 with a deficit of 4.4 per cent. That deficit will remain at the exact level in 2024, despite the complete phasing out of the support actions taken in the context of the energy crisis, the Commission reports.
What factors contribute to Belgium’s budget deficit reaching 4.7% in 2025?
The structurally growing current expenditure (especially to pay pensions) and the higher interest rates on the national debt are to blame. The reality that the deficit threatens to increase to 4.7 per cent in 2025, at least if policy remains intact, also has to do with the pension bill and interest costs.
The debt ratio was 105.2 per cent at the end of last year and is anticipated to decrease slightly this year to 105.0 per cent. This is largely the outcome of the 1-year government bond that was issued and which provided the government with a considerable amount of cash. However, the rising budget deficit threatens to increase the debt to 106.7 per cent in 2025.
How does Belgium’s deficit and debt ratio compare to Maastricht standards?
With these figures, Belgium is far beyond the Maastricht standards, which ask EU countries to limit their deficit to 3 per cent of GDP and their debt ratio to 60 per cent. After several years of more flexible application of the rules, the Commission desires to enforce the standards again on the basis of new rules.
The report per Member State is expected on June 19, with a focus on the countries that disregarded the three per cent standard in 2023 – such as Belgium.
What actions might the European Commission take regarding Belgium’s budget situation?
Under the new fiscal rules, assumed only a few weeks ago, the application of the extreme deficit procedure based on public debt will become stricter in particular.
Next month it will not only become apparent whether the Commission will initiate proceedings against Belgium, but it will also draw up proposals for the Member States for a new multi-annual budget, which should put the budget back in order over a period of four to seven years. By September 20 at the latest, Member States must introduce their budget plans, including attention to priority reforms and investments.
What term did Commissioner Paolo Gentiloni use to describe the upcoming budget discussions?
At the press conference raising the new economic prospects, Commissioner for Economy and Finance Paolo Gentiloni expressed the EU is facing a “hot budget summer”. He revealed that after the European elections there will also be a transition period for the EU institutions, but that budget rules will be respected, albeit “with the necessary flexibility”.
In its report, the Commission not only discusses the budgetary condition of the Member States. Across the eurozone, the economy would expand by 0.8 per cent this year and 1.4 per cent next year, she predicts. This growth is due to growing private consumption, as a direct result of increasing purchasing power.
Belgium is following this European trend, with an anticipated growth of 1.3 per cent in 2024 and 1.4 per cent in 2025. In Belgium, buying power is supported by the automatic indexation of wages and social benefits, the Commission points out. She calls the entire Belgian economy “resilient”.
