What state is Belgium in? Is our economy prepared to face a new shock? What will be the big challenges for the next government? To try to answer these different questions, the bank BNP Paribas Fortis, Belgian subsidiary of the French banking giant, has updated its “FuturProof Index”, an instrument which, through the analysis of a certain number of economic variables ( productivity, state of public finances, employment rate, sustainable development index, etc.), makes it possible to measure the competitiveness of our country, in comparison with the 26 other countries of the European Union.
guillementIf we take all the criteria into consideration, Belgium is only in 21st place out of 27 countries in the European Union.”
The observation is rather depressing, even downright worrying. Because even if between the start of 2022 and the end of 2024, Belgium should have posted the best growth in the euro zone (Editor’s note: with growth of 1.3% expected this year and in 2025), with the exception of Spain, This good performance, achieved thanks to the automatic indexation of salaries and the very strong growth in business investment, actually masks structural weaknesses in our economy. Which, in the absence of rapid reforms could lead the country down a dangerous path. “If we take all the criteria into consideration, Belgium is only in 21st place out of 27 countries in the European Union”, explains Koen De Leus, chief economist at BNP Paribas Fortis. Our French neighbor is doing even worse. But our other neighbor, the Netherlands, can boast a good third place.
“We have changed era”
At the top of the concerns, we obviously find, without much surprise, the budgetary situation. Belgium, as a reminder, has just been lectured by the European Commission which has launched an excessive deficit procedure against our country. “Belgium is in the worst 20% of countries on this criterion. If we do not implement reforms quickly, Belgium’s budget deficit should reach 5.6% of GDP (Editor’s note: against 4.7% currently) in 2029. We should reduce this deficit during the next legislature. of 0.5% per year to return below the 3% threshold. It will be very difficult but necessary”, further specifies Koen De Leus. Who continues: “We have changed eras. In recent decades, in a context of low or even negative interest rates, we have seen a drop in the amounts linked to the repayment of interest on the debt. In 1996, they were 19 billion euros before falling to a floor level of 8.5 billion in 2021. But with the rise in rates, this debt burden will increase by around 6 billion in 2025. These last decades, governments played a bit of a Saint Nicholas game because they had the opportunity to do so with these very low rates. Today, that no longer works and the time for gifts is over. This safety cushion, linked to very low rates, no longer exists”.
“We know what the big challenges are in Belgium. It’s a song we’ve been singing for years”
Working beyond 67?
In short, at the same time, we will have to reduce state spending.pretty much everywhere” and try to begin a process of debt reduction, to prevent the country from being strangled by the repayment of interest on it.
guillementRaising the employment rate from 72% to 82%, the level of the best-ranked countries, will be one of the great challenges of the next government. This will be essential to reduce social spending and alleviate the cost of ageing.”
In terms of other criteria, Belgian productivity displays a generally good score, in the third of the best students in the class of European Union countries. Research and development spending is particularly to be welcomed. “There are still ways to improve things”, specifies, however, the economist, in particular through greater efficiency of education, a framework more conducive to the development of technologies such as 5G or even to the establishment in our country of large companies. Koen De Leus also highlights another point, much weaker, that of the labor market and the employment rate where, on the contrary, Belgium is in the third of the least performing countries. “Increasing this employment rate from 72% to 82%, the level of the best-ranked countries, will be one of the major challenges of the next government. This will be essential to reduce social spending and reduce the cost of aging”he explained, pleading, like other countries, for “a stricter link between the increase in life expectancy and that of retirement. At some point, we will undoubtedly have to accept the idea of working beyond the age of 67, except in the most difficult professions”.
“In search of the new Liz Truss”
Finally, regarding issues related to sustainability, Belgium displays an average score, due to the relative weakness in the field of renewable energies and a high carbon footprint in terms of imported products.
guillementIt is urgent to make savings, boost our productivity and boost our employment rate rather than having to do it with a knife to our throat.”
Ultimately, and in light of the analysis of these different criteria, Belgium appears to be a fairly fragile country.Look at what is happening in France with the increase in the rate differential with Germany. Without rapid reforms, financial market speculators may be looking for a “new Liz Truss (Editor’s note: the short-lived former British Prime Minister was forced to resign after 45 days, notably under pressure from the financial markets). This could happen sooner or later if we remain at the bottom of the class or if the markets have doubts about our ability to reduce spending., adds our interlocutor. And to warn: “There is a real risk of a negative spiral. We could, in fact, find ourselves in a ‘perfect storm’ scenario and relive what we experienced during the 80s and 90s when we had to make huge savings. This period of austerity has been very painful for 15 years. It is urgent to make savings, boost our productivity and boost our employment rate, rather than having to do it with a knife to our throats.. A warning which in a world where geopolitical instability predominates, is certainly worth pondering…
