The earlier flash estimate for Belgium’s Q2 2026 GDP growth was confirmed at 0.0% qoq. The stagnation of economic activity implies a deceleration from the 0.2% growth recorded in Q1. Looking at GDP components, private consumption growth slowed from 0.6% to a still surprisingly good 0.4%. Investment in housing continued to rise, albeit at a slow pace (+0.2%). Business investment contracted by 0.7%. Public investment dropped by no less than 8.0%, while government consumption increased slightly by 0.1%. Trade flows once again surprised on the upside: exports and imports of goods and services both increased, by 2.9% and 1.9% respectively, resulting in a positive contribution of net exports to economic growth (+0.8 percentage points). Lastly, the contribution of changes in inventories to GDP growth was largely negative at -0.6 percentage points (see figure BE1). Viewed from the production approach to GDP, value added growth in the services sector was slightly higher (+0.3%) than in Q1 (+0.2%). In construction, value added returned to negative growth (-0.2%) after positive growth in Q1 (+0.5%), while in industry value added growth became more negative (-0.6% compared to -0.2% in Q1).

Unlike in the euro area, sentiment indicators in Belgium worsened in August. The NBB business indicator fell after having risen slightly for three consecutive months. Confidence deteriorated in both industry and construction. Consumer confidence receded as well in August, mainly due to consumers’ more pessimistic expectations for the general economic situation. Meanwhile, the external environment remains challenging, with still a lot of uncertainty surrounding the Middle East conflict. The spike in energy prices in particular stays an issue, as the Belgian economy is relatively vulnerable to such a shock due to a structural combination of a highly energy-sensitive industrial sector, extreme dependence on fossil fuel imports and a rigid wage-setting system. The current shock could trigger a new round a wage indexation and a renewed loss of competitiveness of Belgian companies. A worrying fact in this regard is that, while Belgian trade flows have showed positive growth in the first two quarters of the year, business leaders in the manufacturing sector assessed their export order books less favourably again over the summer months (see figure BE2). The latter could imply that Belgian exports will edge down again in the second half of the year. 

Downside risks increasing

Uncertainty on full-year 2026 growth remains high. One particular question is how the component of inventories will further impact GDP in the remainder of the year. Given the strongly negative contribution of changes in inventories to GDP growth in both Q1 and Q2, on top of a negative carry-over from 2025, the likelihood of changes in inventories strongly weighing on annual 2026 GDP growth is high. A precise assessment remains difficult though, as changes in inventories (also including statistical discrepancies) are a notoriously volatile expenditure component of GDP (see figure BE3). Private consumption, which proved to be quite resilient in H1 2026 despite the negative environment, is another big uncertainty. Likely, as in Q1, the development in Q2 was driven by households digging further into their savings, leading to another fall in the savings rate (Q2-figure not yet available). Moreover, employment growth, although remaining lacklustre, picked up a bit in Q2 (with 6,490 people added to the workforce), which also may have supported consumption more recently (see figure BE4). We assume that private consumption growth is set to weaken in the second half of 2026 and to remain rather bleak in 2027, as it is likely to be negatively impacted by the hike in energy prices, either through the confidence channel or the unfavourable impact of higher inflation on purchasing power.

We continue to be on the cautious side for Belgian quarterly growth in the second half of 2026 and kept the outlook for real GDP growth in 2026 as a whole unchanged at 0.6%. We did lower the GDP growth projection for 2027 though, from 1.1% to 0.9%, on the back of the ongoing hike in energy prices. Risks to the growth scenario moreover are clearly on the downside, with an intensification of the energy crisis and/or substantial supply chain issues posing the biggest threats to the Belgian economy. We also changed the outlook for end-of-year unemployment a bit. Surprisingly, Belgium’s harmonised unemployment rate fell to 6.0% in July, from 6.3% in June (see figure BE5). The series, which is based on Eurostat’s Labour Force Survey, has been relatively volatile over the past year with several revisions of past data, likely impacted by Belgium’s unemployment benefits reform. Nevertheless, the lower July figure made us to marginally update the outlook for the unemployment rate, to 6.5% and 6.3% at the end of 2026 and 2027 respectively. 

Belgian inflation (based on the HICP) rose to 4.2% in August, from 3.7% in July. The increase was entirely driven by higher energy inflation (from 15.1% to 21.8%). Both core inflation (which excludes energy and food) and food inflation were stable, so the August figure did not signal energy inflation further broadening out. At 4.2% and 3.2% respectively, Belgian headline and core inflation are 0.9 and 1.0 percentage points higher than the respective euro area figures. Currently, 17 out of 21 euro area countries have an inflation rate which is lower than the Belgian one. As the upward move in inflation over the summer has been stronger than we had expected and, more importantly, energy prices rose sharply in recent weeks, we upwardly revised the outlook for 2026 annual HICP inflation, from 3.2% to 3.7%. The inflation outlook for 2027 now is at 2.4%, up from 2.1% previously. As was the case in 16 out of the 20 past years, Belgian annual inflation in 2026 and 2027 will most likely again end up being higher than the euro area one (see figure BE6). Also, the continuing conflict in the Middle East has made the economic environment significantly more uncertain, creating sizeable upside risks for inflation.