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Belgium Country Risk Report Q1 2017

  • October 2016
  • -
  • Business Monitor International
  • -
  • 29 pages

Core Views

An increasingly challenging external environment will hurt fixed investment in Belgium's export-oriented manufacturing sector. Uncertainty about how Brexit will play out over the coming years will overshadow Belgium's economy, given a high degree of trade integration with the UK. The outcome of upcoming elections in Italy, France and Germany over the next year could significantly impact on Belgium's own political landscape over the coming years.

Table Of Contents

Belgium Country Risk Report Q1 2017
Executive Summary.................................................................................................................................. 5
Core Views.......................................................................................................................................................................................5
Key Risks........................................................................................................................................................................................5
Chapter 1: Economic Outlook.................................................................................................................. 7
SWOT Analysis........................................................................................................................................................... 7
BMI Economic Risk Index.......................................................................................................................................... 7
Economic Growth Outlook........................................................................................................................................ 8
Challenging External Environment Will Hurt Investment-Led Growth.......................................................................................8
An increasingly challenging external environment will hurt fixed investment in Belgium's export-oriented manufacturing sector. Having
already lowered our economic growth forecasts for Belgium in the wake of the UK's Brexit vote in June, we note that lingering political
uncertainty poses significant downside risks to the economy.
TABLE: GOODS EXPORTS, % OF TOTAL (12-MONTHS TO JUNE 2016).............................................................................................................8
GDP By Expenditure Outlook.................................................................................................................................. 10
TABLE: GDP GROWTH FORECASTS.................................................................................................................................................................... 10
TABLE: PRIVATE CONSUMPTION FORECASTS.................................................................................................................................................. 10
TABLE: GOVERNMENT CONSUMPTION FORECASTS....................................................................................................................................... 10
TABLE: FIXED INVESTMENT FORECASTS.......................................................................................................................................................... 10
TABLE: NET EXPORTS FORECASTS.................................................................................................................................................................... 10
Monetary Policy........................................................................................................................................................ 11
ECB Policy: Looser For Longer...................................................................................................................................................11
The economic slowdown caused in part by the UK's vote to leave the European Union in June has increased the chances that monetary
policy tightening in the eurozone will be pushed back even further. But even more importantly, the potential for systemic crises and
the long-term deb t outlook increasingly suggest that the path of least resistance for the ECB will be to keep short-term rates as low as
possible for as long as possible, while extending quantitative easing.
TABLE: ECB REFINANCING RATE FORECASTS (%)........................................................................................................................................... 11
Chapter 2: 10-Year Forecast................................................................................................................... 15
The Belgian Economy To 2025............................................................................................................................... 15
Tepid Outlook Compared To Eurozone Peers............................................................................................................................15
Belgian real GDP growth will lag eurozone averages in the coming decade, amid the government's ongoing fiscal austerity drive and a
challenging macroeconomic backdrop. Structural reforms being implemented by the current administration will ensure that growth picks
up more substantially beyond 2020.
TABLE: LONG-TERM MACROECONOMIC FORECASTS..................................................................................................................................... 15
Chapter 3: Political Outlook................................................................................................................... 19
SWOT Analysis......................................................................................................................................................... 19
BMI Political Risk Index........................................................................................................................................... 19
Domestic Politics..................................................................................................................................................... 20
European Populist Surge, Security Fears Could Reshape Political Landscape.....................................................................20
The risk of additional terrorist attacks and the rise of eurosceptic, nationalist movements across Europe leave Belgian politics vulnerable
to renewed fragmentation and potential gains for far-right parties in the 2019 election. The outcome of upcoming elections in France,
Germany and Italy over the coming 18 months could significantly impact Belgium's own political landscape.
TABLE: POLITICAL OVERVIEW............................................................................................................................................................................. 20
Long-Term Political Outlook................................................................................................................................... 21
Unity To Prevail.............................................................................................................................................................................21
Flemish separatism, though less significant than in previous years, will remain a political risk facing Belgium over the coming decade,
spurred by economic as well as cultural and linguistic divisions. An outright dissolution of the state is unlikely given the still sizeable
proportion of the population that supports union. Moreover, threats of terrorism will be an even more prominent issue in Belgium than in
many other European countries.
Chapter 4: BMI Global Macro Outlook................................................................................................... 25
Global Macro Outlook.............................................................................................................................................. 25
Broad Recovery But Three Notes Of Caution.............................................................................................................................25
TABLE: GLOBAL FORECASTS, 2015-2020........................................................................................................................................................... 25
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %.................................................................................................................................... 26
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %................................................................................................................................... 27
TABLE: MACROECONOMIC DATA and FORECASTS.............................................................................................................................................. 29

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