European Commission Warns Belgium About Rising Public Spending

Brussels – Projections indicate that the Belgian budget deficit may rise to 4.9 percent of GDP by 2025 if existing policies remain in effect. An increase in spending on pensions and social benefits, along with climbing interest costs for refinancing national debt, could elevate the debt ratio beyond 105 percent in the coming year. This alert has been issued by the European Commission in its most recent economic growth outlook.

Following an extended period of stagnation, the European economy is beginning to exhibit signs of moderate growth. The Commission anticipates that the average GDP growth for countries in the eurozone will reach 0.8 percent in 2024, advancing to 1.3 percent in 2025 and 1.6 percent in 2026.

Belgium is projected to attain a growth rate of 1.1 percent by the conclusion of 2024, in line with eurozone trends, with forecasts of 1.2 percent in 2025 and 1.5 percent in 2026.

This year, Belgium is facing the highest inflation rate in the eurozone, expected to hit 4.4 percent (the Belgian statistical office Statbel reported a figure of 4.3 percent on Thursday). Croatia ranks next with an inflation rate of 4.0 percent, while the average for the eurozone stands at 2.4 percent.

The significant uptick in prices is linked to the tapering of energy support and the monthly adjustments to variable electricity and gas contracts. Nonetheless, inflation is projected to decline to 2.9 percent in 2025 and 1.9 percent in 2026, aligning Belgium with the eurozone averages (2.1 percent and 1.9 percent, respectively) over the next two years.

Finally, the Commission has expressed concerns about the increasing budget deficit, which is estimated at 4.6 percent of GDP in 2024, 4.9 percent in 2025, and peaking at 5.3 percent in 2026. This rise is greatly influenced by the absence of new policy measures owing to protracted negotiations within the federal government, as well as escalating costs related to pensions and social benefits. Additionally, Belgium is expected to face higher interest payments stemming from the increasing debt ratio (predicted to be 105.1 percent in 2025) and the necessity to refinance maturing debts.