Economy of Belgium - Budget

Budget

Although Belgium is a wealthy country, public expenditures far exceeded income for many years, and taxes were not diligently pursued. The Belgian Government reacted with poor macroeconomic policies to the 1973 and 1979 oil price hikes by hiring the redundant work force into the public sector and subsidizing industries like coal, steel, textiles, glass, and shipbuilding, which had lost their international competitive edge. As a result, cumulative government debt reached 121% of GDP by the end of the 1980s. However, thanks to Belgium's high personal savings rate, the Belgian Government financed the deficit from mainly domestic savings, minimizing the deleterious effects on the overall economy.

The federal government ran a 7.1% budget deficit in 1992 at the time of the EU's Treaty of Maastricht, which established conditions for Economic and Monetary Union (EMU) that led to adoption of the common Euro currency on January 1, 2002. Among other criteria spelled out under the Maastricht treaty, the Belgian Government had to attain a budget deficit of no greater than 3% of GDP by the end of 1997; Belgium achieved this, with a total budget deficit in 2001 (just prior to implementation of the Euro) that amounted to 0.2% of GDP. The government has balanced the budget every year since, until 2009 where it ran a deficit of about $25 billion. Belgium's accumulated public debt remains high at 99% of 2009 GDP. A slight decrease in the accumulated public debt compared to GDP has been seen, however, thanks to a higher economic growth rate compared to the budget growth rate, which pushed the percentage from 99% of GDP in 2009 to 95% of GDP in 2011, a four point decrease in two years, a feat rare enough to mention in the Western World.