Belgium faces a daunting budget challenge, with the deficit projected to hit €36 billion next year if no corrective action is taken.
The jury is still out on how to slice the budget cake. The Arizona coalition has only a matter of weeks to agree on a consolidation plan.
Despite fears over the economic fallout from new U.S. tariffs, the Planning Bureau's latest report, published Monday, shows Belgian growth holding steady.
GDP is forecast to rise by 1.2% in 2025, buoyed by household consumption and business investment, before easing slightly to 1.1% in 2026.
The labour market outlook is comparatively upbeat: net job creation is expected to jump from 17,000 in 2024 to 26,000 in 2025 and 38,000 in 2026.
The number of jobseekers claiming benefits will remain broadly stable this year, but should fall sharply (by nearly 117,000 by 2026) thanks to stricter time limits on unemployment benefits.
Inflation, meanwhile, appears to be under control. Having dropped to 2% over the summer from 4% at the start of the year, it is projected at 2.4% in 2025 and just 1.4% the following year, largely due to falling energy costs.
Those relatively positive forecasts do little to mask the sheer scale of the public finance problem. The deficit is set to climb from €34.7 billion this year to €36 billion in 2025, marginally better than the €37.2 billion the Monitoring Committee had predicted in July, but still around 5.8% of GDP.
Prime Minister Bart De Wever (N-VA) likened the task to a "gigantic hors catégorie climb," while MR leader Georges-Louis Bouchez declared that the government would need to "write a New Testament," arguing that the war-driven surge in defence spending has rendered February’s coalition agreement outdated.
This time, ministers cannot afford lengthy wrangling: instead of the eight months it took to strike a deal after the election, they have until mid-October, when the European Commission expects to see member states' budgets. Unsurprisingly, the parties have already started staking out red lines.
If the N-VA sticks to its target of bringing the deficit below 3% of GDP, the government would need to find a further €20 billion in savings.
Bouchez put that figure on the table during a recent appearance on De Afspraak op Vrijdag. Flemish nationalists, however, are now more cautious, suggesting a ten-year horizon. A more modest interim target of 4.5% of GDP would still require €12 billion in cuts by 2026.
Finance Minister Jan Jambon (N-VA) has reiterated the formula agreed in coalition talks: two-thirds of the adjustment should come from structural reforms, one-third from discretionary measures.
Of that discretionary share, only a third can come from new taxes, in other words, just one-ninth of the total.
The left, meanwhile, has its own red lines. Vooruit leader Conner Rousseau told Het Laatste Nieuws at the weekend that no further reforms of the labour market or pensions are acceptable, given the sweeping changes already underway.
The Flemish Socialists are, however, prepared to discuss lifting the taboo on higher patient co-payments in healthcare.
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