Belgium’s inflation eased to 2.2 percent year-on-year by the end of 2025, but price pressures in the services sector remain persistent, according to the latest assessment by the International Monetary Fund following its Article IV Consultation with the country.
In a staff report released with the consent of Belgian authorities, the IMF said the economy has shown notable resilience despite a series of external shocks and ongoing global uncertainty. However, growth has slowed. The economy expanded by 1.1 percent in 2024 and is projected to maintain the same pace in 2025, weighed down by weaker external demand and geopolitical tensions.
While overall inflation has moderated, services inflation is proving slower to decline. The Fund noted that labour market conditions remain relatively strong, although early signs of softening are emerging. Earlier concerns about Belgium’s labour-cost competitiveness have stabilised.
Looking ahead, the IMF expects growth to slow further in 2026 before gradually returning to its estimated medium-term potential rate of 1.3 percent. The recovery is expected to be driven largely by private consumption and investment. Lower energy prices and easing wage growth should help stabilise inflation around the 2 percent target, while the country’s external current account deficit is projected to narrow as global demand improves.
Still, risks remain tilted to the downside. The IMF warned that prolonged global uncertainty, rising trade barriers or tighter financial conditions could further dampen growth. Supply-chain disruptions could also reignite inflationary pressures. At the same time, delays in fiscal consolidation or structural reforms may complicate efforts to stabilise public finances, particularly if rising risk premia increase borrowing costs.
The Fund’s Executive Directors welcomed Belgium’s resilience but stressed that sustained fiscal consolidation and deeper structural reforms will be essential to safeguard long-term stability and the country’s social model.
They acknowledged recent steps taken under the EU’s economic governance framework and the 2026 fiscal budget to strengthen public finances. However, mounting age-related and defence spending pressures are expected to require additional adjustment to put public debt firmly on a downward path.
The IMF urged authorities to reduce current spending further, improve the efficiency of public investment and social expenditure, and streamline tax expenditures while protecting growth-enhancing investments. Effective pension reform implementation and stronger coordination across federal and regional governments were also highlighted as critical to achieving durable fiscal consolidation.
On the financial sector, the IMF said the system remains broadly resilient, though certain vulnerabilities require close monitoring. Directors recommended maintaining adequate macroprudential buffers and signalled that the countercyclical capital buffer could be raised further if risks persist. They also encouraged continued implementation of recommendations from the 2023 Financial Sector Assessment Program, including those requiring legislative action.
Finally, the Fund welcomed progress in tax, pension, labour market and healthcare reforms but emphasised that steadfast implementation — along with additional measures — will be necessary to lift potential growth. Reforms aimed at boosting employment in the face of population ageing, strengthening productivity and enhancing competitiveness were cited as priorities. These include adjustments to employment protection rules, stronger active labour market policies and reforms to wage-setting mechanisms to better align pay growth with productivity.
The IMF added that deeper integration within the EU single market, advancement of the savings and investment union, and further energy market integration would help strengthen Belgium’s economic resilience in the years ahead.
