Belgium’s economy faces a difficult autumn
The desk anticipates that Belgium's economy, while not heading toward recession, is facing significant stresses that could impact the EUR. Per the full note , renewed energy pressures may push inflation toward 5%, alongside a €10bn budget package that will likely suppress consumer demand. With GDP growth stalling at 0.2% in Q1 and 0.0% in Q2, the outlook appears bleak, particularly with geopolitical tensions exacerbating inflationary pressures. Our analysis suggests that, without robust government intervention, Belgium's economic landscape is poised for further deterioration, influencing its currency dynamics against major pairs.
What the desk is arguing
The desk's primary thesis is that Belgium's economy is under considerable stress due to rising inflation and stagnant growth, which could adversely affect the EUR. Per the full note , inflation could rise up to 5% as energy prices surge again, exacerbating consumer hardships and limiting spending power.
Supporting this view, GDP data from the National Bank of Belgium indicate stagnation, with investment declining notably (public investment down 8.0% in Q2). Additionally, renewed energy price hikes, such as the rise in diesel costs seen in September, only reinforce this trajectory.
How other firms see it
Firms like jpmorgan are aligned with this cautious outlook, forecasting challenges for the Belgian economy, while bofa presents a more optimistic view, expecting stability in EUR dynamics. Such divergence highlights the uncertainty in the monetary outlook for the Eurozone.
Potential trading influences may arise in pairs like EUR/USD, where performance could be reflective of regional economic health and central bank policies. The European Central Bank's stance could also serve as a barometer for investor sentiment surrounding the EUR amid these challenges.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Belgium's economy is facing significant inflationary pressures with expectations of near 5% inflation.
- 02Stagnant GDP growth, marked by a 0.0% change in Q2, signals potential vulnerabilities.
- 03Geopolitical tensions have contributed to rising energy costs, consequently impacting household budgets.
- 04The upcoming fiscal management may further test consumer spending and business investment.
Market implications
Traders should monitor the EUR/USD reaction to upcoming inflation data releases or shifts in ECB policy, particularly as current projections put EUR under stress. Volatility may increase around energy market developments, given the significant influence on economic sentiment.
Risks to this view
A sudden easing of geopolitical tensions or a favorable resolution to energy supply issues could rapidly stabilize inflation and improve growth metrics, undermining the cautious anticipation of EUR depreciation. Additionally, any unexpected fiscal stimuli aimed at boosting consumer confidence may alter the economic landscape.
Articles Belgium’s economy faces a difficult autumn Published 15:30 Belgium Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download For now, the Belgian economy is not heading into recession, but its resilience is being tested. Renewed energy pressures are likely to push inflation up to near 5%, while a difficult €10bn budget package will weigh on demand. Growth should remain weak, leaving little room for policy errors Philippe Ledent We don't expect Belgium to go into recession, but we see growth slowing, inflation near 5% and difficult choices to be made in terms of public finances Belgium’s economy is bending, but not breaking – for now After a modest first quarter, when the economy grew by 0.2% quarter-on-quarter, Belgian GDP stagnated in the second quarter.
On the demand side, household consumption once again proved resilient, rising by 0.4% despite the first wave of higher energy prices. By contrast, business investment fell by 0.7%, while public investment dropped by 8.0%. On the supply side, industry again underperformed, with activity contracting by 0.6% from the previous quarter.
In practical terms, Belgian industrial added value in 2026 remains below its level at the end of 2019. At the end of June, there were grounds to hope that the easing in energy prices would prove lasting, paving the way for activity and inflation to normalise. That optimism helped lift both consumer and business confidence over the summer.
Based on July and August data, the National Bank of Belgium estimated that growth could then rebound by 0.3% in the third quarter. We are less optimistic, however. The escalation in geopolitical tensions since August has dashed hopes of a swift end to the conflict.
In September, diesel prices moved above their early-April peak. European natural gas prices, meanwhile, are now more than twice their level at the start of the year, adding to household energy bills. Combined with the first effects of fiscal tightening, it is hardly surprising that consumer confidence fell back in September to its May low.
Business confidence improved in September, but the headline indicator owes much to manufacturing. Confidence in the sector continued to recover, with the index rising from -17.8 in August to -12.2 in September, close to its level before the conflict in the Middle East. Similar, and somewhat surprising, resilience can be seen elsewhere in Europe.
Yet sentiment weakened markedly in every other sector, with the services' indicator falling to its lowest level since October 2023. The bottom line is that Belgium’s economy is likely to end the year on a subdued note. We do not expect a recession, but growth is set to remain very weak.
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