Panorama econòmic

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.

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