Even before the War in Iran Belgium’s central bank, the National Bank of Belgium, voiced concerns about Belgium's international competitiveness. ‘It has deteriorated structurally,’ warned Belgium’s central banker, Governor Pierre Wunsch, during the presentation of the bank’s 2025 annual economic report. In the midst of a changing world, Wunsch called for a faster reform of the Belgian economy.
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Can Belgium still compete with other countries? wonders Belgium’s central banker Pierre Wunsch
Colin Clapson
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‘2025 is the year our world collapsed,’ Pierre Wunsch, Governor of the National Bank, said as he opened the presentation of the 2025 annual report with Gallic flourish at the beginning of March. He was referring to the measures taken by the Trump administration in the US, with trade tariffs at the forefront of his mind. These are interventions that are turning the global world order upside down and creating uncertainty. The Iran War that started on 28 February, when Israel and the US launched strikes on the Islamic Republic came too late for consideration in the present report, but will of course not have improved Belgium’s economic outlook.
Strangely enough, all this drama contrasts with a remarkably stable world economy, thanks to the AI boom in the US and the continued growth of emerging economies such as China and India. Going by the figures, you could almost think that 2025 was a rather boring year.
In Belgium, too, there were hardly any major economic fluctuations in 2025, either positive or negative: rather modest growth of 1 per cent and an unemployment rate of 6.2 per cent, ‘which has risen slightly but remains historically low’.
The opportunities of AI and robotics
And yet. Wunsch and his colleagues at the National Bank are indeed concerned about Belgium's competitive position i.e. the strength of the Belgian economy compared to other countries. ‘It has deteriorated structurally,’ Wunsch warned.
‘We have now had a trade deficit for four years in a row (i.e. we import more than we export), whereas previously we had a surplus. This gives the impression that something structural is going on.’
According to Wunsch, the sectors that have given Belgium an economic boost in recent years are now under pressure. ‘We know that industry is suffering from high energy prices and that we have higher climate ambitions here than in the US. We also traditionally exported a lot of pharmaceutical products to the US, but now the US wants to bring that production over there.’
What can Belgium do about this? ‘There is no magic solution, but you have to keep playing the game: look to the sectors of the future, not to those of the past,’ emphasises Wunsch. ‘Nowadays, these are increasingly AI and robotics, and we also have a number of strengths in these areas. Think, for example, of Imec in Leuven.’
But these are precisely the sectors in which we must dare to take more risks, he adds. ‘This is not traditional industry, where progress is relatively slow. Things are moving fast these days, and Belgian society must dare to adapt to that.
Fewer rules are needed
There is work to be done by the government: the National Bank is calling for further reforms, especially when it comes to productivity: we need to be able to do more with the same number of people. And then, for example, you also have to look at the many rules that apply in Belgium.
According to a survey by the European Commission, the managers of six out of ten young Belgian SMEs, small and medium-sized businesses, believe that these administrative burdens are hindering their growth. In this respect, Belgium is performing (much) worse than neighbouring countries.
‘You also have to create an environment in which entrepreneurs can be successful. Regulations in Europe and Belgium weigh too heavily on business. We need to find a better balance between growth, investment and risk-taking on the one hand and regulations on the other.’
He points to the rapid rise of AI: ‘We have the European GDPR rules (that protect citizens’ privacy), we have an AI Act (that keeps the use of artificial intelligence within reasonable limits). It gives the impression that we want to have everything under control before we even start. There needs to be some room for uncertainty and experimentation.’
More flexibility with regard to wages required
Wunsch and his colleagues believe that we should also dare to take a look at the rigid way in which wages are handled here. In Belgium, on the one hand, we have a wage norm law that limits wage increases so that salaries don't increase faster than in neighbouring countries, but on the other hand, we have automatic wage indexation that adjusts our wages in line with the increase in the cost of living.
According to Wunsch, this is a ‘handicap’. ‘It makes it almost impossible to distinguish between companies or sectors that are doing well and those that are struggling. There is currently very little room between the law’s norm and minimum indexation. This slows down the movement of employees from less successful companies and sectors to more dynamic sectors. As a result, it is also more difficult to breathe new life into the Belgian economy.’
Wunsch realises that this is a sensitive issue and knows that this reform is not a top priority for the government. ‘But it remains important that we dispatch the message that this is one of the elements that limits the flexibility of our economy.’
What about the budget? ‘Making efforts every year’
Wunsch concedes that the government has indeed taken robust action to limit the budget deficit. Unfortunately, however, this is not enough. ‘This is due to the ageing population, but also to rising interest costs and increased spending on defence.’
‘We are now ending up with a deficit that is stabilising, but at too high a level: 5 per cent. That has to come down, so more needs to be done.’ Ideally, the government is trying to move towards a deficit of 3 per cent, and preferably even 2 per cent.
‘If government policy is credible, and I think the government has scored points in that area, we have time to get to 3 per cent. But we need to be able to signal every year that we are moving in the right direction. If we fail to do so, for example due to elections or other developments, I fear that the market could turn against us.’