- 25/6/2025

Belgium highly vulnerable to rising ageing costs

3 min

The numbers do not lie

While most European countries have reformed their pension systems and built up reserves, Belgium has opted for the status quo. No tough choices, no electoral risks. Meanwhile, our dependency ratio – the number of inactive people relative to those in work – continues to rise. By 2050, there will be more than one inactive person (both young and retired) for every working-age individual. That is no longer solidarity. It is self-denial.

However, the real drama is unfolding on the state’s balance sheet. Our public debt is already among the highest of the industrialised countries and, according to the IMF, it is projected to rise the fastest by 2030 increasing from 106% to 126% of GDP. And even after that, ageing-related costs will continue to increase. The additional spending on pensions and especially healthcare over the next 25 years will add another 86 percentage points of GDP to our existing debt. Only Spain and the U.S. perform worse.

The recent Fitch downgrade therefore comes as no surprise. Belgium is being penalised for what it has been doing for years: postponing, evading responsibility and passing the buck. As the debt ratio rises, so do interest rates, and suddenly the market’s confidence evaporates. Note that both Standard & Poor’s and Moody’s have a negative outlook for Belgium’s rating. The problem is not that we are ageing. All countries are. The problem is that we continue to act as if ageing were a natural disaster that we are powerless to combat. But ageing is not a flood. It is a predictable socio-economic trajectory, and, above all, a matter of political choice.

In our Ageing Vulnerability Index, both Anglo-Saxon and Scandinavian countries perform well. In both regions, the proportion of public pensions in total average pension income is significantly lower than Belgium’s figure of 86%. A well-developed second pillar of occupational pensions prevents the financing of a rapidly growing retired population from falling entirely on the increasingly narrow shoulders of the working population. Raising taxes is not an option. Today, our tax revenues are already among the highest of all industrialised countries.

No shortage of solutions

There is no lack of solutions. Most effective is linking the retirement age to rising life expectancy. Nearly a third of European countries have introduced this measure since 2000. Belgium has not. As a result, our pension expenditure as a percentage of GDP is expected to rise twice as fast in the coming decades compared to our neighbouring countries. Fairness could be further improved by adjusting the statutory retirement age in proportion to actual life expectancy. Workers in heavy manual jobs tend to have a shorter life expectancy than those in less physical roles.

Raising the employment rate to 80% is also essential. This target is part of the coalition’s agreement for 2030, but would require the creation of nearly 500,000 jobs over 4 years. This seems overly optimistic given that job creation over a 4-year period since 2000, even during boom periods, has ranged between 250,000 and 300,000. Strengthening the second pension pillar is also part of De Wever I’s proposed government programme. This would involve raising employer contributions to at least 3% of wages by 2035 at the latest. This is another laudable initiative. However, introducing a capital gains tax on these savings efforts would undermine everyone’s willingness to support it.

Ageing is not a revolution. It is gradual, slow and silent, until the system breaks down. Unless we act now. Doing nothing is also a choice. But it is the most expensive one we can make.

Koen De Leus
Co-author of The New World Economy in 5 Trends & Chief Economist, BNP Paribas Fortis