The economic outlook for Belgium is bleak. According to new statistics published by the International Monetary Fund as part of its 2023 World Economic Outlook, economic growth in Belgium will be one of the lowest in the eurozone.
The IMF warns that this will not sustain Belgium's public spending as the nation's gross domestic product (GDP) will grow by less than 0.7% in 2023. Over the next five years, the Belgian economy is forecast to grow by an average of just 1.2% per year. Only Italy is set to perform worse among eurozone countries (1% per year average).
This is terrible news for the Federal Government. Economic consensus goes that nations need annual growth of around 2% to deal with ballooning social security costs driven by the demographic influx of people reaching retirement age. Belgium's growth is on track to be less than half of the eurozone average until 2028.
Belgium’s budget deficit is certainly cause for concern. The Federal Government dismissed former Federal State Secretary for Budget and Consumer Affairs, Eva De Bleeker, for giving overly optimistic figures on Belgium’s budget deficit to the European Commission. The EU has repeatedly reprimanded the government for its untargeted and inflated public spending.
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Under current forecasts, Belgium’s fiscal deficit is expected to increase to 6.1% of annual GDP, making it the biggest overspending nation in the EU. This is largely a result of measures aimed at protecting consumers from rising energy prices. By 2028, this deficit will rise to 19.5%, the IMF predicts.
According to the IMF’s calculations, Belgium is racing towards a “structural” budget imbalance of -5.8% of GDP by 2028. Only Romania comes close with -4.2% of GDP. Belgium spends nearly 54% of its total wealth on public spending, only behind France, Finland, and Greece. But by 2028, Belgium is forecast to top the list for public spending, which is on course to be 57.2% of GDP.
The Federal Government recently announced a €1.8 billion slash to public spending and the introduction of new minimum taxation for multinational companies operating in the country. But this only scratches the surface of Belgium’s multi-billion euro overspend. Belgium’s public deficit is currently €27.4 billion.
