Economic Fact Book: Belgium‏

Belgium is a small open economy. Exports represent more than two-thirds of GDP. Belgium exports mostly to other countries within the EU but the proportion of exports to countries outside the EU is increasing. Belgium has no natural resources and imports raw materials, machinery etc. to use in production.

GDP is above pre-crisis levels as a result of a quick recovery in late 2009/early 2011 after which GDP levelled off. GDP growth has not exceeded 0.2 % q/q since Q1 11 and has even been negative in some quarters.

The government budget deficit was below 3% of GDP from 2000 to 2008, but increased to 5.6% of GDP in 2009. Belgium was then put into Excessive Deficit Procedure (EDP) and asked to correct the excessive deficit by 2012. However, in 2012 the deficit came out at 3.9% of GDP. This was partly due to the cost of recapitalising the banking group Dexia (0.8% of GDP) at the end of 2012. The European Commission recommended on 29 May to give Belgium an extra year to get its budget in line with the Maastricht criteria, but also noted that Belgium had taken "no effective action" to correct its deficit over the past three years. The deficits have caused government debt to rise and it is now around 100% of GDP. Belgium’s business climate is ranked #33 in the world in the World Bank’s Doing Business report and #17 on the World Economic Forum’s Global Competitiveness Index.

The lack of progress can partly be blamed on the political situation. In December 2011, a broad coalition government was formed (coalition of six parties) after more than 18 months without a government following the general election in June 2010. Part of the deal was an agreement on the sixth state reform, which transfers political and economic power from the federal level to the regions. The political problems have arisen from cultural and economic differences between the Walloons and Flemish. Economically, Flanders has a higher skilled labour force, higher productivity, lower unemployment and GDP per capita than Walloon. Flanders is mainly service oriented and Walloon is mainly industry oriented. Brussels is the ‘capital of Europe’ and has a number of headquarters and institutions, including the European Commission/Parliament, NATO headquarters and the Belgian federal government. For this reason, Brussels is mainly service oriented.

Belgium’s house prises are close to an all-time high. There are some signs that house price increases have come to a standstill.

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