Belgian Economy Projected To Slow Down To 0.8% In 2025 Amid Global Uncertainty

The European Commission anticipates Belgium's economic growth to slow to 0.8% in 2025, primarily due to global uncertainties and reduced exports. A slight improvement to 0.9% is expected in 2026, aided by better external demand. Inflation is predicted to drop to 2.8% in 2025 and further to 1.8% in 2026, as industrial goods and energy prices ease.

Belgium's government deficit is forecasted to rise over the coming years, driven by increased spending on ageing-related costs, defence, and interest payments. Consequently, government debt is also expected to continue its upward trajectory. The Belgian economy experienced a growth of 1% in 2024, largely supported by robust private consumption despite weakened purchasing power.

Investment saw only moderate growth during this period. Although both exports and imports declined, net exports contributed slightly positively to overall growth. GDP growth remained steady at 0.4% quarter-on-quarter in the first quarter of 2025.

Domestic demand is projected to decelerate in 2025, with further moderation anticipated in 2026. Slowing employment growth and declining consumer sentiment are expected to impact private consumption negatively. As a result, the saving rate is forecasted to decrease modestly to around 12.6% of disposable income by 2026.

Investment is expected to grow by 0.5% in 2025 and increase further by 1.2% in 2026. While construction activity is set to expand, uncertainties in the global environment may hinder equipment investment.

Impact of US Tariffs on Trade

The introduction of US tariffs poses challenges for Belgian exports, particularly affecting sectors like pharmaceuticals (previously exempt from tariffs), machinery and equipment, and transport-related industries. The US ranks as Belgium's fourth-largest export market.

Imports are projected to decline less than exports, leading to a negative contribution of exports to growth in 2025. Following a contraction that year, both exports and imports are expected to rebound in 2026 due to an anticipated mild improvement in the external environment.

Overall economic activity is forecasted to grow by 0.8% in 2025 with a slight recovery of 0.9% expected in the following year.

With inputs from WAM