Belgian Planning Bureau fears peak in public debt
Like the National Bank of Belgium earlier this week, the Planning Bureau warns of continuing budget deficits and a national debt that threatens to rise again from 2023 onwards.
"In 2026, the debt ratio would even exceed the peak of 2020, the year marked by the corona crisis," the Planning Bureau highlights in its new economic outlook for the period 2022-2027.
The budget deficit peaked at 9.1 percent of gross domestic product (GDP) in 2020, as a result of a series of expenditures to contain the corona crisis. In 2021, it fell to 5.5 percent, mainly due to the economic recovery. This year, the deficit is still expected to fall to 4.7 percent, but without measures, it will not fall further after that.
"With unchanged policies, the deficit will remain close to 5 percent of GDP for the next five years," the Planning Bureau said.
The Planning Bureau sees several causes for the pressure on public finances. There were several crises that led to additional expenditure, such as the floods of July 2021 and the corona crisis. Measures have also been taken to relieve the energy bill. There was also the reception of refugees from Ukraine.
At the same time, high inflation is playing a role and there will be further expenditure in the coming years, for example, for increasing the minimum pensions, implementing the healthcare agreements, the recovery plans or refinancing the army.
All this also has consequences for the national debt. It will fall to 104 percent of GDP this year, after 113 percent of GDP in 2020. But from 2023 it will rise again, to around 114 per cent of GDP in 2027.
"It is up to governments to gradually reduce the deficit to a level that is compatible with stabilising or even reducing the debt ratio," Saskia Weemaes, Commissioner ad interim of the Planning Bureau said. "Otherwise, the budgetary situation could become untenable in the event of a new economic shock or a sharp rise in interest rates."
In terms of economic growth, the Planning Bureau is in the same order of magnitude as the National Bank. They expect the Belgian economy to grow by 2.6 precent and 2.4 percent this year and by 1.3 percent and 1.5 percent next year respectively. For the following years (2024-2027), the Planning Bureau expects an average growth of 1.4 percent.
The Planning Bureau also estimates that over 238,000 jobs will be created from 2022 to 2027, of which 67,000 this year. And it expects that, in the longer term, households will, on average, save a larger part of their disposable income than before the coronal crisis. This would bring the so-called savings rate to almost 14 per cent in the period 2024-2027, compared to around 12 percent before the corona crisis.
© BELGA PHOTO JASPER JACOBS