However, it is not all bad news. The Belgian economy is expected to grow by 1.4 percent this year – still noticeably higher than the growth of the eurozone (0.9 percent) – and will continue at that pace until 2029. By that year, the average growth of the Belgian economy would be ( 1.3-1.4 percent) is slightly lower than that of the euro zone (1.5 percent).
The fact that the Belgian economy is now doing so well is mainly due to private consumption in our own country and business investments. Household consumption is expected to rise by 1.8 percent this year. Real disposable income will rise even more strongly (3.6 percent in 2023 and 2.1 percent in 2024). Families can once again save a larger part of their income, especially compared to 2022 when they saved less to compensate for the loss of purchasing power as a result of the energy crisis.
Domestic demand will continue to be the engine of growth in the coming years. From 2025, consumption is expected to grow slightly faster (1.5 percent) than purchasing power (1.4 percent). Purchasing power is now less affected by inflation. A revival is expected in the coming months, as the effects of last year’s sharp energy price falls fade away, but after that inflation is expected to cool further. It would amount to 2.8 percent this year and remain stable around 1.8 percent from next year.
Lost market share
The industry is having a hard time. Exports fell by 3.3 percent and would not resume until 2025. The Belgian industry has lost a significant market share, approximately 2.3 percentage points per year in the period 2023-2025. From 2026, the loss of market share would have stopped.
Construction is also doing poorly, due to higher mortgage interest rates and the rising cost of building materials. Household investments in housing fell by eight percent in 2022 and 2023 together. Growth would not be expected again until 2025.
According to the forecasts, job creation should also gain momentum again from 2025. It clearly lost momentum last year compared to previous years. It will also remain limited this year with 33,000 new jobs. As a result, the unemployment rate would rise slightly again this and next year, before falling back again from 2027. The employment rate would thus rise from 72.1 percent in 2023 to 74.3 percent in 2029, still well away from the 80 percent target.
Save 27 billion
Despite the expected growth, the government deficit will continue to increase, the Planning Bureau warns. The government deficit will amount to 4.6 percent of GDP in 2023 and 2024. That is slightly less than the European Commission’s estimates, but still very high, and the trend is going in the wrong direction. If policy remains unchanged, the government deficit will rise to 5.6 percent in 2029, the Planning Bureau estimates.
This is mainly the result of higher expenditure on pensions and healthcare and higher interest costs on the debt. Investments in defense are also increasing. The debt would even rise by 2029 from 106 percent this year to 117 percent in 2029.
These figures do not yet take into account the reactivation of European fiscal surveillance, which will require Belgium to intervene to control its expenditure and reduce public debt. To reduce the budget deficit to 1.5 percent by 2031, as Europe demands, our country will have to save 27 billion euros over the next seven years.
