On the eve of yet another shock, i.e. the hike in energy prices following the Middle East conflict, hard as well as soft data on the Belgian economy have not been that good. The earlier flash estimate of Belgium’s Q4 2025 real GDP growth was revised down by the National Accounts Institute (NAI), from 0.2% to 0.1% qoq. This outcome is a deceleration from the growth figures recorded in the previous three quarters and mainly resulted from a stagnation of household consumption. Investments in dwellings continued its downward trend in Q4 (-1.0%). Business investment moderated (+0.4%), while public investment surged (+9.7%) owing to the delivery of defence-related purchases. The latter also exerted downward pressure on net exports, which made a negative contribution (-0.3 percentage points) to economic growth. On the production side, Q4 2025 growth was driven by services (+0.2%), while activity in industry and construction fell by 0.6% and 0.1%, respectively.

The deterioration in the economic climate already well before the start of the Iran war on February 28th is also reflected in overall business sentiment as measured by the NBB barometer. The indicator started to soften late in Q4 2025, largely driven by weaker confidence in the manufacturing industry. The better January figure was reversed by a new marked drop in February. In March, the NBB barometer barely recovered from February’s sharp decline. Consumer confidence, which peaked in January, fell sharply in March (see figure BE1). The decline in consumer confidence was mainly due to a sharp rise in pessimism about the general economic outlook.

The fallout from the Iran war

As is the case worldwide, the Middle East conflict has made the outlook for the Belgian economy significantly more uncertain, creating upside risks for inflation and downside risks for growth. In an Economic Brief that we publish together with our updated March outlook, we explore in more detail how the Iranian shock may translate into economic impacts. The analysis suggests that Belgium is somewhat more exposed to the Middle East conflict than the EU average. Measures such as the energy intensity of GDP and households’ final energy consumption show that Belgium is indeed relatively sensitive to the recent spike in energy prices (see figure BE2). In terms of direct goods trade with the Middle East, Belgium's exposure is rather average in an EU perspective. Besides these two key transmission channels (i.e. energy dependency and general trade with the region), the conflict may also impact the economy via non-energy supply chain disruptions (e.g. logistical problems in shipping and air traffic) and a war-induced loss of confidence. 

What the ultimate effects through the various transmission channels will be on Belgian economic growth remains particularly difficult to estimate. Especially the high uncertainty about the duration of the Middle East conflict and, related to that, the further course of energy prices play a crucial role here. Note that even without the outbreak of the conflict, we would have made a limited downward adjustment to our growth outlook for the Belgian economy. Because the quarterly growth rate for Q4 2025 came out lower than reported in the earlier flash estimate, the statistical growth overhang from 2025 to 2026 is also lower. Moreover, confidence indicators (those in manufacturing in particular) were already deteriorating before the war started (see above).

On balance, we now see Belgian real GDP growth in 2026 at 0.6%. In our February scenario, we still assumed that Belgian growth would be 1.1%. This major downward adjustment (by 0.5 percentage points) is a bit larger than the one we made for the euro area. For 2027, we assume a gradual growth recovery, this on the assumption that the Middle East conflict will prove to be a transitory shock. Nevertheless, we lowered the growth estimate for that year too, from 1.3% to 1.1%. This outlook is surrounded by uncertainty that is much higher than usual. The biggest downside risk concerns a further escalation and/or long duration of the war with major damage to local energy infrastructure. The conflict may also lead to bigger-than-expected 'scarring effects' (i.e. lasting damage), to the extent that an end to the war would still imply substantially higher energy prices than those before the outbreak of the war.

Impact on inflation

The path ahead for Belgian inflation remains highly uncertain as well. HICP inflation for February came in at 1.4% yoy, unchanged from the January figure. Core inflation (excluding energy and food) fell from 3.1% to 2.7%. While energy inflation was still negative in February (-6.8%), it will start rising following the recent surge in energy prices, pushing up headline inflation. In our updated scenario, we now see Belgian inflation averaging 3.3% in 2026. That is 1.4 percentage points higher than forecast in February, i.e. before the start of the Middle East conflict. The upward revision moreover is bigger than the one we made for euro area inflation (being 0.9 percentage points). We believe that, as was the case in previous energy shocks, Belgian inflation will again react more strongly to the price hike of energy compared to the euro area (figure BE3, see also our new Economic Brief). Given that, for now, we assume that the conflict will be a transitory shock, we see Belgian inflation falling back to an average of 1.7% in 2027.