Belgium

Belgium, a country of 30,689 km² located in northwestern Europe, is densely populated with 11.7 million inhabitants and is very open to the rest of the world. Belgium continuously works to make this openness its strongest asset.

As a result, Belgium’s economy is generally healthy and its quality-of-life indicators are very good, although with a few sticking points discussed in this report. In 2022, the country’s GDP reached €554 billion (NBB data). GDP per capita is the sixth highest in the EU (Eurostat data), ahead of France and Germany but below the Netherlands, Denmark, and Switzerland. In real terms, GDP in 2023 was 41% above its 2000 level, compared to about 39% for the Netherlands, 30% for France, 27% for Germany, and 6% for Italy (IMF data). The unemployment rate was 5.6% in Q3 2023, a strong performance by recent historical standards and below the euro area’s 6.4%.

Belgium’s openness is not only an economic but an institutional matter. The country is home to several supranational institutions, including the European Commission, the European Parliament, the European Council, and NATO, as well as many multinational corporations and interest groups. Belgium also has a history of migration, with Brussels now home to people from 179 nationalities; about a third of its population is not Belgian.

Belgium is characterized by resilience and a pragmatic approach to problem-solving, particularly for socioeconomic issues. As a small open economy, it must constantly adapt to external competition, a trait ingrained in its socioeconomic fabric. However, this adaptability can also expose Belgium’s weaknesses during times of turbulence, such as the COVID and energy crises. The flip side of this pragmatic approach is a tendency toward protracted compromises that rarely provide clear directions or unlock hard decisions. This leads to strong hysteresis and a complex layer of rules, rather than reversing ineffective policies. Belgium’s overly complex institutional system often frustrates large swathes of the population, with the best way forward far from clear or consensual.

The COVID crisis provided many examples: the economy resisted well and recovery was prompt, but Belgians discovered they had seven health ministers with overlapping competencies. Coordination across different levels of power proved difficult, leading to anomalies and inconsistencies before urgency forced collaboration. Eventually, pragmatism prevailed, science was heard, and the social safety net performed well, but it took a government change, endless negotiations, and immense pressure to avert collapse. The current government coalition includes seven political parties with differing ideologies, making decision-making complex. The COVID crisis forced coalition partners from different ideologies to collaborate, and the government is now reaching the end of its tenure. Despite some successes, it leaves many unsolved problems: a lack of foresight capacity, retroactive problem-solving, a failed tax reform, unsustainable judiciary amid growing violence, corruption, and financial fraud, and barely started energy and digital transition systems. Belgium now has one of the highest public deficits in the euro area.

The next elections are in June 2024, and opinion polls predict a highly fractionalized, probably polarized, outcome. Increasing support for far-left (PTB-PVDA) and far-right (Vlaams Belang) parties could make forming a federal government coalition even more difficult. This may pose significant challenges for the next stages of reform when the pragmatic, slow compromise approach might need to be set aside.