Overall, initiatives were undertaken to stabilise the defence budget and military pensions in the short term; in fact, through significant measures, Belgium expected to decrease its defence expenses to about 0.81% of GDP by 2019. However, under current and future challenges (i.e. high risk of terrorist attacks, migration crisis, cybersecurity incidents, etc.), Brussels should strengthen their efforts, in order to achieve their 2030 Defence plan goals.

Taking advantage of its geographical location, Belgium has managed to serve today, in terms of transportation, more than 200 million people in a radius of 500km, due to its highly expanded logistics network, the capital’s close proximity to other European centres - less than 2 hours from Paris and London by train- as well as its strategic position at the heart of the European Rail network.

All the above, have helped Belgium to develop a highly diversified, industrially and commercially based economy, with communication channels constantly adapted to the needs of the economies they serve.

Despite the high public debt, the persistence in house market overvaluation, the slow improvement of households’ financial capacity, as well as the unemployment levels that reached historically high records (8.5% in 2014), the Belgian Economy has managed to withstand the recent global economic crisis. In fact, the last few years, budget deficits have been reduced and fiscal policy has been improved. Being though highly dependent on the demand of its large volume of manufactured exports, the economy remains vulnerable to the foreign economies’ fluctuations.

Despite the fact that the Belgian economy has not managed to reach the pre-crisis growth rates, GDP growth has averaged at about 0.7%, since 2008. In fact, in 2015, GDP growth rate hit 1.4% (See chart below); private consumption -as a result of wage increases, low inflation and income tax cuts- is estimated as the main contributor of this growth.

In 2015, public deficit was 2.7% of the GDP –within the 3% limit imposed by the EU. Today, public debt has stabilised to about 106% of GDP –much higher than the 60% imposed by the EU-, which indicates the need for reforms, as these set back the progress as far as private consumption recovery. Finally, the recent terrorist attacks’ effects have already reflected upon businesses and tourist spending. Therefore, GDP growth is expected to drop slightly in 2016, only to accelerate once again in 2017, to about 1.5% (See chart above).

Belgium has recorded a deterioration in the goods trade balance since the beginning of the global economic crisis. However, in the last three years, the country has managed to decrease this deficit, reaching the €5.6 billion in 2015.
This decline in the goods trade balance, is attributed to the rise in net imports of energy products. Moreover, the surplus recorded in chemical (including pharmaceutical) products, was counterbalanced by the excessive decline in both machinery and transport equipment balances. Further, imports of minerals and metal-derived goods were increased, while the deterioration of the “mineral products” trade balance, has contributed to the shrinkage of trade in goods overall.

According to the World Trade Organisation (WTO), in 2015, globally, Belgium was the 12th highest exporter and 14th highest importer of goods, while the 13th highest exporter and 12th highest importer of services.

In 2015, the country’s top exports included Chemical products (24.6%), Transport Equipment (10.8%) and Machinery (10.7%), increased by more than 5% each.  However, the drop of oil prices resulted in a decrease in mineral products sales abroad.

Europe is the main exporting destination for Belgium, followed by Asia, America and Africa.

More specifically, the top exporting destinations for Belgium (still for the same years), in terms of countries, were Germany (16.9%), France (15.5%), the Netherlands (11.4%), the UK (8.8%) and the US (6%).

It is worth mentioning that in 2015, overall exports to European Union increased by 3%. More specifically, Belgian exports to euro area countries rose by only 1.6%, while for countries that do not belong to the euro area -including the UK and Sweden- exports rose sharply by 8.4%.

Outside European Union, exports followed the previous year’s (2014) trend (i.e. a decline), mostly as a result of the further reduced transactions with Russia. In addition, exports decreased significantly to certain African countries and by 2.6% to Asia (despite increases in exports towards Saudi Arabia, Japan, Taiwan, Vietnam and the Philippines). On the other hand, exports to the Americas and Oceania, increased by 7.1% and 4.5%, respectively.

