Interest burden on Belgian debt expected to rise from 2023 onwards

The new and higher interest rates have caused the Belgian Debt Agency to revise its expectations considerably in just a few months. It now looks like the interest burden on the Belgian federal debt will rise again in 2023 for the first time in a long time. The agency announced this on Monday during the presentation of its annual report for 2021.

"2022 is a totally different year than the calm years behind us," according to Maric Post of the Belgian Debt Agency. "Markets are very volatile, and movements are extreme. Interest rates are now some 2% higher than at the beginning of the year. We have not seen such a sharp change since 1994."

This year, the interest burden is still expected to reach a historically low level of 1.23% of the Belgian gross domestic product (GDP). The agency had assumed 1.21% of GDP during a previous review in February. In absolute terms, this means an additional cost of 300 million euros for the state.

Next year, the interest burden will increase to 1.34% of GDP, whereas in February the agency still expected a further decrease to 1.17%. In the following years, the federal interest burden is expected to increase gradually, by more than 0.1% annually. According to the new estimate, the interest burden will reach 1.83% of GDP in 2027, instead of the expected 1.47%. That means an additional cost of 2.74 billion euros.

The debt ratio also fell to 108.4% of GDP last year, after rising to 112.8% of GDP due to the COVID-19 crisis in 2020. Belgium's debt ratio is still well above the eurozone average of 95.6%. These new estimates do not bring good news for the Belgian government, which will have to take the higher interest costs into account when drawing up the budget.




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