De Croo faces a deficit of 18.3 billion

October 07, 2020

14:40

A new report from the monitoring committee clarifies for the first time how big the structural budget deficit is, after six months of corona. The De Croo government would still have to find 18.3 billion euros to achieve structural equilibrium.

The team of top civil servants that monitors the budget already delivered an interim report in September at the request of preformers Egbert Lachaert (Open VLD) and Conner Rousseau (sp.a). That formed the basis for the government negotiations, which were brought to a successful conclusion last week. Taking into account a faster economic recovery after the first corona wave, the monitoring committee then wrote a report that looked a lot less dramatic than previous estimates.

The federal deficit for 2020 was corrected from 40 to 33 billion and for 2021 from 26 to 24 billion. The latter figure is the most important, because the De Croo government has to submit a draft budget for 2021 to the European Commission by 15 October.


The monitoring committee emphasizes that the uncertainty about economic growth due to corona remains very high.

In a more detailed report, the monitoring committee now confirms this trend. What is new is that the structural balance has been determined for the first time since the corona outbreak. One-off measures and the effects of growth are clarified in this. The European Commission also attaches the greatest importance to this structural deficit when assessing budgets, although it has taken the reins since the outbreak of the crisis.

No new policy yet

For 2020, the monitoring committee sets the structural deficit at EUR 13.28 billion or 3 percent of gross domestic product (GDP) and for 2021 at EUR 18.35 billion, or 3.84 percent of GDP. For the sake of clarity, the newly planned policy of the De Croo government has not yet been taken into account. The relatively large increase in the structural deficit (+0.8 percent of GDP) is mainly explained by a strong growth in social expenditure – as a result of the aging population – versus falling income. In recent years, the structural deterioration has been limited to 0.1 percent of GDP.

All this means that the new policy of the De Croo government has yet to be added. There is no problem for investments: they are one-off and therefore do not impede the structural result. This will be the case for the structural increase in pensions and the budget for health care, the increase in the budgets for the security departments and the reduction in the burden for the recruitment of a first employee, which together cost 3.2 billion at cruising speed. The government is putting 4 billion in new income and savings in return, but those eyes have not worked out at all. The ambition to reach 1 billion euros from fraud prevention alone by 2024 raises eyebrows among experts.

The monitoring committee points out that the estimates cannot be set in stone. Due to the flare-ups of the coronavirus, a lot of uncertainty remains about economic growth.

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