Belgian budget deficit could rise to 4.9% of GDP by 2025 without policy changes, the European Commission warned in its latest economic forecast on Friday.
The main concerns raised were increased spending on pensions, social benefits and interest payments on national debt, which could exceed 105% of GDP next year.
The Commission stated that Belgium and other EU countries must strike a balance between reducing their debt and stimulating economic growth.
Belgium is expected to close 2024 with a growth of 1.1%. Growth in Belgium is projected to continue at 1.2% in 2025 and 1.5% in 2026, outperforming Germany (0.7%) and France (0.8%) but trailing behind the Netherlands (1.6%) and Luxembourg (2.3%).
However, the Commission warns of increased uncertainty that could impact the European economy. The Russian invasion of Ukraine and the Middle East conflict pose geopolitical risks and threats to European energy supply security. Additionally, new protectionist measures by EU trade partners could disrupt global trade flows and affect the European open economy, though no specific countries were mentioned.
Belgium is set to record the highest increase in consumer prices in the eurozone this year, with an inflation rate forecast at 4.4% for 2024, while the eurozone average is 2.4%.
The sharp price rises in Belgium are attributed to the withdrawal of energy support and the monthly indexation of variable electricity and gas contracts. However, with forecasted inflation rates of 2.9% in 2025 and 1.9% in 2026, Belgium is expected to align more closely with the eurozone averages of 2.1% and 1.9%.
The Commission also foresees a growing Belgian budget deficit: 4.6% of GDP in 2024, 4.9% in 2025, and 5.3% in 2026. This is tied to the ongoing Federal Government negotiations and rising pension and social benefit costs. Increased interest payments due to growing debt and the need to refinance maturing debts are additional concerns.
