Still decent start into 2026

The earlier flash estimate of Q1 2026 GDP growth was confirmed at 0.2% by the National Accounts Institute (NAI). The figure implies a strengthening of quarterly growth compared to the previous quarter (0.05%) and was broadly in line with growth of the euro area economy, when excluding the effect of Irish GDP. It shows that the Belgian economy still performed surprisingly well at the beginning of the year. Looking at the details, household consumption (+0.6% qoq) was the primary driver of Q1 GDP growth, following a stagnation in Q4 2025. Investment in dwellings edged up by 1.3%, i.e. the first positive quarterly growth of the component since Q1 2024. Both government consumption and investment fell, by 0.5% and 1.0% respectively. Business investment growth was moderately positive, growing by 0.3%. Trade flows surprised on the upside, with exports and imports increasing by 2,8% and 2,6% respectively, resulting in a slight positive growth contribution of net exports (+0.1 percentage point). Lastly, the contribution of changes in inventories to GDP growth was negative at -0.1 percentage point (see figure BE1).

The Q1 data release by the NAI also showed that quarterly employment growth rebounded (+0.2% qoq or 10,350 people added), suggesting that the labour market remained resilient (see figure BE2). Job creation improved in industry and construction, as well as in professional, scientific and technical activities and administrative and support service activities. Moreover, the harmonised unemployment rate fell from 6.4% at the end of 2025 to 6.2% in March and April 2026. Caution is warranted when interpreting Belgium’s Q1 labour market figures, though, as employment likely has been incentivised under the new two-year cap on unemployment benefits. Meanwhile, soft data recently are signalling that the outlook for the labour market has worsened. E.g., the NBB’s monthly surveys show employment expectations by businesses and unemployment expectations by consumers becoming more pessimistic. Consequently, employment growth is set to be weaker again in the coming quarters. 

Unchanged scenario

More in general, overall sentiment have weakened markedly since the start of war in the Middle East end February. The worsening has been most pronounced for consumer confidence, which fell below its long-term average, following a rally of the indicator throughout 2025. The impact of higher inflation and government reforms on real incomes, and hence purchasing power, will likely result in household spending growth slowing substantially in Q2 and the next quarters relative to the unexpectedly high qoq growth in Q1. Despite the optimism surrounding the agreement between the US and Iran on reopening the Strait of Hormuz and extending the ceasefire, considerable uncertainty remains regarding the full implementation and occasional setbacks. The agreement does limit the downside risks to general economic activity, but we continue to expect only meagre growth of 0.6% for the Belgian economy this year. The scenario implies Belgian GDP will virtually stagnate in Q2 and only gradually recovers in the next quarters. For 2027, we kept annual GDP growth unchanged as well, at 1.1%.

Belgian inflation (based on the European HICP) stood at 4.0% in May, down 0.2 percentage points compared to the April figure (see figure BE3).

Besides a fall in energy inflation, from 18.2% to 17.1%, lower headline inflation was caused by lower food inflation (down from 1.8% to 1.5%) as well as a  slight decline in core inflation (i.e., excluding energy and food, from 3.3% to 3.2%). Looking ahead, we continue to forecast Belgian headline inflation to average 3.2% this year before moderating again and reaching 2.1% in 2027. On the one hand, lower futures prices for oil and gas compared to a month ago imply lower expected energy price inflation. On the other, we now see indirect effects contributing somewhat more to core inflation over the next months than previously expected. Surveys of inflation expectations indeed suggest a continuation of core price pressures (see figure BE4).