'Good news': Belgium's budget deficit for 2022 upwardly revised by €7 billion

'Good news': Belgium's budget deficit for 2022 upwardly revised by €7 billion
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Belgium's budget deficit for the 2022 financial year has been upwardly revised by €7.1 billion, from €29 billion to €21.9 billion, according to new estimates provided to l'Echo by State Secretary for Budget and Consumer Protection Alexia Bertrand (Open VLD).

The new assessment implies that Belgium ran a budget deficit of 4% of annual GDP last year, rather than 5.3% as previously believed; moreover, its public debt-to-GDP ratio is now estimated to be 105% instead of 106.2%.

According to Bertrand, Belgium's improved fiscal position is largely a consequence of its upwardly revised growth for 2022, which is now assessed to be 3.1% instead of 2.6%. Another major factor was a €1.4 billion downward reappraisal of last year's Federal Government spending.

In an interview with l'Echo and De Tijd, Bertrand welcomed the news, but downplayed its broader significance and criticised the notion that it should encourage greater government spending.

"This is a small improvement, good news, but one that must be taken with caution," Bertrand said. "The mistake we often make in this country is to immediately take advantage of a windfall to spend more. I really want to fight this idea."

'The deficit in 2023 remains huge'

The recent news comes as the Belgian Federal Government is mired in negotiations for this year's budget, which must be approved by the end of March. According to recent Federal Government estimates, Belgium is forecast to run a deficit of €33 billion in 2023: a 50.7% increase relative to 2022.

"The deficit in 2023 remains huge and the uncertainty just as great," Bertrand explained. "We still do not have visibility on a whole series of macroeconomic parameters. What about energy prices? Will they remain stable or will they fall further? And if they go down, what about the windfall tax? What about inflation? Growth? Interest rates?"

Bertrand's remarks were corroborated by l'Echo columnist Quentin Joris, who noted that the upward revision was "good news," but that Belgium's policymakers should "avoid excessive enthusiasm."

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"The very slight improvement in public finances does not exempt governments from continuing the course of reforms," Joris wrote. "This correction must not make us lose sight of the fact that a consolidation of our public finances is essential. Because, like it or not, a deficit of 4% and a public debt of 105% of GDP last year — these remain unbearable levels in the long term."

Indeed, despite the recent fiscal reappraisal, Belgium's budget deficit and its public debt remain among the highest in the EU. Moreover, they both significantly exceed the EU's fiscal ceiling of 3% and debt-to-GDP limit of 60%, which were enshrined into European law in the late 1990s but temporarily suspended during the Covid-19 pandemic. The EU's budgetary rules are scheduled to re-enter into force in 2024.

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