On the other hand, overall EU imports to Belgium fell by 4.3%, mainly due to a decline of the imports from the Euro area, by some 5.3% - mainly associated with imports from the Netherlands, Germany and France (See chart below). Considering the countries outside EU, but still within Europe, a significant drop of 11.9% was registered, mostly due to the drop of imports from Russia (down by 21.8%).

The main commodities that Belgium imported in the last year (2015), were chemical products (23%), Mineral products (13%), Machinery and equipment (12%) and Transport equipment (12%).

In terms of services, in recent years, the Belgian economy has become more service-oriented than ever before, with services operating as a ‘driver’ of economic growth. Today, the Services sector represents about 77% of total economic activity in Belgium, followed by 17% attributable to the industrial sector and 6% to the construction sector. To be more specific, Manufacturing, Transportation, Telecommunication, Business & Financial services are the main contributors to the country’s Services sector export growth.

The shift towards a more services-based economy, has contributed to the national jobs market growth. Between 2000 and 2014, a significant amount of services-related jobs in the public, education and healthcare sectors were created, increasing total employment by some 4%.

However, according to the IMF, today, Belgium’s unemployment rate is at its highest value for a number of years -slightly lower though, compared to the euro area average-, having stabilised to about 8.5%, in the last three years (See chart below). In fact, at the end of 2015, the total number of unemployed people, were some 566,000, while the total number of employed, reached the 4.6 million mark (according to the National Bank of Belgium).

Within the next two years (2016-2018), it is forecasted that 140,000 new jobs will be created, as a result of structural reforms and labour cost-cutting measures. Therefore, the unemployment rate is expected to decrease, to about 7.8% in 2018, and 7.4% by 2021.

Finally, it should be noted that today, the labour market is deeply segmented, in terms of region (with the highest employment rate being in the Brussels capital region), age (low unemployment levels among the young and the elderly), skills and immigration background (only ½ of non-EU born residents are employed, compared to 80% of Belgian-born residents). Notably, Belgium has a poor track of non-EU migrants’ integration into the labour market. Therefore, given that asylum seekers in Belgium are to increase in the next two years, as a result of the Syrian refugee crisis, the Belgian government needs to accelerate their integration, through technical training and language support, not only to contribute to public finances and social cohesion, as well as the reduction of the cost of the aging population, but also to aid the country’s potential growth.

The country’s small size and limited internal market have helped the Belgium to form a strong export culture, while its highly developed infrastructure, in addition to good living standards, central location and highly-skilled workforce, have turned the European capital’s host nation, to an attractive destination of foreign investments. Only in 2015, some €27.9 billion of foreign capital have been invested in Belgium.

The main Foreign Direct Investors (to Belgium) were the US, the UK, France, Germany and the Netherlands, with the majority of investments directed to sales & marketing projects, followed by projects in the industrial and logistic sectors.

In general, the increase of FDI inflows, can be attributed to the excellent assistance offered by the official trade agencies in Belgium, and the friendly investment policy that does not discriminate between local and foreign companies. As far as the latter, limitations apply to specific cases only; for example, the acquisition of Belgian flag vessels can be achieved only by shipping companies having their headquarters in Belgium (maritime transport), the airlines established in Belgium should be owned and preferably controlled by an EU state, unless specified otherwise through an international agreement between the EU and another country and finally, some restrictions apply regarding public works financing and the nationality of the awarded person/state.

The recent terrorist attacks (2016) certainly had a negative impact on the Belgian economy, essentially as far as tourist numbers and associated spending. Moreover, inflation is forecasted to reach to 1.6 % in 2016 and 1.9 % by 2018. Budget deficit is expected to increase to 2.8 % of the GDP in 2016, as a result of outstanding expenditure for increased security measures and to deal with the migration crisis, before dropping to 2.4 % of the GDP in 2017, and 2018.