Most sentiment indicators dropped in the final month of 2024, adding to the growth concerns for the Belgian economy. The further loss of consumer confidence was mainly due to less optimistic unemployment expectations. The worsening followed the ongoing moderation on the labour market. Business confidence fell after two months of improvement and continued its downward path seen since spring 2024. Sentiment deteriorated across almost all sectors. Construction was the only sector that saw confidence strengthen in December, for the third month in a row. A sharp fall of confidence in business-related services brought an abrupt end to the positive trend seen in the sector since August. Manufacturing confidence dropped once again, more than reversing previous month’s upside surprise gain. The downturn in the sector’s sentiment started in spring 2024 and was strongly driven by a less favourable assessment of total order-books, in line with businesses’ more pessimistic assessment of their competitive position (see figure BE1).  

Bankruptcies up

The weakening of the business climate was also reflected in the evolution of bankruptcies. More than 11,000 companies went bankrupt last year, marking a 7% rise compared to 2023. The construction and transport sectors fared particularly badly, both reaching a record high. Despite lots of bad news about the sector, bankruptcies in manufacturing stayed well below their 2013 peak. For the economy as a total, the increase in bankruptcies largely reflects a normalisation following artificially low numbers during the pandemic period. As the number of active companies continued to grow steadily, the failure rate (i.e. the number of bankruptcies per 100 active companies) is a better indicator. In 2022 and 2023, this rate rose to 0.66% and 0.72% respectively, up from a historically low of 0.46% in 2021 (see figure BE2). 

For 2024, data on the number of active companies are not yet available. Likely the failure rate, while increasing further, remained well below the record level seen in 2013 following the sovereign debt crisis. Moreover, compared to neighbouring countries, bankruptcies in Belgium increased earlier but not more sharply on balance (see figure BE3).

Our GDP growth forecast for 2025 was kept at 0.6%. For 2026, we see Belgian economic activity still growing below potential, at 0.9%. This rather downbeat outlook relates to the expected protectionist turn of the US following president Trump’s re-election. Under this scenario, which is at the downside of the range of forecasters, the manufacturing industry in particular continues to experience difficult times. Growth risks for the Belgian economy are tilted to the upside, though, and hinge on the severity of Trump’s economic policies. Lower than expected tariff increases could lift our GDP growth outlook for 2025 and 2026.

Belgian harmonised inflation (HICP) for December came in at 4.4%, down from 4.8% in November. Average annual inflation reached 4.3% in 2024. With this, Belgian headline inflation again rose well above euro area inflation last year, which has been the case in 16 out of the past 20 years (see figure BE4). A higher sensitivity to market prices for energy, the statistical treatment of energy-related fiscal measures and higher food inflation were the main factors behind this. In our updated scenario, we now expect Belgian inflation to average 2.8% this year, up from 2.6% in our previous forecast. The revision is in line with the revised inflation outlook for the euro area and reflects slightly higher expected energy inflation. Annual HICP inflation for 2026 is forecast at 2.2%.

Q3 house price data

In early January, Eurostat published harmonised house price data for the third quarter of 2024 (see also our Economic Brief “European housing market is no longer cooling off”). The price index in Belgium went up by 1.6% qoq, which implies an acceleration from the Q2 (-0.3%) and Q1 (+0.8%) data. The Q3 figure confirms that, most likely, we have put the cooling in the Belgian housing market behind us. Since the second half of 2023, there has been a remarkable price divergence between existing and new dwellings. The price recovery of existing dwellings was more moderate, but accelerated in Q3 2024. In contrast, the again weak Q2 and Q3 figures for new construction brought a welcome tempering, after a cumulative price rise of as much as 8.1% between Q2 2023 and Q1 2024 (see figure BE5). Given the somewhat stronger than expected qoq price rise in Q3 2024 for total dwellings, we revised upward the estimated annual house price growth in 2024 from 2.9% to 3.1%. Taking into account the expected development of market fundamentals, we expect that Belgian house prices continue to rise moderately, by some 3% per year, in both 2025 and 2026.