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Belgium GDP growth is expected to weaken from 1.4% in 2023 to 1.1% in 2024, before increasing to 1.5% in 2025. Household consumption will slow as purchasing power is held back by slowing employment growth, while tight financing conditions restrain investment. Belgium is highly exposed to international economic conditions and a further loss of competitiveness due to wage growth. Headline inflation is projected to increase to 3% in 2024 as energy prices rise and core inflation stays high, before declining to 2.4% in 2025 as economic slack alleviates underlying inflationary pressures. The fiscal stance is expected to be broadly neutral in 2024 and 2025. Given Belgium’s high debt burden, a consolidation plan and expenditure rules are needed to ensure confidence in fiscal sustainability. Strengthening the taxation of personal capital income with a progressive tax rate schedule and a capital gains tax would reduce tax arbitrage opportunities. A credible long-term carbon pricing framework and improved coordination and coherence across federal and regional governments is required to promote green investment and diversification away from fossil fuels. Economic growth has slowed Growth slowed to 0.5% in the third quarter of 2023, amid high inflation and borrowing costs, weakening international trade and high uncertainty. Household consumption has supported growth, partly due to automatic wage indexation and a robust labour market, but weak confidence has weighed on economic activity. Business confidence indicators have fallen during 2023 and higher borrowing costs have held back household residential investment, with mortgage demand at its lowest level since 2007. Annual headline inflation has fallen fast to -1.7% in October, mainly due to lower energy prices. Core inflation remains high at 6.4% in October, but is declining as raw material prices subside, supply chain problems ease, and second-round effects from wage indexation diminish.
Belgium
Source: OECD Economic Outlook 114 database; and OECD National and Regional House prices and related indicators database. StatLink 2 https://stat.link/gt82do OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 2: PRELIMINARY VERSION © OECD 2023