National Bank of Belgium sounds alarm over widening budget deficit
The National Bank of Belgium (NBB) has warned that the country’s budget deficit could rise to 5.6 per cent of GDP by 2027, despite moderate economic growth and falling inflation. Governor Pierre Wunsch said on Friday that current fiscal efforts are insufficient and called for additional measures across all levels of government.
Presenting its spring economic projections, the NBB painted a mixed picture. While the economy is expected to grow by around 1 per cent annually over the next three years, and inflation is forecast to fall from 2.6 per cent in 2025 to just 1.3 per cent in 2026, the budget outlook is deteriorating sharply.
The deficit is projected to rise from -4.5 per cent of GDP in 2024 to -5.2 per cent in 2025, and further to -5.6 per cent by 2027. Belgium’s debt-to-GDP ratio is also set to climb from 104.7 per cent to 112.7 per cent over the same period.
Wunsch warned that Belgium remains “very vulnerable to a future recession”, with the deficit potentially reaching 7 per cent if the economy contracts again.
The bank attributes the worsening deficit to rising ageing-related costs and higher interest payments on public debt. While measures such as pension and unemployment reforms have been introduced, their impact will only be felt in the medium term. Increased defence spending and ongoing pressures in health care also offset savings elsewhere.
The NBB expects 100,000 jobs to be created by 2027, including 30,000 as a result of the time limit on unemployment benefits. However, the measure’s short-term impact is expected to be limited. Many new roles are likely going to be part-time and in low-productivity sectors.
Despite these challenges, the bank remains cautiously optimistic on several fronts, including the recovery in construction, improved competitiveness, and resilience in exports.
National Bank of Belgium governor Pierre Wunsch © BELGA PHOTO JASPER JACOBS