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Economic and political overview

Economic Overview

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) 579.06627.51658.12682.07703.75
GDP (Constant Prices, Annual % Change) 3.21.00.91.21.2
GDP per Capita (USD) 49,84353,65756,08557,95559,594
General Government Balance (in % of GDP) -4.4-4.9-4.7-4.8-5.1
General Government Gross Debt (in % of GDP) 105.1106.0106.8108.5110.9
Inflation Rate (%) n/a2.54.32.11.8
Unemployment Rate (% of the Labour Force) 5.65.75.75.75.5
Current Account (billions USD) -20.67-16.98-12.78-8.07-5.20
Current Account (in % of GDP) -3.6-2.7-1.9-1.2-0.7

Source: IMF – World Economic Outlook Database , October 2021

Country Risk

See the country risk analysis provided by La Coface.

 

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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.

 
Monetary Indicators 20162017201820192020
Euro (EUR) - Average Annual Exchange Rate For 1 USD 0.940.890.850.890.88

Source: World Bank - Latest available data.

 

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Foreign Trade

The Belgian economy is particularly open, with foreign trade representing 193% of GDP (World Bank, latest data available). In addition to being considered an export champion (8th in the world rank - WTO), Belgium plays an important role as a transit and distribution centre for other countries in the European Union. According to data from the Belgian Foreign Trade Agency, the majority of exports comprise chemical products (27.7%), mineral products (18.3%), transport equipment (8.6%), machinery and equipment (8.4%), base metals (7.3%), and plastics (7%). The main imports are chemical products (24.5%), mineral products (23.2%), machinery and equipment (10.8%), transport equipment (9.1%) and base metals (6.6% - data on 2022).

Belgium's role as a regional logistical hub makes its economy vulnerable to shifts in foreign demand, particularly with EU trading partners (who accounted for 68% of exports and 58.5% of imports in 2022). Germany remained the first customer (21.2%) in 2022, followed by the Netherlands (13.8%), France (13.1%), and the U.S. (5.8%). The main suppliers were the Netherlands (25.4%), Germany (15.9%), France (12.7%), China and the United States (8.2% each - data Belgian Foreign Trade Agency).

According to WTO data, in 2022 exports amounted to USD 635.2 billion, while imports reached USD 623.6 billion. Exports of services totalled USD 139.4 billion, as imports stood at USD 143.5 billion. The country’s trade balance is traditionally positive when including services; however, the overall external trade balance was negative by around 1.6% of GDP in 2022 (from a surplus of 1.8% one year earlier - World Bank). According to the latest data from the Belgian Foreign Trade Agency, in the period Jan-Sep 2023 Belgium exported EUR 396.3 billion and imported EUR 385.1 billion (down by 12.3% and 12.6% year-on-year, respectively). During the period, the EU accounted for 59.8% of total exports and 55.3% of imports.

 
Foreign Trade Values 20182019202020212022
Imports of Goods (million USD) 455,188428,878397,957527,128623,686
Exports of Goods (million USD) 468,213446,910421,842548,869635,245
Imports of Services (million USD) 124,108124,500118,938136,152143,566
Exports of Services (million USD) 124,423123,667120,875137,647139,426

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20182019202020212022
Foreign Trade (in % of GDP) 166.5164.2157.2172.6193.1
Trade Balance (million USD) -2,0044,1767,0375,014-18,064
Trade Balance (Including Service) (million USD) -1,6513,3448,8766,605-21,996
Imports of Goods and Services (Annual % Change) 2.02.0-5.610.74.9
Exports of Goods and Services (Annual % Change) 1.12.4-5.011.35.1
Imports of Goods and Services (in % of GDP) 83.481.877.785.897.7
Exports of Goods and Services (in % of GDP) 83.182.479.486.895.3

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20232024 (e)2025 (e)2026 (e)2027 (e)
Volume of exports of goods and services (Annual % change) -1.21.73.53.63.5
Volume of imports of goods and services (Annual % change) -0.32.03.84.03.9

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Belgium is a member of the following international economic organisations: Benelux Economic Union, ICC, OECD, European Union, IMF, G-9, G-10, WTO, among others. For the full list of economic and other international organisations in which participates Belgium click here. International organisation membership of Belgium is also outlined here.
Free Trade Agreements
The complete and up-to-date list of Free Trade Agreements signed by Belgium can be consulted here.
 

