A RECOVERY IS ON THE CARDS

Lourdes Abeyeratne examines the state of one of the founders of Europe’s largest institutions

One of the founding countries of the EU, the Eurozone, NATO, the OECD and WTO, Belgium –  is the sixth most densely populated nation in Europe and considered to be among the most globalised nations in the world.

It is placed third in the KOF Globalisation Index 2020, following Switzerland and the Netherlands. Moreover, it ranks as one of the most peaceful nations on Earth.

Said to be the first country in continental Europe to undergo the Industrial Revolution in the early 19th century, the advanced high income economy is characterised by its high standard of living, quality of life, healthcare and education, as well as a productive workforce.

In addition to being located at the heart of a highly industrialised region, Belgium’s economy is integrated with the rest of Europe by virtue of its transportation infrastructure comprising ports, canals, railways and highways.

As such, neighbouring France, Germany, the Netherlands and the UK are among its major trading partners, in addition to the US.

The Belgian economy comprises traditional sectors including steel, textiles, refining, pharmaceuticals and automobiles, while machinery and equipment, chemicals, finished diamonds, metals and metal products, and food products are among its main exports.

Following the outbreak of the pandemic, Belgium was cited as having one of the highest death rates in Europe with University of Oxford researchers estimating that it registered nearly 650,000 cases and 20,000 deaths at the end of last year.

The result of this was an economic contraction of 6.3 percent in 2020 – less than the 8.8 percent contraction projected by agencies such
as Fitch Ratings, nevertheless.

However, the situation has improved with the country no longer being marked red in the European Centre for Disease Prevention and Control’s (ECDC) map in June thanks to a falling rate of infection. Furthermore, it is ranked among the top 30 countries with the highest vaccination rates globally.

The Belgian economy is also set to continue its recovery owing to the country’s vaccination campaign and a gradual relaxation of restrictions.

Accordingly, the National Bank of Belgium projects a growth of 5.5 percent in 2021 with GDP rebounding to pre-COVID levels by the end of the year. Thereafter, the pace of growth is expected to gradually normalise.

As for unemployment, the lack of activity resulting from the pandemic appears to have had a limited impact as the monetary authority reports that the labour market is experiencing shortages with employers facing difficulty filling vacancies.

As the country looks to emerge from the pandemic, it has established a recovery and resilience plan to make the economy greener and more digital, for which the European Commission (EC) has earmarked EUR 5.9 billion in aid
from the EU’s Recovery and Resilience Facility.

This includes initiatives such as a project worth more than one billion euros to make government buildings and homes more energy efficient.

Prior to the pandemic, the OECD Economic Survey of Belgium published in February 2020 stated that robust job creation – the majority of
which took place in low wage industries – led to unemployment in the country falling to a “historic low.”

With its complex system of governance comprising six governments structured on regional and municipal, as well as linguistic and cultural grounds, it has been noted that political negotiations in Belgium can span months or even years.

And while King Philippe has served as the monarch of the country since 2013, Belgians have spent more than three years without a fully functioning government over the last decade or so.

However, the pandemic prompted Belgium to seek a solution to the political deadlock that kept it without a stable government since the 2019 federal parliamentary election, which led to a caretaker government.

This was followed by a minority government taking power in March last year while the present Vivaldi coalition was formed in October following weeks of talks between seven parties across four distinct political forces – after a record 653 days of delays.

The new government is headed by Prime Minister Alexander De Croo. His administration’s agenda includes focussing on climate and energy policies, supporting the EC’s proposed emission reduction target of at least 55 percent by 2030, gradually phasing out Belgium’s nu-clear power plants by 2025 and reducing the sales tax for green investments.

Despite the difficulties it has faced over the last few years, there appears to be light at the end of the tunnel for Belgium.

In its Summer 2021 Economic Forecast, the European Commission states: “Continued improvement in business and consumer sentiment – including in hard hit services and retail trade sectors – suggests that economic activity has moved onto a solid recovery path and will continue expanding in the coming months with the consumption of services rebounding strongly.”

Moreover, the EU funding is expected to strengthen the country’s recovery this year and the next.