OECD Economic Outlook, Volume 2025 Issue 2

Belgium

GDP growth is expected to remain modest, at 1.1% in 2026 and 1.2% in 2027. Household consumption is set to slow with the easing of income growth. Slowing global trade growth and policy uncertainty will weigh on exports and business investment. Disinflation will continue, pushing inflation below 2% in 2026 and 2027. Slow fiscal consolidation could increase debt servicing costs, while the increase in defence spending of NATO countries could boost the Belgian defence industry.

Stabilising the debt-to-GDP ratio and strengthening the fiscal framework remains a priority. Fiscal consolidation will resume in 2026. Shifting the tax burden away from labour and removing work disincentives could help increase employment and economic growth. Reducing regulatory burdens and the associated costs for businesses could additionally stimulate investment.

Economic growth is stable

GDP growth has been stable, at 0.3% in the third quarter of 2025. The weakness in exports and housing investment continued in the first half of the year. Private consumption moderated but remained the main growth driver, supported by disposable income growth. Business and consumer confidence rose in the third quarter. The number of building permits declined, and confidence in construction has been weak. The unemployment rate declined slightly from its March 2025 peak of 6.2% to 5.9% in September. Disinflation has continued, on the back of falling energy prices and slower wage growth, with headline inflation at 2.5% and core inflation at 2.6% in October, but services inflation remained sticky (3.7% in October).

Belgium

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

2. The nominal wages are divided by the number of dependent employments for the total economy. Projections since the third quarter of 2025.

Source: OECD Economic Outlook 118 database.

Statlink

Belgium: Demand, output and prices

Statlink

Belgium is a very open economy, exposed to trade shocks. The United States is a major trading partner, accounting for almost 8% of Belgian goods exports in 2024. More than half of the goods exports to the United States are pharmaceuticals followed by machinery, other chemicals and vehicles. Only a small part of pharmaceuticals are generic medicines exempt from the US tariffs on imports from the European Union. Past wage increases have eroded Belgium’s price competitiveness, making the country more vulnerable to a trade slowdown.

Fiscal consolidation is needed but has been slow

Consolidation has been delayed by political uncertainty. The primary budget deficit is projected to rise in 2025 to 3.8% of GDP, partly due to a planned increase in defence spending (from 1.3% in 2024 to 2% of GDP by 2026). The projections assume a structural primary balance improvement of 0.5% of GDP in both 2026 and 2027. Stronger consolidation efforts will be needed to bring the general government deficit to 3% of GDP by 2029, as originally envisaged. Consequently, the debt ratio is expected to rise to 111.9% of GDP by 2027. Policy measures already approved, intended to lift employment, include a cap on employer’s social security benefits and on the maximum duration of unemployment benefits at 2 years from 2026. In addition, the increase of statutory pension age from 65 to 66 in 2025 is expected to raise labour force participation of older workers.

Trade uncertainty, wage moderation and consolidation will weigh on growth

Economic growth is projected to remain subdued, at 1.1% in 2026 and 1.2% in 2027. Wage growth will moderate due to a mechanism restricting wage growth beyond inflation to preserve price competitiveness, leading to softening private consumption growth. Global trade uncertainty will weigh on investment, which will pick up only slowly over the next two years. Exports will recover gradually as foreign demand strengthens and price competitiveness improves. Labour force and employment growth are expected to persist, supported by policy measures, though at a slower pace than in previous years. Disinflation will continue, with headline inflation falling below 2% in 2026 as wage growth moderates. Core inflation will decline more gradually, due to persistent services inflation. Given the sizeable debt, delaying consolidation could lead to higher debt servicing costs. Conversely, increased European defence expenditure could potentially benefit the Belgian defence industry and modestly boost exports.

Structural reforms are needed to bring down debt and revive the economy

High public debt and growing spending pressures call for credible medium-term fiscal consolidation that prioritises spending efficiency, especially in healthcare, long-term care and pensions. Binding expenditure rules for federal and regional governments, and ensuring budgetary coordination between government levels are essential for fiscal discipline. Shifting the tax burden away from labour and removing work disincentives could boost employment rates and help address labour shortages. Burdensome regulations, exacerbated by interregional regulatory differences, impose significant costs on businesses. Adopting a whole-of-government approach to reduce administrative costs for businesses, streamlining entry requirements in professional services and insolvency procedures could foster business dynamism and investment.