Main Partner Countries

Main Customers
(% of Exports)		 2022
Germany 20.1%
Netherlands 14.2%
France 12.5%
United States 6.8%
United Kingdom 5.1%
See More Countries 41.3%
Main Suppliers
(% of Imports)		 2022
Netherlands 21.1%
Germany 11.9%
France 10.7%
United Kingdom 6.4%
United States 5.4%
See More Countries 44.5%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
King: Philippe of Belgium (since 21 August 2013);
Prime Minister: Alexander De Croo (since 1 October 2020)
Next Election Dates
Senate and Chamber of Representatives: 2024
Current Political Context
Belgium is a stable country even if cultural tensions between Wallonia (French-speaking) and Flanders (Flemish) have impregnated political life. The political system is a complicated one as there are different majorities at both regional and national levels. The decision-making process is highly controversial in Belgium as leaders of “Communities” can pass decrees and ordinances bearing the same juridical value as federal laws.

The government led by Prime Minister Alexander De Croo, in office since October 2020, is supported by a seven-party coalition agreement (also known as the “Vivaldi” coalition): the liberals (Open Vld and MR), the socialists (Vooruit and PS), the greens (Groen and Ecolo) and the Christian democrats of CD&V. Federal elections are scheduled to be held on 9 June 2024, with good probability for the repetition of the Vivaldi coalition.
Main Political Parties
Historically, parties are divided between French and Flemish groups, fuelling intercommunal tensions.

- Workers' Party of Belgium (PTB-PVDA): far-left (ideologies: communism, marxism, marxism-leninism, socialism)
- Socialist Party (PS): centre-left, largest francophone party
- Flemish Socialists and Spirit alliance (SP.A): socialist, Flemish party
- Ecolo: green, francophone party
- Groen: green, Flemish party
- Christian, Democratic and Flemish Party (CD&V): centre-right
- Humanist Democratic Centre (Les Engagés) (cdH): centre, francophone party
- Flemish Liberal Democrats (Open VLD): centre-right, Flemish party
- Reform Movement (MR): centre-right, francophone party
- New-Flemish Alliance (N-VA): right-wing, pushes for Flemish independence from Belgium
- Flemish Interest (Vlaams Belang): right-wing populist, pushing for Flemish independence
Executive Power
Chief of the state is the King, who plays a largely ceremonial and symbolic role. The King's primary political function is to designate a political leader (Prime Minister) to form a new government. Following legislative elections, the leader of the majority party (or the leader of the majority coalition) is usually appointed Prime Minister by the King and then approved by the parliament for a four-year term. The King, on recommendation of the Prime Minister, formally appoints the Council of Ministers. At the federal level, executive power is wielded by the Council of Ministers, with each minister heading a governmental department, with a maximum of 15 ministers. The Prime Minister chairs the Council.
Legislative Power
The Belgian Parliament is bicameral and consists of the Senate and the Chamber of Representatives. The Chamber has 150 directly elected members by proportional representation vote. The Senate has 60 members; 50 members indirectly elected by the community and regional parliaments based on their election results, and 10 elected by the 50 other senators. All the members of the Parliament serve 5-year terms.
 

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COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
The summary of the EU’s economic response to the COVID-19 pandemic is available on the website of the European Council.
For the general overview of the key economic policy responses to the COVID-19 pandemic (fiscal, monetary and macroeconomic) in Belgium, please consult the country's dedicated section in the IMF’s Policy Tracker platform.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.
 

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