Belgium

Belgium: lagging the Eurozone

Belgium’s economic performance has been improving in the past few years and the EPI grades its current economic performance at C+ level, with the EPI score projected to be 89.7% in 2016. The economy has shown considerable resilience but the outlook is weighed down by weak demand in Europe.

The relatively subdued economic outlook will be affected by still-muted external demand from the rest of Europe, persistently high unemployment, wage restraint and fiscal consolidation. Belgium’s recovery has been continuing, mainly driven by domestic demand, but still remained modest with real GDP growing by 1.3% in 2015, up from 0.3% in 2013. The unemployment level of 8.5% is still high and has been on the increasing path. Fiscal adjustment is expected to resume after a pause in 2014, with the budget deficit reduced from 3.2% in 2014 to 2.8% in 2015. Inflation remains very low, driven by low commodity prices and disinflationary environment in Europe.

The 5-Minute Economist projects Belgium’s EPI score to continue improving only gradually in the medium term from almost 89%, or a C+, level currently to 91.5%, or a solid B level, by 2020. The major drivers for improvement in the EPI score the medium term are projected to be continued fiscal deficit reduction as well as lower unemployment levels. Improvements in economic growth rates are unlikely, with GDP projected to stay flat at 1.5% in the medium term. Inflation is likely to start picking up in this environment and reach 1.7% by 2020, once monetary conditions in the Eurozone normalize.