Belgium's economy in a nutshell - Economic outlook of October 2019

Belgium, a small and open economy of 11.4 million inhabitants, is located in the heart of Europe. The economy benefits from a strong communication infrastructure and a highly qualified workforce. Nevertheless, foreign trade is essential for Belgium. Moreover, the share of Belgian exports in the European Union exports to other European members amount to 8.2 %, and to 5.5 % for countries outside the European Union. It is also important to note that 70.9 % of Belgian exports are directed to the European Union market. The most significant trade partners for Belgium are its neighbouring countries, namely Germany, France and the Netherlands. Yet, its trade balance was negative in 2018.

In 2018, the products mainly exported by Belgian companies concerned the chemical industries, as well as vehicles and transport equipment and finally machinery and equipment.

In 2018, the chemical industry was the main value added creator, followed by food and beverages and the pharmaceutical industry.

Recent cyclical developments indicate that GDP growth was relatively good in 2018 (+1.5 % year-on-year, compared to +2 % in 2017), thanks to a strong domestic demand (excluding inventories changes) and more precisely, investments. However, GDP growth was less robust in Belgium than in the European Union (+2 %) or even in the Euro area (+1.9 %). GDP growth amounted 1.3 % in the second quarter of 2019 y-o-y, the same pace as the one observed during the previous quarter, due to a higher contribution from investments and a lower contribution from net exports.

Services are the main driver of economic growth since 2014 and they sustained almost all of it in 2018.

The production index in the manufacturing industry (construction excluded) increased in 2018 for the third time in a row. The same trend is observed in the construction sector. If the production growth remained dynamic in the manufacturing industry (construction excluded) in the second quarter of 2019, it decreased in the construction sector.

Business demography was also vigorous in 2018, with more creations than deletions, even though the entrepreneurial dynamism was less pronounced than in 2017. The second quarter of 2019 has also showed some entrepreneurial dynamism.

The employment rate rose up in 2018 while the unemployment rate decreased and this trend also continued at the beginning of the year. Despite this favourable development, progress still needs to be done to reach Belgian Europe 2020 employment rate target of 73.2 % in 2020. This target amounts to 75 % in 2020 for the European Union.

While consumer prices in Belgium have been rising at a faster pace than in its main neighbouring countries for several years now, data for the third quarter of 2019 show a stop to this trend, due to a decline in energy prices.

As regards the near-term growth prospects for Belgium, the National Accounts Institute (NAI) forecasts a deceleration in GDP growth to 1.1 % both in 2019 and 2020, after 1.5 % registered in 2018, according to the September 2019 Economic Forecasts.