Belgium is a “debt” country: what does this mean in practice?

Belgium’s debt continues to grow, pushing the country under increased economic surveillance from the European Union. Between historic debt and persistent deficits, Belgian financial indicators are worrying, despite historically low rates.

When a state is described as “indebted”, it means that it has accumulated significant debts, often through borrowing to finance its public spending. In Belgium, this debt rises to a level higher than the European average, which raises concerns. An indebted state is mainly characterized by:

1. High public debtwhich weighs more and more on the national economy.
2. Recurring budget deficitsreflecting regular expenditure higher than state revenue.
3. A significant debt burdenforcing the State to dedicate a significant part of its budget to debt repayment.
4. Use of various types of loanssuch as government bonds and loans from international financial institutions.

A debt at European level and beyond

Belgian public debt reached 507.8 billion euros at the start of 2024, or around 106% of GDP, a proportion among the highest in the European Union. This ratio is well above the European average, estimated at 82%, and places Belgium in fifth position among the most indebted countries in the EU.

In the first quarter of 2024, Belgium posted a deficit of 4.5% of its GDP, exceeding the eurozone and EU averages. The deficit is forecast to continue rising to 5.6% by 2029, while public debt could exceed 120% of GDP by 2030.

The origins of Belgian debt

Belgium’s debt arises from several structural and cyclical factors:

• Legacy of the 1980s : At this time, Belgium was borrowing at very high rates, up to 14%, which contributed to the accumulation of lasting debt.
• Tax reforms : Tax cuts for certain households and businesses have restricted government revenues, leading to increased recourse to borrowing.
• 2008 financial crisis : Public debt increased from 84% to 104% of GDP, in particular to save the banks, an operation costing 35 billion euros.
• Cost of economic crises : The measures taken to mitigate the effects of successive crises have also weighed on public finances.

Public debt has important consequences:

• Pressure on public finances : A significant portion of the budget is devoted to debt service, which limits resources for other essential expenses. For example, some low-income countries allocate up to 7.5% of their budget to debt repayment, according to the World Bank.
• A potential brake on economic growth : Excessive debt can weigh on long-term growth.
• Financial stability at stake : Excessively high debt levels expose the State to economic and financial fluctuations.
• An impact on the credit rating : A high level of debt can lead to a downgrade in credit rating, increasing the cost of future borrowing.

Given these risks, the European Union has placed Belgium under enhanced surveillance as part of the excessive deficit procedure. Debt management reforms and budgetary adjustments are therefore crucial to limit the potential effects of this debt on the Belgian economy.

debt belgium economy money