Over the past few years, the institutional landscape for the Flemish budget has undergone drastic changes, which will continue to have an impact on the years to come. Firstly, there are the new European budgetary rules that were created in the aftermath of the 2008 financial crisis. More stringent rules were adopted and European macroeconomic surveillance and coordination procedures were extended. Secondly, there is the Sixth State Reform, which brings substantial changes to the Flemish budgetary landscape. The size of the Flemish budget has grown substantially; in addition, Flanders has gained a large increase in tax autonomy.
Despite these changes, the Flemish Government has worked hard to reduce its deficit: in 2016, the annual deficit was limited to 127 million euro. In 2017 and 2018 the Parliament voted a budget in balance. However the realization figures were much better with a budget surplus of 507 million euro for 2017 and 367 million euro for 2018. For 2019 the Parliament voted a budget surplus of 154 million euro. Once again the result was in realization much better with a surplus for 2019 of 237.5 million euro. 2020, on the other hand, will be a more difficult year for the budget with an estimated deficit of 431 million euro in the initial budget. In the budget adjustment the deficit increased to 957.6 million euro.
Due to COVID-19 the budget will be impacted. The coronavirus will have an effect on the revenues (727 million) and there were also taken one-off expenditures measures for 2,468 million euro. All these one-off effects are included in de budget review of April and will increase the budget deficit to 4.2 billion euro (subject to approval by Parliament).
Furthermore the 2020 SFA grants could also be impacted as a result of the worse economic figures. Based on the latest predictions of the Federal Planning Bureau of June 2020, this could lower the SFA grants by 2.1 billion euro. Normally this adjustment is lagged by one year but there is a possibility that the federal government will already make the adjustment this year. There is also an increase in the one-off measures of 250 million euro, it will be among other expenses used for the longer period of lockdown for some companies. With this adjustment the budget deficit will further rise to 6.5 billion euro in 2020. These adjustments will probably be included in a second budget review later this year.
In the text below you’ll find an explanation of the impact of the COVID-19 crisis on the fiscal balance of the Flemish Community. Furthermore you’ll find a 2nd text on the ups and downs of the Government balance of the Flemish Community in the period 2015-2019.