Belgium: Macroeconomic Country Outlook
- GlobalData forecasts Belgium’s economy to slowdown to 2.8% in 2022 following the 6.3% growth recorded in 2021.
- Belgium ranked 28th out of 136 nations in the GlobalData Country Risk Index (GCRI) Q4 2021.
- According to GlobalData, the construction sector is projected to grow at an annual average rate of 2.5% over 2022−24.
PESTLE Summary
- Political: Deteriorating relation with Russia. In February 2022, the country announced a decision to close its airspace to all Russian airlines and joined the list of countries closing their airspace to Russian airlines. According to the Prime Minister of Belgium, the country sent 5,000 machine guns and 200 anti-tank missiles to Ukraine. In March 2022, the Russian government approved a list of foreign states and territories, which include Belgium in the list of unfriendly countries. The list added the countries that imposed or joined sanctions against Russia after its invasion of Ukraine.
- Economic: Economic growth to slow down in 2022. Belgium’s economy grew by 6.3% in 2021, underpinned by continued policy support and a well-targeted vaccination strategy that facilitated reopening and boosted confidence. Consequently, households were able to return increasingly to their pre-pandemic consumption pattern. However, economic growth is expected to slow down to 2.8% in 2022, due to rise in price level amid Russia-Ukraine crisis.
- Social: Belgium faces the challenge of an aging population. The country’s aging population will plague Belgium as people continue to retire in increasing numbers. According to GlobalData, the total old-age dependency ratio, as a percentage of the total population, stood at 30.5% of the total working population in 2021, which is forecast to increase to 32.8% by 2025. Furthermore, social protection expenditure accounted for 28.9% of GDP in 2019, which is the third highest in the OECD region. The ratio is expected to rise further, and Belgium is likely to experience one of the highest global increases in pension and healthcare expenditure.
- Technological: Cybersecurity strategy Belgium 2.0 (2021–25). In May 2021, the cybersecurity strategy 2.0 for the period 2021–25 was presented by the Center for Cybersecurity Belgium. The aim of this strategy is to present a forward-looking vision of an open, free and secure cyberspace that responds to potential cyber threats Belgium faces or may face. The strategy defines six goals to meet this constantly changing cyber landscape: to strengthen and increase trust in the digital environment; to protect users and administrators of computers and networks; to protect organizations of vital interest (OVIs) from any possible cyber threat; to improve public, private and academic collaborations; to establish clear international cooperation in the field of cybersecurity; and to respond to cyber threats.
- Legal: Belgium’s tax wedge is the highest among all OECD countries. Taxation in Belgium is ranked the highest in the EU and European Free Trade Association (EFTA) region. The country’s tax wedge stood at 51.5% of the labor cost in 2020, the highest among all other OECD nations. Taxation relies on social contributions and personal taxation in contrast to more employment-friendly tax bases, such as environment and consumption taxes, which are less growth distorting. Belgium was ranked 23rd on the International Tax Competitiveness Index (2021), four spots worse than in 2020. A high tax burden makes a country less investment-friendly for businesses and start-ups, as it increases operational costs. However, the country fares well in terms of time to comply and number of tax payments regionally.
- Environmental: Fulfillment of international environmental commitments. Under the draft National Energy and Climate Plan 2021–30, the country aims to reduce greenhouse gas emission by 35%, compared to 2005 and source 18.3% of its energy from renewable sources by 2030, as part of its contribution to the EU renewable energy targets. According to Ela, a domestic transmission system operator, the country had 4,670 MW of operational wind power capacity (onshore and offshore) in 2020, compared to 3,796 MW in 2019. The cumulative solar photovoltaic (PV) capacity increased to 4,788 MW in 2020 from 3,887 MW during the previous year. In 2020, Belgium obtained 18.6% of power generation from renewables.
Key Fundamentals
Macroeconomic Outlook
- In September 2021, Fitch ratings revised Belgium’s outlook from negative to stable and affirmed the rating at AA-. The rating reflects the nation’s robust economic growth recorded in 2021, the government's fiscal consolidation strategy, high COVID-19 vaccination rates and improved resilience of the economy to containment measures.
- Belgium boasts of a highly diversified and open economy. The government has undertaken several measures to increase Belgium’s attractiveness to foreign investment and economic competitiveness. Despite the ongoing global disruptions, Belgium attracted $8.3 billion in FDI during Q1−Q3 2021, a rise of 894% over the same period previous year.
- Belgium’s federal 2021 budget agreement aims to reduce the budget deficit from 5.4% of GDP in 2021 to 3.1% of GDP in 2022, following the end of COVID-19 support measures. The agreement calls for a balancing act between investments aimed at economic recovery and search for resources for budget repair.
- Belgium has welcomed investment and reform initiatives in the National Resilience and Recovery Plan and encouraged ambitious labor and product reforms in 2021. The recovery plan includes EUR5.9 billion ($6.7 billion) (1.2% of GDP) of Next Generation EU grants, earmarked for green and digital investment, with two thirds of the total planned to be absorbed over the period 2021−23.
GlobalData Country Risk Index (GCRI) - Q4 2021
Belgium ranked 28th out of 136 nations in the GCRI Q4 2021. The country’s score of 26.7 is in the low-risk nations band (below 30). Belgium’s overall risk score is same as the West Europe, however, lower than the world average (42.9) in the GCRI Q4 2021. Belgium’s political turmoil led to a decline in its score and increased its risk as compared to the previous year, but it was still better than most other countries in the West European region.
GCRI Methodology
GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy.
The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from GlobalData. West European nations in this publication include Switzerland, Sweden, Finland, Germany, Denmark, Iceland, the Netherlands, Austria, Norway, Ireland, the UK, Belgium, Luxembourg, France, Italy, Spain, Greece, and Portugal.
About the report
GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides quick view of current situation and the risk score of the country in comparison to region and world based on proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillar of PESTLE, economic growth prospects and key events which can impact the country future outlook.
More details: Belgium PESTLE Insights – A Macroeconomic Outlook Report
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