Belgium’s central bank warns of 'worrying' public debt outlook
The National Bank of Belgium has once again voiced concerns about the state of the country's public finances. Despite these countries having far higher debt ratios, it warns that Belgium's debt position is as fragile as that of France, Italy, the United States and Japan.
Belgium’s public debt currently stands at around 104 per cent of GDP, compared to 113 per cent in France, 135 per cent in Italy, 122 per cent in the US, and an astonishing 236 per cent in Japan. However, the National Bank cautions that focusing solely on headline figures can obscure deeper structural weaknesses. It argues that debt sustainability depends not only on the current level of debt, but also on future borrowing needs, fiscal trends, and overall dynamics. All of these factors reveal significant vulnerabilities across the five economies.
In Belgium's case, short-term risks remain limited. However, the central bank has expressed one major concern: the government's gross financing requirement, which amounts to around 20 per cent of GDP each year. Nevertheless, Belgium’s positive net foreign investment position offers some resilience, as domestic savings could help to absorb funding shocks. Belgian savers demonstrated this resilience in 2011, when they purchased bonds after foreign investors pulled back from Belgian debt.
Worrying public debts
Looking further ahead, the National Bank describes the projected increase in Belgium’s public debt as 'worrying', citing persistent budget deficits, mounting interest costs, and expenditure related to an ageing population. France is facing similar structural challenges, exacerbated by political instability and fiscal slippage over the past two years. Italy’s challenge lies in its chronically weak growth, while the United States has the most troubling debt trajectory due to its large and persistent primary deficits.
Japan’s high debt ratio poses a risk, though this is offset by substantial public assets and the fact that most of its bonds are held domestically.
The National Bank concludes that none of these five economies is facing an immediate crisis. However, it warns that a sudden shift in market sentiment could quickly turn liquidity pressures into solvency risks, turning today's slow-burning debt dynamics into tomorrow's financial emergency.
© BELGA PHOTO BENOIT DOPPAGNE
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