Economic Forecast Summary Belgium – June 2023


Real GDP growth is projected to slow to 0.9% in 2023, before picking up to 1.4% in 2024. Inflation, tighter financing conditions, and high uncertainty will drag on domestic growth, while weak global trade prospects will weigh on net exports. By contrast, public investment, solid labour demand and automatic wage indexation will sustain activity. Headline inflation is projected to fall to 4% in 2023, due to falling energy prices, and 3.7% in 2024. The main risks to the outlook include more persistent inflation due to wage indexation and a consequent loss of export competitiveness.

The fiscal deficit will increase in 2023 and remain large in 2024. In the longer term, measures to ensure the sustainability of public finances will be necessary given high public debt. The level of debt poses macro-financial risks and limits the scope for public investment. Policies reducing the gender gap in labour market participation could sustain stronger and more inclusive growth.

Economic growth is slowing

Economic growth has slowed significantly in the wake of high energy prices, rising borrowing costs, and weakening international trade. Weak confidence has weighed on economic activity, but consumer and business confidence indicators are now improving. GDP rose by 0.5% in the first quarter of 2023 (at an annualised rate), after 0.2% in the previous quarter. Sharply-higher interest rates have dampened housing market activity. Mortgages granted in January fell to their lowest level in 17 years, and credit demand is lower than during the 2008-09 financial crisis. Annual headline inflation is falling fast due to declining energy prices, reaching 3.3% in April. Labour market tensions are easing as the number of jobseekers rises, but wages are increasing faster than in major trading partner economies. Second-round effects from automatic wage indexation are being felt more broadly, with core inflation at 6.3% in April.


  1. Harmonised index of consumer prices excluding food, energy, alcohol and tobacco.

  2. Maastricht definition.

Source: OECD Economic Outlook 113 database; and Eurostat.

Belgium: Demand, output and prices

Belgium: Demand, output and prices
  1. Contributions to changes in real GDP, actual amount in the first column.

  2. Harmonised index of consumer prices excluding food, energy, alcohol and tobacco.

  3. The Maastricht definition of general government debt includes only loans, debt securities, and currency and deposits, with debt at face value rather than market value.

As a small, open economy, Belgium is highly exposed to an international trade slowdown. Exports were at a 13-month low in February as high energy and commodity prices dragged down export growth. Energy support measures have been extensive, and with electricity and gas prices falling, the average electricity (gas) bill in April 2023 was 19% (45%) lower than in April 2022. Risks of energy shortages are limited. Belgium has a central location in Europe’s energy grids, hosts a large LNG terminal and has domestic nuclear energy facilities that cover about 40% of electricity consumption.

Financing conditions have tightened, energy support continues

Financial conditions will continue to tighten, with higher interest rates and stricter credit standards. The fiscal deficit will widen by 1.3 percentage points of GDP in 2023, and will remain large in 2024. Sovereign bond yield spreads widened recently amid international financial market turmoil, but are still contained. Energy support measures are already starting to end. The widening of customers who qualify for the social tariff on electricity and gas introduced in 2021 will be maintained until July 2023. The VAT reduction on electricity and gas will be made permanent, with a new excise duty to partly compensate the revenue loss. The fiscal cost of the measures is estimated at EUR 4.7 billion (around 0.9% of GDP) for 2023. Other fiscal measures include a budget-neutral tax reform that reduces the tax burden on labour, which should help to foster labour supply growth, and increases taxes on wealth and consumption.

Economic activity will cool

GDP growth is projected to slow significantly to 0.9% in 2023, before recovering to 1.4% in 2024. High inflation, uncertainty, and interest rates will hold back business and residential investment. Weak global trade growth, and higher energy and wage costs, will exert a drag on exports. Private consumption should help drive GDP growth as household disposable incomes improve in real terms due to receding inflationary pressures and automatic indexation mechanisms. Public investment will continue to be supported by Next Generation EU funding (Belgium has an allocation of almost EUR 5 billion, equivalent to around 0.9% of 2022 GDP). Headline inflation is projected to decline to 4% in 2023 and 3.7% in 2024. Falling energy prices are quickly feeding through, and growing economic slack due to tighter monetary policy should also alleviate underlying inflationary pressures. A larger loss of export competitiveness due to more persistent inflation from second-round effects is a risk, while a sharper slowdown in house prices could weigh on economic activity.

Ensuring fiscal sustainability and competitiveness

Belgium has the sixth highest gross government debt to GDP ratio in the European Union. New fiscal measures are necessary to reduce any negative effects of government debt on the economy, and to avoid correction being driven by pressure from an adverse change in market sentiment. Belgium faces rising future spending pressures from an ageing population, the climate transition, and high interest rates. High debt is limiting scope for public investment, including for public infrastructure needed to reduce fossil fuel dependence. Further removing barriers to female labour market participation, such as high taxation of second earners, would promote gender equality, foster labour supply, and raise tax revenues. Strengthening the links between wage developments and productivity at the firm-level could attenuate any negative impacts from wage setting on international competitiveness.


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