Flemish municipalities stay financially stable despite growing pressures
Flemish municipalities remain financially healthy and plan to maintain balanced budgets over the next six years, according to a new study by Belfius. The region’s 285 municipalities are also set to continue investing heavily in local projects.
However, Belfius warns that several challenges could put pressure on local finances in the coming years.
One of the main concerns is the federal government’s planned income tax reform. The increase in the tax-free allowance will reduce personal income tax revenues, an important source of funding for municipalities.
Although the federal government has promised compensation, Belfius says the system may not work equally for all municipalities. Wealthier areas could receive more compensation than needed, while lower-income municipalities may not recover all of their losses. The effects are expected to become visible from 2029 onwards.
Municipal welfare services are also facing higher costs after the federal government limited unemployment benefits in time. More long-term unemployed people are expected to seek financial support from local welfare offices.
As a result, spending on individual social assistance is forecast to rise by more than 18% in 2026. While the federal government will provide support, local welfare agencies are still expected to bear part of the cost.
Another major challenge is the rising cost of pensions for retired civil servants. Municipal contributions are expected to increase from €475 million in 2026 to €738 million by 2031, putting growing pressure on local budgets.
Belfius also warned that municipal budgets may underestimate future energy spending. Many financial plans were prepared before the recent escalation of conflict in the Middle East, which has increased uncertainty around energy prices and inflation.
Investment plans
Despite these risks, municipal finances remain solid. Local authorities expect income to continue growing, supported by higher tax revenues and increases in some local taxes and fines.
Municipalities are planning €4.1 billion of investment in 2026 and €17.4 billion over the 2026-2031 period, mainly in transport, culture, environmental projects and public infrastructure.
Belfius concluded that Flemish municipalities are entering the new policy cycle from a position of financial strength, although significant uncertainties remain.
#FlandersNewsService | Merchtem municipality © BELGA PHOTO JASPER JACOBS