Robust Q1 growth

According to the flash estimate by the National Accounts Institute, Belgian real GDP posted 0.4% growth in the first quarter of 2025 relative to the final quarter of 2024. The figure came out stronger than what we had expected (0.2%) and implies a strengthening of growth dynamics compared to previous quarters. Moreover, Belgian Q1 growth was among the strongest performances in the euro area and, when excluding Ireland, twice that of the euro area. The preliminary estimate shows that value added (in real terms) was up in construction and services by a strong 0.9% and 0.4% qoq, respectively. This firm economic momentum is striking, as business confidence fell sharply in both sectors in the first months of the year (see figure BE1). Value added in industry remained stable in Q1, signalling an improvement as it had been declining since the beginning of 2023. Compared to the other two main sectors, confidence in industry has held up better in recent months, which may be related to the expected shift in EU and especially German fiscal policy. 

Full details on Belgian Q1 growth will be published on 28 May. So, for now, we don’t know which GDP components contributed to the relatively strong growth figure. Possibly, exports have been higher at the beginning of the year to anticipate the announced US import tariffs. The latest trade figures from the US Bureau of Economic Analysis show that US imports (in nominal terms) from Belgium rose by almost half in March compared to a year ago. This indeed suggests some positive growth impact from a pull forward of Belgian exports that would have occurred further down the road. The remarkably strong Q1 growth in construction (0.9%) could be the result from both continued strong public investment as well as an ongoing recovery of residential building investment.

The gradual downturn in survey indicators pertaining to household consumption, which started to be observed in Autumn 2024, persisted in the first months of 2025. Consumer confidence continued to weaken in April. In particular, consumers’ expectations concerning the general economic situation in Belgium slipped to a level close to the historic lows seen in 2020 (during the pandemic) and 2022 (following the outbreak of the war in Ukraine and the subsequent energy crisis). Also, consumers fear that prices will increase at a faster pace again in the next months (see figure BE2). April’s further drop in confidence undoubtedly reflects current turbulent times, with concerns about US tariffs in particular deepening doubts over the near-term outlook.

Scenario changes

A continuation of the positive growth trend into the next quarters looks very doubtful to us, given the ongoing trade war initiated by US president Trump. Likely, we will see a couple of quarters with (close to) zero growth, followed by slow growth till mid-2026. Compared to our previous scenario published in April, we lowered the quarterly growth path for the Belgian economy till Q2 2026, in line with our euro area scenario. The impact of this on 2025 growth is neutralised by the better-than-expected Q1 figure, so average 2025 growth of the Belgian economy was kept unchanged at 0.7%. Lower quarterly growth in the first half of 2026, which reflects persistent trade war related uncertainty, results in a downward revision of our average 2026 growth outlook from 1.1% to 0.8%. With this, both the 2025 and 2026 figures continue to be at the lower end of the range of forecasts made by other institutions.

Belgian HICP inflation for April continued its downward path, from 3.6% to 3.1%, on the back of further declines in both energy and food price inflation. Core inflation (excluding energy and food) was marginally up, though, reaching 2.3% in April (see figure BE3). Although Belgian headline inflation stays well above the euro area figure (2.2%), Belgium no longer is among the group of euro area countries with the highest inflation. In April, seven euro area countries posted higher inflation readings than the Belgian one, against four countries in March, two in February and one in January. In line with what we did for the euro area, we lowered our forecast for average 2025 Belgian inflation, which we now see at 2.9%, down from 3.2% previously. The revision reflects the removal of the (previously expected) impact of EU retaliation and a near-term downwards impulse of energy prices. 

S&P issues negative outlook

On April 25th, credit rating agency S&P downgraded the outlook on Belgium's AA rating from stable to negative, citing concerns over the country’s increasing budget deficit. On the one hand, S&P praised the efforts of the new federal government, which signal a shift toward fiscal prudence. But on the other, the rating agency sees hurdles to the implementation of the austerity measures. If Belgium does not deliver on its budgetary promises, a rating cut to AA- might follow. Potential pitfalls mentioned by S&P include the current global trade shock, which could hit growth harder than feared, as well as possible social backlash against spending cuts. The impact of S&P's decision on Belgian interest rates is likely to be limited today. The other two major rating companies, Moody's and Fitch, already maintain a rating equivalent to AA-, with a negative outlook. If implemented, a rating cut there would have bigger implications as it would see Belgium tumble out of the double-A category for the first time ever.