MNI BRIEF: Belgian Competitiveness Hit By Wages-BNB

Belgian export competitiveness has deteriorated sharply due to big increases in wages as a result of the automatic indexation, the Belgian National Bank noted today in its Q4 economic projections.

Under Belgium’s Competitiveness Act, there will now be no margin for workers to negotiate real wage increases in 2023-24. The wage gap between Belgium and its biggest trade partners will reach 4 percentage points in 2023-24. (See MNI SOURCES: ECB Needs Sub-3% Core Inflation To Consider Cuts)

The BNB also warned on the Belgian fiscal outlook. After narrowing to 3.5% of GDP in 2022, the general government deficit is expected to widen to 4.3% of GDP in 2023 and to 4.4% of GDP in 2024. In 2025 and 2026, the budget balance is projected to worsen further.

The public debt ratio is expected to increase to 105.3% of GDP in 2023, the BNB said, and high budget deficits would put public debt on a structural upward trajectory, to just below 110% of GDP in 2026.