Belgium: Risk Assessment

Country Risk Rating

A2 The political and economic situation is good. A basically stable and efficient business environment nonetheless leaves room for improvement. Corporate default probability is low on average.

Business Climate Rating

A1 The business environment is very good. Corporate financial information is available and reliable. Debt collection is efficient. Institutional quality is very good. Intercompany transactions run smoothly in environments rated A1.


  • Ideally located between the United Kingdom, Germany, and France
  • Presence of European institutions, international organizations, and global groups
  • The ports of Antwerp (second busiest in Europe) and Zeebrugge, canals and motorways 
  • Low level of household debt (56% of GDP)
  • Well-qualified workforce as a result of vocational training
  • Net external creditor position 


  • Political and financial tensions between Flanders and Wallonia
  • Exports concentrated on intermediate products and the European Union
  • High structural unemployment
  • High public debt
  • Tight housing market 

Current Trends

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Modest growth

Growth is expected to remain modest in 2016. The contribution of external trade is expected to shift from being negative to slightly positive. Exports (82% of GDP), made up to a great extent of intermediate products, machines and transport equipment, will benefit from another drop in the real, effective exchange rate linked to the depreciation of the euro and lower production costs. They will also profit from a modest advance in growth in the neighboring countries and the buoyant UK market. As for imports, with low commodity prices and softer domestic demand, these will slow. Despite rising private sector employment, household consumption is also expected to slow, with households facing wage moderation and a freeze on wage indexation until the end of 2016, higher taxes and a cut in public-sector jobs but, because of its importance to the economy (52% of GDP), this will still be the main driver of growth. Business investment will continue to be sustained by easy access to cheap credit, increasing capacity utilization rates, as well as improving price competitiveness.

Slow fiscal consolidation and transfer of charges from labor to consumption

The public debt exceeds GDP, which is reflected in an interest burden equivalent to almost 3% of GDP, despite low interest rates. The authorities want to both bring down the cost of the debt by cutting the overall deficit and, as a priority, transfer levies on labor to consumption. The fiscal effort is expected to represent 0.75% of GDP in 2016-2017, chiefly through better spending control by refilling only one job in five to achieve a 10% reduction in the wage bill in five years' time, by reducing investment loans by 20% and toughening the eligibility criteria for welfare payments the revaluation of which is currently frozen. Employers’ social security contributions are destined to represent only 25% of the wage bill compared with 33% at present. SMEs are likely to benefit from substantial financial support. In the context of low input costs and lower levies, business margins should rise and the number of insolvencies should continue the downward trend begun in 2014. Household income tax for low and middle incomes is expected to fall by EUR100 a month. All these tax cuts are due to be financed by increased taxes on fuel, alcohol, tobacco and fizzy drinks. The reduced rate of tax on domestic electricity consumption is likely to be abolished, taking it up from 6 to 21%. The tax on dividends will rise from 25% to 27% and a levy of 33% will be introduced on the sales of securities held for less than 6 months. However, how the effort to be made regarding the budget restructuring will be shared between the Federal state and the regions remains unclear. Meanwhile, the 43 billion euro Belgian government guarantee in the context of the Dexia orderly resolution plan, whose role is currently limited to the custody of undervalued or illiquid assets (loans to local authorities and sovereign bonds) until maturity, is a threat.

A recovery of price competitiveness

The trade in goods deficit, which appeared in 2008, turned into a surplus in 2015 (amounting to 1.3% of GDP). This is explained by dynamic exports, which are benefiting from improved price competitiveness. Since 2014, labor productivity has been rising, while the cost of labor has been falling, bringing to an end a decade of lost competitiveness and market share, in particular on the European markets. Planned tax transfers should reinforce this trend. Services will continue to run a surplus, thanks to IT, telecommunications, royalties, transport and trade. Because of its position at the heart of Europe and with its ports providing easy access to its markets, Belgium plays a major role in the re-export of goods destined for or arriving from its neighbors. Substantial investments held abroad by Belgian economic players generate considerable income, which offsets transfers by foreign workers and the net contribution to the European budget. Finally, the current account balance is in surplus.

A government dominated by Flemish parties and focused on the economy

Since October 2014, the country has been governed by a center-right coalition, dominated by the Flemish parties, made up of the conservative Nieuw-Vlaamse Alliantie (N-VA), the leading party in Flanders and at the federal level, the Christen-Democratisch en Vlaams (CD&V) and the Open Vlaamse Liberalen en Democraten (open VLD), headed by Prime Minister Charles Michel from the French-speaking Mouvement réformateur. The socialist party, the main French-speaking political force, is in opposition. So as not to upset its partners and the majority of the population, the N-VA has toned down its wish to abolish the Brussels-Capital region and marginalize the Federal State, which retains, in addition to its sovereign powers, most social spending including pensions and health spending, i. e. about half of public spending, as well as financial oversight, competition, collection of the main taxes and the mechanism for index-linking incomes. The government's focus is on the economy.


Coface (09/2016)