Belgium's budget deficit is projected to surge by €2 billion more than previously forecast next year, as lower-than-expected growth figures and persistently high inflation continue to darken the country's economic outlook.
On Thursday, the Monitoring Committee – a team of senior public officials tasked with overseeing the budget – predicted that Belgium's deficit will reach €18.6 billion (or 3.1% of annual GDP) in 2024. This is €1.97 billion greater than the Committee had forecast in its last report in July.
In addition, the Committee noted that Belgium will have to trim the budget by at least €815 million next year if it is to abide by previous promises made to the European Commission to keep its deficit below the EU's fiscal threshold of 3% of annual GDP from 2024.
Causes for concern
The Committee explained that key reasons for the upwardly revised projection include increases in social pensions and welfare payments worth hundreds of millions of euros each.
However, the Committee emphasised that the revision is also partially a consequence of shrinking growth, which not only lowers potential tax revenue but also increases the size of the deficit as a proportion of GDP.
Earlier this month, the Federal Planning Bureau (FPB), the Belgian government's leading economic forecaster, predicted that Belgium's economy will grow by just 1.0% this year before expanding by 1.3% in 2024: 0.3 percentage points fewer each year than previously expected.
The FPB cited "a deterioration in the international environment", and in particular a decrease in global trade, as the primary reason for the downward revision.
Adding to the pessimism, the FPB predicted that Belgium's inflation rate will fall from 4.4% this year to just 4.1% in 2024: 0.8 percentage points higher than formerly anticipated and more than double the European Central Bank's (ECB) 2% target rate.
'The Greece of the North Sea'?
Speaking at the United Nations General Assembly in New York on Thursday, Prime Minister Alexander De Croo issued a defiant rebuke to critics of his handling of the Belgian economy.
"In the difficult circumstances, we must remember what we have achieved," he said. "We can listen to Cassandra, who says that Belgium is the 'Greece of the North Sea'. But is this really the case? I have a lot of respect for the Greeks, but Belgium is twice as prosperous as Greece."
Echoing previous comments, the Belgian leader also defended his government's decision to provide financial assistance to businesses and citizens during the Covid-19 pandemic and subsequent energy crisis, claiming that this was necessary to prevent "thousands" of bankruptcies and "hundreds of thousands" of job losses.
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Furthermore, De Croo suggested that Belgium's fiscal predicament is in many ways comparable to – and in some ways better than – that of other industrialised countries.
"We say that we have a high debt, but when we compare it to other countries... Are we saying that Canada is on the brink? However, it is a country with two languages that goes through an institutional crisis from time to time and which has a higher public debt than Belgium."
"We are continuing the work diligently," he added. "Budgetarily, we are moving in the right direction."
