The economic context of Belgium

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Situated between the UK, Germany and France, Europe’s three main economies, Belgium benefits from a strategic geographical position. Despite experiencing a historic recession due to the COVID-19 pandemic, the Belgian economy rebounded strongly in 2021 and the first half of 2022. However, high energy prices, declining confidence and weakening international trade slowed GDP growth in the second part of the year, with the IMF estimating an overall growth of 2.4%. Private consumption is expected to remain weak until mid-2023 despite the automatic indexation of wages, same as for international trade (Belgium is highly exposed to the performance of its main trading partners); thus the IMF forecasts a growth rate of only 0.4% this year before a rebound in 2024 (1.4%).

As the government measures taken to contain the effects of the pandemic weighed considerably less on public finances in 2022, the budgetary cost of measures to mitigate the impact of high energy prices contributed to a high budget deficit (4.8% - IMF). In 2023, the government deficit is forecast at 4.6% by the IMF, although the European Commission expects it to increase to 5.8% amid lower corporate tax revenue, the automatic indexation of public sector wages and social benefits, and a rising interest rate burden. After decreasing to 103.9% in 2022 - from 108.4% one year earlier -  the debt-to-GDP ratio is expected to rise to 105.1% of GDP this year and 107.2% in 2024, driven by high budget deficits. Headline inflation reached an unusually high level of 9.5% in 2022 as the sharp increases of wholesale gas and electricity prices have transmitted quickly to retail prices. Both headline and core inflation are projected to remain high in 2023 (4.9%) before subsiding the following year (1.1% as per the IMF forecast, 3.3% according to the EU Commission).

Unemployment decreased to 5.4% in 2022; however, rising uncertainty and the downturn in economic activity may moderate the performance of the labour market, with the level of unemployment floating around 5.6% over the forecast period (IMF). 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 62,065 by the IMF for 2022.

Main Sectors of Industry

Belgium’s strategic geographical position, its highly developed transport infrastructure, its 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 (0.7%) 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 2022, the production value of the agricultural sector increased by 19.5%; however, rising energy costs and inflation directly affected all inputs to the agricultural sector: expenditure on fertilisers rose an estimated 86% in 2022, energy by 67.3% (StatBel).

The industrial sector accounts for 19.6% of GDP, employing 21% 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 its contribution to GDP has been decreasing in recent years, the manufacturing industry is still key to the Belgian economy (12%).

The Belgian economy is largely oriented towards services. In fact, the tertiary sector accounts for 68.8% of the GDP and employs 78% 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, although it was affected by the COVID-19 pandemic: in 2021, overnight stays increased by 45% on the previous year, but it was still 31% lower than the 2019 level (StatBel).

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	0.9	20.8	78.2
Value Added (in % of GDP)	0.7	19.6	68.8
Value Added (Annual % Change)	-3.8	1.3	7.1

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

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

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

 

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