Belgian regional public finances 2010-2024 mapped out
The budgetary situation of the Belgian government is unsustainable, not only at the federal level but also in the federated states. In this Economic Brief, we highlight the development of regional public finances from different perspectives, using figures recently updated by the National Accounts Institute (NAI). Specifically, we look at the contribution of the federated entities (Flanders, Wallonia and Brussels) to overall Belgian public finances and at the regional budgetary situation (deficit and debt) expressed in relation to gross regional product on the one hand and to regional revenues on the other.
The National Accounts Institute (NAI) published new updated figures on the finances of the various Belgian government levels in mid-October (see https://www.nbb.be/nl/media/23213). The update concerns an update of the first estimate for the 2024 figures made in April, but also a revision of the figures for earlier years, this due to the availability of new fiscal data and to adjustments made to the GDP figures in the National Accounts. In this Economic Brief, we first highlight the contribution of the main government entities (i.e. federal government including social security, as well as communities and regions) to Belgium's aggregate public finances (section 1). We then zoom in on regional public finances (section 2).
1. Contribution to general public finances
The rapidly succeeding corona and energy crises cut heavily into the finances of the Belgian governments. In 2019, the deficit and debt of the combined Belgian government were 2.0% and 97.7% of GDP, respectively. In 2020, both peaked at 9.0% and 111.4%. The situation improved in 2021-2022, but in 2022 the deficit remained well above the pre-pandemic level, at 3.6% of GDP. The debt ratio had fallen to 102.4% by 2023. In 2023 and 2024, the deficit widened again, mainly due to higher spending due to ageing, increased investment (including in defence) and rising interest payments. In 2024, the combined general government deficit and debt were 4.4% and 103.9% of GDP, respectively. For your information: in the first estimate in April this year, the NAI still assumed a deficit and debt in 2024 of 4.5% and 104.7% of GDP, respectively.
The fiscal position of the general government as a whole is the result of the finances of the various government entities. Figures 1 and 2 show the contribution of the federal government (including social security) and of the main communities and regions to the deficit and debt of the general government, respectively. The finances of smaller regional governments (the Flemish, French and Common Community Commissions, the German-speaking Community and non-distributed entities) and of local government (provinces and municipalities) are grouped together in 'other' in both figures.
Figure 1 shows that the rising general deficit since 2022 is largely due to rising deficits at the communities and regions. In 2024, the deficit declined at the federal level (a 0.5 percentage point GDP decline in the federal government deficit, partly offset by a 0.3 percentage point GDP decline in the social security surplus). The (main) communities and regions combined saw their deficit increase by 0.5 percentage point of GDP. The differences are largely due to the decline in transfers from the federal government to the federated entities under the Special Finance Act. Those endowments experienced the after-effect of the year 2023 in which they were temporarily boosted by substantial settlement balances, due to strong inflation in the previous year.
2. Focus on regional public finances
Just as Belgium's general public finances are related to Belgium's gross domestic product (GDP), we can plot the finances of the federated states against their own gross regional product (GRP).1 The GRP refers to the total value added generated in the three respective regions. The NAI has not yet published 2024 figures for the GRP. Nevertheless, to have a 2024 figure to which we can relate regional public finances, we apply the Federal Planning Bureau's forecast for nominal regional growth in 2024 (made in July) to the already published 2023 GRP figures. Calculated that way, the budget deficit in 2024 was at 1.3% of GRP in both Flanders (Flemish Region and Community) and Brussels (Brussels-Capital Region). In Wallonia (Walloon Region and French Community), it was 2.5% of GRP (see figure 3).
2. Focus op de regionale overheidsfinanciën
Net zoals de gezamenlijke Belgische overheidsfinanciën worden gerelateerd aan het Belgische bbp, kunnen we de financiën van de deelstaten afzetten tegenover hun eigen bruto regionaal product (brp)1. Het brp betreft de totale toegevoegde waarde voortgebracht in de drie respectievelijke regio's. Het INR heeft nog geen 2024-cijfers voor het brp gepubliceerd. Om toch een 2024-cijfer te hebben waaraan we de regionale financiën kunnen relateren, passen we de voorspelling van het Federaal Planbureau voor de nominale regionale groei in 2024 (gemaakt in juli) toe op de wel al gepubliceerde 2023-cijfers inzake brp. In 2024 bedroeg het begrotingstekort, zo becijferd, 1,3% van het brp in zowel Vlaanderen (Vlaamse Gewest en Gemeenschap) als Brussel (Brussels Hoofdstedelijk Gewest). In Wallonië (Waalse Gewest en Franse Gemeenschap) was dat 2,5% van het brp (zie figuur 3). Also related to GRP, the debt ratio in Flanders, Wallonia and Brussels in 2024 was 11.4%, 37.2% and 13.3% respectively (see figure 4).
It is notable that the budgetary situation in Brussels and Wallonia was already deteriorating before the pandemic. Another observation is that the figures for Brussels in figures 3 and 4 are quite 'not too bad', despite the recent doom-and-gloom reports about the Brussels-Capital Region's financial situation. This is because much value added is generated within the Capital Region, a significant part of which flows away via large outbound income flows, mainly to commuters living in Flanders and Wallonia (see also the recent NBB study). Consequently, the high level of output (i.e. the denominator) pushes Brussels' deficit and debt ratios (expressed as a percentage of GRP) lower.
Usually, the budget balances of the federated entities are expressed rather as a percentage of their respective total revenues, to give a picture of the deficit or surplus in relation to the budget size of the federated entities. Viewed this way, Brussels' budget figure does show a more obvious slippage (see figure 5). In 2024, the region recorded a deficit equivalent to no less than 25.4% of its revenue. This is well above that of Flanders and Wallonia, where the deficit (region and community combined) in 2024 was 7.4% and 8.2% of revenues respectively. By comparison, in 2019, before the pandemic broke out, Brussels and Wallonia had a deficit of 14.4% and 2.4% of their revenues, Flanders a slight surplus of 0.6%.
The sharp deterioration in regional finances is also reflected in the debt figures (see figure 6). Also set against the total respective regional revenues, the debt in 2024 was 61.2% in Flanders, 121.3% in Wallonia and 231.5% in Brussels. Again, Brussels performs particularly badly here: in that region the debt ratio rose by 119 percentage points compared to 2019, which is much higher than in Flanders (+27 percentage points) and Wallonia (+32 percentage points).
[1] The analysis in section 2 concerns the main communities and regions. The finances of the German-speaking Community, the Flemish and French Community Commissions, the Common Community Commission and non-distributed interregional entities are not taken into account here.