The climate-fiscal timebomb: Belgium

Fiscal outlook

Belgium recorded a 4.4% deficit and a debt-to-GDP ratio of 103.9% in 2024. Belgium is under the EU’s excessive deficit procedure, with a Council of the European Union recommendation adopted on 20 June 2025 requiring Belgium to reduce its deficit by 2029. Attempts by the government to limit the budget via social spending cuts have sparked massive protests, and have blocked the government,for a substantial amount of time.

Deficit measures the level of borrowing in a given year. Debt-to-GDP compares the total public debt to the size of the economy. Both are currently used to determine how much borrowing a member state is allowed to undertake. However, neither measure in itself determines a government’s capacity to sustain higher levels of public investment. Fiscal sustainability depends on growth, the multiplier effects of investment, interest rates, inflation, the structure of the economy and external risks such as climate change. NEF advocates moving away from strict numerical debt targets.

Rising climate costs

Climate-related losses are mounting. The 2021 floods caused over €3bn in damages and killed 39 people, making them among Europe’s costliest inland floods. As much of the countries land is lying at low elevation, the country is particularly vulnerable to storms and the surges they bring, as well as growing sea-level rise, which has risen at an accelerating rate and have now risen by around 23cm since 1900. The country’s food-system is under threat facing declining crops, pollinator loss, soil degradation and livestock diseases. The 2018 drought reduced potato yields by nearly 30%, showing how climate extremes can disrupt both farmers’ livelihoods and food supply chains. Heat exposure also resulted in 5,122,930 potential labour hours lost in 2024, a 97.1% increase from the 1990 – 1999 baseline. In 2024, lost earnings in the construction sector reached about €95m ($110m), representing 0.017% of GDP, while agriculture, manufacturing, and services together added another €70m ($80m) in losses.

What NEF’s modelling shows

Organisation for Economic Co-operation and Development (OECD) projections show Belgium’s GDP declining by 11% by 2050 and 15% by 2070 under current policies. Our modelling shows the following:

• Under current policies (BAU – business as usual), Belgium’s debt is projected to be 75 pps higher than the climate-agnostic baseline in 2050 and 249 pps higher in 2070.

• With early EU mitigation and sufficient adaptation spending, debt is 27 pps higher in 2050 and 52 pps higher in 2070

• Delayed EU investments and insufficient adaptation results in higher debt levels of 46 pps in 2050 and 95 pps in 2070. EU early action combined with global cooperation results in 11 pps lower debt levels than the climate-agnostic baseline in 2050 and 41 pps lower levels in 2070.

• Progressive taxation, such as a wealth tax, combined with early EU action, would increase debt by 20 pps in 2050 and 37 pps in 2070 compared to the climate-agnostic baseline.

Image: iStock