Kingdom of Belgium (B324) | News Based Sentiment Analysis

• On August 25, 2025, the Belgian Debt Agency held successful auctions for OLOs and Treasury Certificates, accepting a total of EUR 2.723 billion in bids for OLOs and EUR 3.202 billion for Treasury certificates. The OLO 97 (OLO 3.00% 22/06/2033) saw a bid-to-cover ratio of 1.80, while OLO 100 (OLO 2.85% 22/10/2034) had a ratio of 1.58, indicating healthy demand. This successful auction provides funding for the Belgian government, but also highlights the ongoing need for debt management.
• Belgium's annual inflation rate eased slightly to 1.91% in August 2025, down from 1.92% in July 2025, reaching its lowest level since January 2024. While consumer prices fell by 0.01% month-over-month, analysts forecast inflation to rise to 2.30% by the end of the third quarter of 2025, suggesting this dip may be temporary. This easing of inflation could influence monetary policy decisions.
• The Belgian federal budget faces significant challenges, currently showing a deficit of 4.1% of GDP, equivalent to EUR 26.2 billion as of August 29, 2025. Projections indicate this deficit could escalate to EUR 40 billion by 2030 if current trends continue, and meeting the 2% of GDP NATO defence spending target is exacerbating the shortfall. This substantial deficit raises concerns about long-term fiscal sustainability.
• The Flemish government is also facing budgetary pressures, anticipating deficits of EUR 3.2 billion in 2026 and EUR 753 million in 2027. These regional deficits add to the overall fiscal strain on Belgium, highlighting the need for coordinated budgetary efforts.
• Analysts noted on August 29, 2025, that Belgium's net interest payments are currently 3.8% of government revenue, comparable to France's projected 4% in 2025. With a current credit rating of AA-/Negative, this underscores the fiscal pressures facing Belgium and its vulnerability to rising interest rates.
• The Brussels region has been without a government for 15 months as of September 1, 2025, leading to a deepening debt situation. This prolonged political impasse highlights governance challenges and could hinder economic development in the capital region.
• Belgium's GDP growth slowed to 0.20% in the second quarter of 2025, down from 0.40% in the first quarter, though it marked the seventh consecutive quarter of growth. However, the GDP Growth Rate is expected to be -0.10% by the end of the third quarter of 2025, according to forecasts from September 2025. This slowdown suggests potential headwinds for the Belgian economy.

The Investment Story: August and September 2025 presented a mixed picture for Belgium, with successful debt auctions offset by growing budget deficits, a prolonged political vacuum in Brussels, and slowing GDP growth. The easing of inflation provides a small positive, but overall fiscal pressures remain a key concern.

What It Means for Investors: These developments suggest increased risk for investors in Belgian government bonds and potentially broader economic headwinds. The rising debt levels and negative GDP forecast could lead to credit rating downgrades and reduced investor confidence. Monitoring fiscal policy and political stability will be crucial.

Looking Ahead: Investors should closely watch for updates on the budget deficit, the resolution of the political situation in Brussels, and any changes to Belgium's credit rating. The Q3 2025 GDP figures, expected to be negative, will be a key indicator of the economy's trajectory.

The Bottom Line: Belgium's economic outlook is becoming increasingly challenging, with significant fiscal pressures and political instability. While the debt auctions were successful, the underlying trends suggest a cautious approach to investing in Belgian assets is warranted.