Economic and Political Overview

flag Belgium Belgium: Economic and Political Overview

In this page: Economic Outline | Political Outline | COVID-19 Country Response

 

Economic Outline

Economic Overview

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 Indicators 202020212022 (E)2023 (E)2024 (E)
GDP (billions USD) 524.79594.50582.21624.25642.69
GDP (Constant Prices, Annual % Change) -5.46.13.10.71.1
GDP per Capita (USD) 45,54551,45150,11453,37854,770
General Government Balance (in % of GDP) -6.5-5.2-4.8-5.2-5.5
General Government Gross Debt (in % of GDP) 112.0109.2105.3106.0108.3
Inflation Rate (%) 0.43.210.34.72.1
Unemployment Rate (% of the Labour Force) 5.66.35.56.06.0
Current Account (billions USD) 5.802.56-19.60-17.01-9.17
Current Account (in % of GDP) 1.10.4-3.4-2.7-1.4

Source: IMF – World Economic Outlook Database, Latest data available.

Note : (E) Estimated data

 

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 data available.

 

Find more information about your business sector on our service Market Reports.

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

See the country risk analysis provided by Coface.

 

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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.
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
Type of State
Belgium is a federal parliamentary democracy under a constitutional monarchy.
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.
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
11/180
 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Free
Political Freedom:
1/7
Civil Liberties:
1/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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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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Latest Update: September 2023