National Bank: Governing parties must lift vetoes to get budget back on track
The federal governing parties will have to lift their vetoes to get the budget back on track. This is the warning issued on Friday by Pierre Wunsch, governor of the National Bank.
On Friday, Wunsch outlined the National Bank’s half-yearly forecast for the Belgian economy. The impact of the war in the Middle East is, for the time being, “not dramatic”, but the figures do not look particularly rosy either: the National Bank forecasts a slowdown in growth to 0.6 per cent of gross domestic product for 2026 and warns of rising interest costs in an uncertain geopolitical climate.
“Despite the many, sometimes relatively severe, measures that governments have already taken, it is not yet enough – and in fact far from enough – to stabilise or reduce the deficit,” stated the governor.
It is against this backdrop that the federal government will be negotiating the budget in the coming weeks and months. To know exactly how significant the effort will be, we must still await a report from the Monitoring Committee. However, to bring the deficit down to what Wunsch considers an acceptable level of 4 per cent of GDP by the end of the legislative term, approximately 11 billion euros will be needed, the National Bank calculated.
Taking into account the tax cuts that the De Wever government still intends to implement in 2029, which will cost around 3.5 billion euros, the figure rises to almost 14 billion euros. “That amounts to 7 billion euros now and a further 7 billion euros for the 2028 budget.”
The National Bank does not wish to interfere in political discussions, but “we will have to do more in terms of both expenditure and revenue,” said Wunsch. “If we do not engage in the debate on revenue, but also, for example, on social security or the long-term sick, then we will not get there.”
MR leader Georges-Louis Bouchez has emphasised on several occasions in recent months that his party does not want to accept any new taxes, whilst Vooruit is calling for a millionaire’s tax. The CD&V, for its part, wants to slash the billions spent on defence, much to the dismay of prime minister Bart De Wever and his N-VA party. Redesigning the failed VAT reform from the previous budget agreement, which has left a hole of 500 million euros in revenue, will also be a particularly difficult balancing act.
Even if the De Wever government manages to reduce the deficit to 4 per cent of GDP by 2029, the danger is not yet over, the National Bank also warns. Because by 2035, NATO member states must spend 3.5 per cent of their GDP on defence, compared with 2 per cent at present. Moreover, according to the forecasts, interest costs will continue to rise by 0.2 to 0.3 per cent of GDP each year, and the impact of an ageing population is increasing. “The next government will also have its work cut out for it,” concluded Stefan Van Parys, economist at the National Bank.
National Bank governor Pierre Wunsch © BELGA PHOTO HATIM KAGHAT
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