Belgium is on course for a budget deficit €6 billion lower than previously estimated this year, as falling energy prices and reduced government-mandated wage indexations continue to ease pressures on the country's public finances.
In a report published on Thursday, the Federal Government's Monitoring Committee forecast that Belgium will run a total budget deficit of €27.4 billion in 2023, rather than €33.6 billion as previously predicted. In terms of annual GDP, this is 4.8% instead of 5.9%.
Despite the welcome reduction, the report noted that Belgium's long-term fiscal prospects are far from rosy. Without significant policy changes the country's budget deficit will reach 6.1% of annual GDP (or €41.6 billion) by 2028; annual debt-to-GDP ratio will swell from 106.4% to 117.6%.
If Belgium's deficit and debt levels do continue on this course, they will likely fail to comply with the EU's budgetary limits. According to EU fiscal rules, Member States must run budget deficits no greater than 3% of annual GDP. A nation's total debt-to-GDP ratio should not exceed 60%.
The rules were temporarily suspended during the Covid-19 pandemic and the suspension was extended due to the war in Ukraine. They are scheduled to be re-introduced in 2024.
Pension reforms à la France?
Despite acknowledging the "good news", Secretary of State for the Budget Alexia Bertrand noted that "there is still a lot of work to be done" to improve Belgium's overall fiscal standing. She said that this will necessarily include the implementation of widespread (and unpopular) pension reform.
Assessments of the Monitoring Committee's report by other economists and experts were even more pessimistic. In a lead editorial for l'Echo, columnist Quentin Joris argued that Belgium's fiscal position remains dire.
"Belgian public finances are still under pressure. With a deficit estimated at €27.4 billion euros in 2023, the country's situation remains precarious. The fact that the monitoring committee estimates that it will be less than expected changes almost nothing."
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Joris' comments were supported by a white paper jointly published in l'Echo by fifty senior Belgian economists. It issues ominous warnings about the long-term dangers to Belgium's fiscal health.
"There is no longer any doubt about the seriousness of the situation. With the current deficit and the looming pensions bill, our public finances are on an untenable trajectory."