Belgium is set to experience consistently low rates of economic growth over the next few years, as high budget deficits and soaring levels of government debt mean that the country's economic prospects look increasingly bleak.
According to a report published on Thursday by the Federal Planning Bureau (FPB), Belgium's economy will only grow by 1.3% this year, followed by a 1.6% expansion next year and an average growth rate of 1.4% over the period 2025 to 2028. By contrast, Belgium's economy expanded by 2.4% in 2019, the year prior to the pandemic.
The study also found that inflation, which is currently at 5.2%, will not fall below the 2% rate targeted by the European Central Bank (ECB) until 2025. In addition, the FPB predicted that Belgium's fiscal deficit will increase by almost a full percentage point to 4.8% of annual GDP this year, before reaching 5.5% by 2028. This is 2.5 percentage points greater than the EU's 3% fiscal limit.
Furthermore, the study forecast that Belgium's public debt-to-GDP ratio will hit 114% by 2028: almost twice the EU's 60% threshold. The FPB blamed the increase on government spending on health care, pensions and the military.
"Despite the severe shocks that the Belgian economy has suffered in recent years, it has shown great resilience," said FPB Commissioner Baudouin Regout. "However, that picture is overshadowed by a significant deterioration in public finances, which will be under great pressure in the coming years."
Boundless pessimism
The FPB's pessimistic forecast is supported by numerous other recent studies. The Organisation for Economic Co-operation and Development (OECD) painted a similarly bleak picture of the country's economic prospects in a report published last week.
"Inflation, tighter financing conditions and high uncertainty will drag on domestic growth, while weak global trade prospects will weigh on net exports," the report noted. "The main risks include more persistent inflation due to wage indexation and a consequent loss of export competitiveness."
Related News
- Automatic wage indexations 'main risk' to Belgium's economy, OECD claims
- Eurozone slips into recession due to high food and energy prices
The report also explicitly criticised Belgium's high level of government debt, claiming that it "poses macro-financial risks and limits the scope for public investment".
In March, the National Bank of Belgium (NBB) similarly described the state of Belgium's public finances as "worrisome and unsustainable". It also noted that soaring inflation and high energy prices are currently inducing a "decline in competitiveness" across Belgium. Worryingly, it stated that "according to current projections, any catch-up (in competitiveness) will only be partial."
