Economic Perspectives for Belgium

Belgian real GDP grew by 0.35% in the final quarter of 2023. The figure was revised slightly down from 0.40% in the preliminary estimate and stayed roughly equal to the qoq growth rates recorded in the three previous quarters. For the full year 2023, economic growth was at 1.5%, i.e. three times that of the euro area. The breakdown by GDP components shows that private consumption (+0.5%) and investment in dwellings (-2.7%) have continued their trend, confirming the still robust consumption dynamics and the ongoing housing market cooling. Public consumption and public investment rose by 2.0% and 0.5%, respectively. Most surprisingly, business investment contracted by no less than 8.5%, after several quarters of positive growth. The sharp drop was caused by an exceptional transaction, being the foreign sale of ships (24 petroleum tankers by shipping company Euronav). The sale of investment goods abroad also (positively) impacted exports, resulting in a 1.1 percentage point positive growth contribution of net exports (see figure BE1).


Despite the relatively good growth performance in 2023, the Belgian economy is currently facing a number of serious headwinds. First, industry is going through a difficult period, reflecting a bleak external environment combined with a loss of cost competitiveness due to past high wage increases. Value added in total industry was down 3.1% in volume terms in 2023 (in the manufacturing subsector the correction was smaller but still at -0.9%). According to industrial production figures, activity in the pharma, chemical and textile sectors fell strongly in particular. In February, we did see a slight uptick in sentiment in manufacturing, but it only reversed the setback of a month earlier. Several survey indicators, like the assessment of incoming export orders, continue to plummet and capacity utilisation in the sector reached very low levels. 

Second, 2024 promises to be another difficult year for residential construction, as household investment in housing is expected to continue to shrink, albeit likely at a somewhat slower pace. The combination of high interest rates, material prices and personnel costs has hit the market for new constructions and renovations hard and will likely continue to put brakes on builders’ new project intentions for some time. The difficult situation in residential construction is likely to be further complicated by the rollback of the 6% VAT for non-private demolition and reconstruction projects since the beginning of this year. More structurally and looking further into the future, the transition to a more energy-efficient housing stock will require a big renovation wave, which will benefit residential investment in the years to come. 

Moderating job creation

The increase in domestic employment continued to slow in the fourth quarter of 2023. Over the year 2023, almost 30,000 net jobs were created, down from 77,000 in 2022 and 120,000 in 2021. In industry, though, more than 4,000 net jobs were lost in the three final quarters of 2023. Mid-March, Belgian bus manufacturer Van Hool announced it would cut back production as it struggles to meet competition from electric buses made in China. More than 1,000 jobs, and even a few thousands (including those at suppliers ) (if the company were to ultimately go bankrupt), are at risk. In 2023, although on the rise, the number of employees affected by an intention to make collective dismissals (like the plan at Van Hool) remained below the longer-term annual average (see figure BE2). The risk of more job losses in industry from closing and restructuring is high, suggesting even more moderate employment growth ahead in the whole economy. In our scenario, the Belgian economy is expected to add 20,000 and 30,000 net jobs over 2024 and 2025, respectively. 

We decided to keep our cautious economic outlook unchanged. The scenario implies that quarterly GDP growth in Belgium weakens to 0.2% in both the current and next quarter, thereafter strengthening again to 0.3% in the third and fourth quarter, in line with our scenario for the euro area. Hence, we also continue to see the annual growth rate for the Belgian economy in 2024 at 1.1%, down from the relatively strong 1.5% in 2023. In 2025, growth is expected to stabilise at 1.1%. Belgian HICP inflation rose sharply in February, from 1.5% to 3.6%, driven by energy and, more specifically, the disappearance of the downward impact of government measures to ease household energy bills. The good news is that core HICP inflation (i.e., excluding energy and food) was down more strongly than in previous months, reaching 4.0% and narrowing the still positive gap with the euro area (3.1%). The big rise in general inflation in February was beyond our expectation (we had expected the rate to rise to 2.6%). Given the strong upswing, we upgraded our average annual inflation estimate for 2024 from 3.6% to 3.8%. The rate for 2025 was kept unchanged at 2.1%.


Economic forecasts March 2024

National accounts (real yearly change, in %)

              2023 2024 2025
Private consumption 1.4 1.5 1.4
Public consumption 0.4 2.3 1.0
Investment in fixed capital 3.3 -2.2 2.4
Corporate investment 6.3 -2.5 2.9
Public investment 2.5 3.1 2.6
Residential building investment -5.7 -4.5 0.6
Final domestic demand (excl. changes in inventories) 1.6 0.8 1.6
Change in inventories (contribution to growth) 0.4 0.0 0.0
Exports of goods and services -3.3 -1.0 2.3
Imports of goods and services -2.8 -1.4 2.8
Gross domestic product (GDP) 1.5 1.1 1.1
Household disposable income 4.4 1.8 1.4
Household savings rate (% of disposable income) 14.6 14.9 14.7

Equilibrium indicators 

              2023 2024 2025
Inflation (average yearly change, in %)      
Consumer prices (harmonised CPI) 2.3 3.8 2.1
Health index (national CPI) 4.3 3.2 2.0
Labour market      
Domestic employment (yearly change, in '000, year end) 29.2 20.0 30.0
Unemployment rate (in % of labour force, end of year, Eurostat definition) 5.6 5.6 5.5
Public finances (in % of GDP, on unchanged policy)      
Overall balance -4.2 -4.5 -4.9
Public debt 105.2 105.7 107.4
Current account balance (in % of GDP) -0.7 -0.5 -1.0
House prices (average yearly change in %, existing and new dwellings, Eurostat definition) 2.0 2.2 2.5

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