Belgium flag Belgium: Economic and Political Overview

The economic context of Belgium

Economic Indicators

Situated between the UK, Germany and France, Europe’s three main economies, Belgium benefits from a strategic geographical position. Despite facing global economic challenges, Belgium's economy has displayed remarkable resilience in 2023 (with GDP growing an estimated 1%, from +3.2% one year earlier - IMF), primarily fueled by a robust performance in private consumption. The driving force behind this resilience lies in the automatic adjustment of wages to inflation. Additionally, tax reductions implemented in January 2023, aligning personal income brackets with the elevated inflation rate of 2022, have further enhanced household purchasing power, contributing significantly to Belgium's economic performance. On the downside, exports recorded a contraction due to weakening demand from trading partners. The IMF forecasts a deceleration to 0.9% in 2024, with a subsequent uptick to 1.2% in 2025. The conclusion of energy support initiatives and a decline in employment growth will hinder purchasing power, while export performance is likely to be affected in the short term due to subdued global trade and diminished cost competitiveness. Additionally, constrained financing conditions will hinder both business and residential investment.

In recent years, the government measures taken to contain the effects of the pandemic and of high energy prices (including the reduction of the VAT for electricity and gas from 21% to 6%) weighed considerably on public finances. During 2023, the automatic indexation of public sector wages and social benefits, as well as rising interest payments, resulted in a marked increase in the expenditure-to-GDP ratio, with an overall government deficit estimated at 4.9% (from 4.4% one year earlier). In 2024, the deficit should stabilize at around 4.7% of GDP on the back of the complete removal of energy-related measures and substantial revenue gains, particularly from corporate income tax. Similarly, the debt-to-GDP ratio has been on an upward trend, reaching roughly 106% in 2023. It is expected to further increase to 106.8% in 2024 and 108.5% in 2025, driven by continued primary deficits and rising interest spending (IMF). Following a peak at 10.3% in 2022, headline inflation was estimated at 2.4% in 2023 (EU Commission). This decline is attributed to the swift transmission of decreasing wholesale gas and electricity prices to retail prices, coupled with the impact of government initiatives aimed at curbing price hikes. Headline inflation is expected to rise to 4.2% in 2024 as the impact of these measures diminishes gradually. The forecast for 2025 is 1.9%.

Having achieved a rate of 2.1% in 2022, employment growth decelerated to 0.8% in 2023. Unemployment stood at 5.7% and should remain stable over the forecast horizon. Compensation of employees per head increase by 7% in 2023, and should be followed by growth rates of 3.6% in 2024 and 3.1% in 2025, primarily driven by the automatic indexation of wages observed in the past year. The low labour market participation rate remains a major challenge for Belgium in the coming years, with unemployment disproportionately affecting young people, non-European immigrants and the region of Wallonia as a whole. Overall, Belgian citizens enjoy a high GDP per capita, estimated on average at USD 65,813 by the IMF for 2023.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 583.90630.11655.19673.25693.46
GDP (Constant Prices, Annual % Change) 3.01.51.21.21.2
GDP per Capita (USD) 50,25953,65955,53656,88758,429
General Government Balance (in % of GDP) -4.0-4.8-4.4-4.7-5.0
General Government Gross Debt (in % of GDP) 104.3104.5105.4107.1109.2
Inflation Rate (%) 10.32.33.62.01.9
Unemployment Rate (% of the Labour Force) 5.65.55.55.55.4
Current Account (billions USD) -5.91-0.62-3.39-2.51-1.60
Current Account (in % of GDP) -1.0-0.1-0.5-0.4-0.2

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

Belgium’s strategic geographical position, its highly developed transport infrastructure, the wide range of services and its influence in industry and high tech have contributed to the development of its economy. Agriculture contributes a small amount of the national GDP (0.6%) and employs 1% of the active population (World Bank, latest data available). The main crops are sugar beets, vegetables and fruits, meat and milk. According to data by StatBel, organic farming accounts for 7.2% of the utilized agricultural area, of which 90.8% is located in Wallonia. In 2023, the agricultural industry experienced a significant enhancement in its net value added. Following the elevated costs recorded in 2022, intermediate consumption decreased by 8.6%, concurrently with a 1.6% rise in the production value of the agricultural sector. The net value added, representing the production value after deducting costs and depreciation, surged by an impressive 49.3%.

The industrial sector accounts for 20% of GDP, employing the same share of the workforce. There are significant discrepancies between the three Belgian regions: while Flanders has succeeded in developing the second-largest petrochemical industry in the world, Wallonia is in the middle of restructuring, following the closure of its collieries and a large number of steel plants. Brussels distinguishes itself in the areas of telecommunications, software development and the pharmaceutical and automobile industries. Despite that the contribution to GDP has been decreasing in recent years, the manufacturing industry is still key to the Belgian economy (13%).

The country’s economy is largely oriented towards services. In fact, the tertiary sector accounts for 69% of the GDP and employs 80% of the active population. Brussels, the hub of several European institutions, numerous diplomatic representations and different interest groups, has essentially based its economy on services. Tourism is also an important sector of the economy, and it showed signs of recovery in 2022 when it clocked a record 51 million overnight stays with a 4.3% surge from the pre-pandemic levels. The banking sector is also active: at the end of 2021, the Belgian banks’ total assets on a consolidated basis stood at EUR 1,151 billion (European Banking Federation, latest data available).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 0.9 19.4 79.7
Value Added (in % of GDP) 0.7 20.7 68.3
Value Added (Annual % Change) -11.7 -0.1 4.2

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
70,1/100
World Rank:
37
Regional Rank:
22


 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
7.37/10
World Rank:
25/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

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Sources of General Economic Information

Ministries
Foreign Affairs, Foreign Trade and Development Cooperation
Federal Public Service Finance
Federal Public Service Employment, Labour and Social Dialogue
Statistical Office
National Institute of Statistics
Central Bank
National Bank of Belgium
Stock Exchange
Brussels, Paris and Amsterdam Stock Exchange
Economic Portals
 

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Latest Update: April 2024