Regular blows to industry, poor exports, a faltering labour market, lower investments in housing: there are many indications the Belgian economy is struggling. This too is clear from the National Bank's autumn forecasts. And yet, for the coming years, there is also hope of improvement Belgium’s central banker says.
There is a lot of uncertainty, notes Pierre Wunsch, the governor of Belgium’s National Bank. Wunsch is mainly referring to the international situation: what will be the economic impact of Donald Trump's presidency? How will China react? And how will the domestic economy perform as a result? These are questions that concern all of us.
In this uncertain climate, Belgium does not hold the best economic cards. Look at industry, where confidence is currently very low. Look at how production capacity is used in Belgium: production is currently so low that we are at levels seen during the pandemic.
‘One of the factors Belgium faces is the high cost of energy. Cheap Russian gas is no longer available,’ Wunsch explains. ‘Moreover, our ambitions in terms of the climate are greater than in the US, for example. In addition, there is a lot of competition from China in terms of electric cars, but also in terms of solar panels and wind energy.’
Job creation is stalled
Add to this a decline in business investments, after a relatively large spike in such investments. The National Bank says companies partly blame uncertainty about regulations and permits in Belgium for the lack of investments. ‘It has become very difficult to get large investment projects off the ground,’ notes Geert Langenus of the National Bank's study department.
This can also be seen on the labour market: job creation has virtually stalled this year. Exports too, which have been particularly low in recent years, are causing a headache. In terms of housing investment, too, the figures are dismal.
In addition, inflation, the general rise in our country's price levels, has not fallen as much as economists hoped. Energy and food prices in particular are the culprits, though the rise in food prices is mainly due to the rise in tobacco prices. Currently, Belgian inflation stands at about double the eurozone average.
Growth is stable
It’s not a happy picture, but at the same time, the mood at the National Bank is not just one of doom and gloom. For instance, Belgium’s captains of industry expect the economy to continue growing in a fairly stable way in coming years, despite everything, thanks to healthy household consumption.
This year, growth of some 1 per cent in gross domestic product (GDP, the total value of goods and services produced in Belgium in one year) will be realised. In coming years, growth will rise slightly to around 1.2 and 1.4 per cent a year.
Inflation that is higher than expected is also currently on the decline again and will reach a fairly healthy 2.9 per cent as early as next year, before falling back further to 1.3 per cent in 2026.
The labour market may be faltering, but that does not mean employment is falling. ‘We think a cautious recovery is on the way,’ Langenus suggests. ‘Labour demand may be slowing down in manufacturing at the moment, but it remains particularly high.’ Some 90,000 jobs will be created between 2025 and 2027. The unemployment rate will remain at an ‘historically low’ level (around 5.6 per cent).
Only in terms of business investment and housing investments does the National Bank not expect to see miracles in the coming years. ‘Business investment will recover somewhat in the coming years, but will remain below the historical average,’ Langenus says. The same goes for housing investments: ‘Recovery is on the way, but even if it comes, housing investments will still be 6 per cent lower in 2027 than in 2019.’