The flash estimate of Belgian growth in the final quarter of 2024 came out at 0.2% qoq. The figure was in line with what we had expected and signalled a slight deceleration from the stable 0.3% growth recorded in the previous four quarters. Q4 growth was above the euro area figure (0%) and driven by activity in both services (0.2%) and construction (0.7%). Industry continued to record negative growth (-0.1%). For the full year 2024, Belgian real GDP growth slowed to 1.0%, from 1.3% in 2023. The Q4 component breakdown has not yet been published, but details for the first three quarters already indicate that 2024 growth was underpinned by final domestic demand, while net exports and especially inventory change were a drag. Despite the slowdown in annual growth, Belgium continued to outperform the euro area, where annual growth in 2024 was at 0.7%. Having realised three years of stronger growth in a row compared to the euro area, Belgium’s performance has been quite good in relative terms. Looked at from a longer perspective, economic activity in Belgium in Q4 2024 was 7.1% higher than its pre-pandemic level (Q4 2019), as against only 5.2% higher in the euro area.

Regional growth figures in Belgium lag behind the publication of the national GDP figures, meaning that it is unclear for now to what extent activity grew differently in the regions in 2024. Flanders having a relatively bigger manufacturing sector and a more open economy than Wallonia and Brussels, the region likely was affected more by the downturn in industry and the weak external environment. The latter does not necessarily mean that 2024 growth for the economy as a whole was lower in Flanders than in Wallonia and Brussels. In 2023, for which regional data have recently been published, growth in Flanders was already significantly affected by a sluggish industry, mainly due to a slump in the chemicals sector. Still, Flanders recorded growth of 1.3% that year, compared to 1.2% and 0.5% in Wallonia and Brussels, respectively. Growth slowed noticeably in 2023 in all three regions, mainly as a result of post-pandemic normalisation. Flanders’ growth in 2021 (+7.2%) and 2022 (+5.5%) had reached record highs, driven partly by the production of vaccines in the pharmaceutical industry (see figure BE1).

Trade uncertainty

For now, Europe has been spared by US tariffs but president Trump signalled that the EU is also set to be targeted. If effectively implemented, US tariffs could weigh on Belgian economic growth, given Belgium’s strong dependence on foreign trade. The potential hit to businesses would be another negative shock to the manufacturing sector, at a time when its activity is already subdued. For 2024 as a whole, value added in Belgian industry fell by 1.0% according to the preliminary estimate. Given high trade uncertainty, we decided to stick to our more cautious stance on Belgian growth and to not make major changes to the forecast at present. The scenario still assumes that ultimately tariffs on the EU will be applied.

We nevertheless upgraded the 2025 growth outlook slightly from 0.6% to 0.7%. First, as Europe was not included in the first round of US tariffs, there is no immediate impact, in contrast to what we had expected. Second, amid all tariff-buzz seen over the recent weeks, there were also some small bright spots to highlight for the Belgian economy. The NBB business survey showed a slight improvement of producer confidence and capacity utilisation in industry in January. Also, in the Q1 EC confidence indicator, insufficient demand is seen somewhat less as a factor limiting industrial production in Belgium (see figure BE2). Last but not least, a coalition deal was reached on 31 January to form a new federal government, after more than seven months of negotiations. This reduced the prevailing uncertainty on the political situation and avoided Belgium falling in a protracted political crisis. 

The latter will likely be recognised by the European Commission, rating agencies and financial markets. Between 30 January, the day before the coalition deal was reached, and 12 February, when we finalised this publication, the Belgian-Germany 10y bond spread fell by 7 basis points (see figure BE3). The impact of the many ambitious (but some still vague) reforms on the budget balance and possibly on long-term economic growth should be positive, but its extent remains highly uncertain. A particular weak spot in the budget exercise are the expected payback-effects and receipts from fight against fraud. These are budgeted for a total of 9 bn EUR but may well end up being smaller than expected. There is also a risk of a gap between the intentions of the agreement and the actual reforms carried out. The difficulty of reaching the agreement illustrates that the views of the five governing parties remain very different, possibly resulting in political conflict. Despite the risk of not fully delivering on the planned budget consolidation, the main good news is that Belgium finally has an government in full power, capable of taking long-due structural decisions.

Drop in core inflation

Belgian HICP inflation for January came in at 4.4%, unchanged from the December figure. Core inflation fell sharply, though, from 2.6% in December to 1.4% in January. Surprisingly, the month-on-month decline in core goods prices, traditionally caused by the January winter sales, was relatively big this time (-7.1%, as against only -3.3% in January 2024 and -5.0% on average in the month of January in 2000-2024). In contrast, the year-on-year inflation for the other HICP categories (energy, food, services) was up in January, fully compensating the sharp drop in core goods inflation. These categories are still important drivers of Belgian inflation, with energy and food inflation currently much higher than in the euro area as a whole. In our scenario, we continue to expect Belgian inflation to average 2.8% this year and marginally changed the inflation outlook for 2026 from 2.2% to 2.1%.