Belgium's budget deficit is set to soar over the next couple of years, as rising healthcare and pension costs coupled with persistently high interest rates are expected to push the country's public spending well beyond the EU's soon-to-be-reinstated fiscal threshold.
In its Autumn 2023 Economic Forecast released on Wednesday, the European Commission predicted that Belgium's budget deficit will reach 4.9% of annual GDP this year, up from 3.5% in 2022.
The Commission also forecast that the country's deficit will remain at 4.9% in 2024 before rising slightly to 5.0% in 2025: at which point Belgium is expected to run the highest deficit in the EU after Slovakia.
Belgium's budget problems are all the more striking when compared to the rest of the EU. The Commission estimates that net public spending in the bloc will fall from 3.2% of annual GDP this year to 2.8% next year, before dropping even further to 2.7% in 2025.
'We have not left anyone behind'
The Commission's forecast arguably represents a savage indictment of the recent budgets announced by Belgium's Federal and Regional Governments, whose deep cuts appear incapable of restoring the country to fiscal rectitude.
Last month, the Federal Government announced highly controversial reforms to its labour market and healthcare sector, including cuts of over €100 million to the country's healthcare industry as well as an expansion of the government's 'flexi-job' scheme to 12 different economic sectors.
Similarly, the Brussels-Capital Region Government announced cuts of up to 3% in staff costs as well as reductions in business subsidies and investment spending of 8% and 10% respectively.
In a recent speech delivered to the Chamber of Representatives, Prime Minister Alexander De Croo claimed that his government's high level of public spending since 2020 was necessary to protect citizens from the worst effects of the Covid-19 pandemic and subsequent energy crisis.
"Protecting our citizens and our companies in times of crisis has cost us more than €20 billion," De Croo said. "We have not left anyone behind. Our policy has made it possible to protect Belgians' wallets. Our policy has made it possible to avoid social bloodshed."
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Under the terms of the EU's Maastricht Treaty, Member States are required to maintain budget deficits under 3% of annual GDP. This limit was temporarily suspended during the Covid-19 pandemic; the suspension was later extended to 2024 following Russia's full-scale invasion of Ukraine.
Worryingly, Belgium's failure to comply with the EU's fiscal constraints could mean that the country will have to face even more severe budget cuts in 2025. Under controversial new rules proposed earlier this year by the European Commission, Member States which run deficits greater than 3% of GDP will be forced to trim their budgets by 0.5% per year until they fall below the 3% threshold.
