Belgium begins to come under increasing focus for the European authorities, as it appears that the country’s new budget projections show that it expects to suffer the largest budget deficit in the entire eurozone. New budget projections by the European Commission hint that the deficit situation for Belgium stands to be 5.5 percent of the total GDP by 2026.
Commission forecasts reveal Belgium’s deteriorating fiscal position
Belgium gets a reality check on its financial future as the EU autumn outlook makes dire predictions regarding the country’s financial situation, revealing that Belgium’s budget deficit performance is projected to be the worst compared to the entire Eurozone. Belgium’s budget deficit performance, as projected, would increase from 4.4 percent of the GDP in 2024 to 5.3 percent in 2025 and then further deteriorate to 5.5 percent in 2026. This number exceeds the EU’s 3 percent deficit threshold.
Projections for growth are no comfort, as it appears that Belgium’s GDP growth for 2025 and 2026 will be only 1.0% and 1.1%, respectively. This growth can primarily be attributed to factors such as reduced export growth, high global uncertainty, and the effect of US trade policies on the Belgian economy. Unemployment levels are also projected to increase, standing at 6.0% and 6.2% for 2025 and 2026, respectively.
Rising defense spending and interest payments drive expenditure increases
Defense spending appears to be one major factor that adds to the financial problems that Belgium faces, and military spending begins to increase towards the 2% NATO target for 2027. The schedules for the delivery of military equipment and the obligations for their procurement are shown to raise military spending by 0.3% of the GDP for 2026. This moment appears to come at the worst time for Belgium.
Government struggles to find agreement on €10 billion restructuring plan
The federal government, which consists of five parties and is headed by Prime Minister Bart De Wever, faces huge tasks to come up with an effective budget deal that will address the growing financial burdens. The government, which is currently striving to gain the support of the other groups for a €10 billion restructuring plan, has experienced unusually difficult talks.
As recently as the middle of last week, De Wever had asked for an additional 50 days to reach an agreement, which extended the new deadline into the Christmas period. This automatically means that initially, the country would run on “provisional twelfths” during the beginning of 2026, which refers to the budgetary allocation where the country would spend an amount that equals the same period last year.
Key fiscal challenges
- Budget deficit reaching 5.9% by 2027
- Public debt rising to 112.2% of GDP
- Defense spending increases of 0.2% annually
- Interest payments are growing due to higher refinancing costs
Debt trend casts a shadow over the future economy
Gross government debt in Belgium was 103.9 percent of the GDP as of the end of 2024, but the high deficit is pushing it consistently upwards. The projection for debt, as presented by the Commission, stands at 112.2 percent of the GDP and ranks among the highest within the Eurozone by 2027. There are grave implications regarding the sustainability of the economy, which faces potential shocks.
The interest payment burden is growing as well, as costs are increasing by 0.2% of GDP each year. This would create an ongoing cycle where the country would need to borrow even more money to pay back the debt. This would, in turn, worsen the fiscal situation. The problem requires urgent attention to avoid the debt spiral that could undermine the financial autonomy of Belgium.
The Belgian budget crisis offers a significant challenge to the management of the European economy. Belgium needs until 2029 to ensure that its deficit is lower than the 3 percent limit, but the reality of the situation appears to be that it would be difficult for the country to achieve such an objective. The implications of the Belgian budget problems cannot be limited to the country.
