Belgian economy faces modest growth amid calls for reforms

The Belgian economy is expected to grow modestly over the next three years, with annual growth projected between 1.2% and 1.4%, according to the latest forecasts from the National Bank of Belgium (NBB). While household spending remains a key driver, growth is likely to moderate in the coming years, and business investments are expected to decline due to stricter regulations and weaker industrial performance.

NBB chief economist Geert Langenus described the outlook as “neither good nor bad” and emphasised ongoing uncertainties. “The industry is struggling, and there’s little incentive for companies to invest,” he said. 

This slowdown is already evident in the labour market, with job creation stalling in the private sector. However, a gradual recovery is expected, with the NBB forecasting around 90,000 new jobs between 2025 and 2027, primarily driven by the service sector and continued high demand for labour.

Labour

Meanwhile, the rising cost of labour continues to weigh on Belgium’s competitiveness. Wage costs are expected to grow faster than anticipated, partly due to the increased price of service vouchers, which will rise from 9 to 10 euros in Flanders starting January. This will drive up inflation slightly, pushing indexed wages higher. The NBB predicts that core inflation in 2025, excluding energy and food, will be revised upward, with wage costs increasing by 3.5% instead of the previously expected 2.5%.

The growing wage gap with neighbouring countries poses further challenges. Belgium’s cumulative wage growth difference with its neighbours is expected to remain at 1% by 2027. This could limit opportunities for additional wage increases beyond indexation.

Formation pressure

Pierre Wunsch, the NBB’s governor, stressed the urgent need for economic reforms, stating that a reform-oriented government is more important than the timing of its formation. “There’s now a relatively broad consensus on what needs to be done. It’s better to take an extra month to form a government that can implement real reforms”, he said. 

Wunsch warned that a loss of momentum could lead to serious issues for Belgium’s long-term economic health.

^{National Bank of Belgium (BNB-NBB) governor Pierre Wunsch and chief economist Geert Langenus during a press conference © BELGA PHOTO HATIM KAGHAT}