The Belgian economy will fare worse than nearly every other European country over the next couple of years, according to newly published forecasts by the International Monetary Fund (IMF).
In its most recent Regional Economic Outlook report for Europe, the fund predicted that Belgium's growth rate will slow from 1% this year to 0.9% in 2024: 0.2 percentage points less than previously predicted.
The fund also estimated that the country's economy will expand only modestly in 2025 to 1.2%: barely half Europe's average forecast growth rate of 2.1%. Among EU countries, only Italy (1.0%) is expected to experience slower growth.
'Risks remain substantial'
The IMF did not mention Belgium explicitly in its written discussion. However, its general policy recommendations (as well as previous reports) make it clear that it believes Belgium – which has one of the highest debt-to-GDP ratios in the EU – should make significant budget cuts over the next few years.
"In high-debt countries, decisive and sustained fiscal adjustments will be needed to secure sustainability, especially given the prospects of higher borrowing costs in the future," the report noted.
It added that such "fiscal consolidation" would "complement monetary policy in the fight against inflation".
'There should be no trade-off'
Such policy prescriptions were strongly criticised by workers' groups.
"There should be no trade-off between the well-being of workers across Europe and fighting inflation," said European Trade Union Confederation (ETUC) General Secretary Esther Lynch.
Lynch also stressed that the IMF's own economists recently attributed Europe's high inflation rate to soaring corporate profits over the past two years.
"We have other tools at our disposal [to fight inflation], notably windfall taxes on the excess profits that have driven inflation, and fair and progressive taxation systems," she noted.
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The IMF, however, argued that such windfall taxes "should be avoided as they distort credit availability and costs".
It also noted that "robust [capital] buffers are even more important at a time like the current one", where "risks remain substantial on the geopolitical front", including weaker-than-expected growth in China and a possible escalation of Russia's war in Ukraine.
The fund also did not call for a more progressive tax system but instead recommended "broadening the tax base" and improving tax collection efficiency.
