The Belgian economy is set to grow steadily by around 1.4% per year between now and 2029, but will struggle to keep pace with the country's budget deficit, which could grow to 5.8% over the same period.
The latest economic outlook published by the Federal Planning Bureau (FPB) on Friday forecasts that Belgium's Gross Domestic Product (GDP) should grow between 1.3% and 1.4% per year between 2025 and 2029. The FPB says that this will mainly be driven by private consumption, while the pace of business investment is "slowing somewhat".
The country's public deficit is also growing. The FPB predicts that this will rise to 4.5% of GDP this year, and gradually widen to 5.8% of GDP by 2029 (without intervention).
This is mainly due to the increase in pension and healthcare expenditure, as well as higher interest being charged on the country's national debt (which is expected to increase from 106% of GDP in 2024 to 117% of GDP in 2029).
Budget deficit to 'worsen substantially'
A separate report recently published by Belgium's national bank also noted that the Federal Government's budget balance is forecast to "worsen substantially" over the next two years.
The FPB noted that the average growth of pension expenditure is expected to be 2.7%, "almost twice real GDP growth." Meanwhile, healthcare expenditure is expected to grow by 3.2% year on year between 2025 and 2029, and sickness and disability benefits by 2.3% per year.
The report predicts that, while inflation has exceeded 3% in recent months, consumer prices should start to weaken at the end of the year, with inflation reaching 2% in 2025 and stabilising at 1.8% each year after that.
The FPB predicts that people's real disposable incomes will increase by around 1.4% per year between 2026 and 2029, and the real value of social benefits will increase by 2% per year. However on the expenditure side, taxes on household income are expected to rise by 2.1% each year on average, in real terms.
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Household spending is expected to increase by 1.4% this year, and grow by 1.5% each year after that until 2029. Regardless, households are still expected to continue saving a larger share of their income than before the pandemic.
The report also predicts that there should be around 43,000 jobs created in Belgium each year between 2025 and 2029, with the employment rate expected to increase from 72.1% in 2023 to 74.1% in 2029.
The FPB emphasised that its forecast is based on unchanged policy, and does not take into account any new measures that future governments take and their impact on economic growth, or budgetary consolidation measures that might be taken in response to new EU budgetary rules.
