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BELGIUM

No return to pre-crisis levels before 2023

AA1

LOW RISK for entreprise

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

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GDP USD 530bn (World ranking 24, World Bank 2019)
Population 11.5mn (World ranking 80, World Bank 2019)
Form of state Constitutional parliamentary monarchy
Head of government Alexander De Croo (PM)
Next elections 2024, legislative
  • Strong business environment
  • Diversified export structure in terms of products
  • High company profitability and equity ratios
  • High-skilled workforce
  • High share of foreign direct investments
  • High level of innovation
  • One of the highest tax burdens on the private sector in the EU
  • Very high corporate debt
  • High public debt
  • High dependency on the Eurozone business cycle
  • High external liabilities
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A stronger recession than the Eurozone

After +1.9% in 2017, the highest level since 2011, Belgium’s real GDP growth slowed down to +1.5% in 2018 and reached +1.4% in 2019, the lowest level in six years. Due to the Covid-19 crisis, real GDP growth should fall to -10% in 2020. We expect a stronger recession in Belgium than the Eurozone average (-9.3% in the Eurozone) due to the strictness and length of the lockdown, as well as the more limited support measures.

In the face of the pandemic that hit the global economy beginning in January 2020, the Belgian caretaker government implemented a strict lockdown. We estimate that activity has lost 30% of its production capacity per month of the lockdown, as in France. Thus, in Q2, we expect Belgium’s GDP to fall by more than -16% (q/q). With a production capacity that will remain durably below 100% as a result of health restrictions, we estimate that Belgium will not return to pre-crisis levels before 2023. At the end of 2021, Belgium will remain -4.5% below its pre-crisis level and at -1.4% at the end of 2021. The fall in new orders to industry was clearly sharper than in 2009 and for the past two months a significant rise in stocks has been reported by Belgian companies, a sign of weak demand in a period of production recovery. We believe that a recovery in company turnovers in the coming months will be very slow, in particular due to volumes persistently below pre-crisis levels, combined with deflationary pressures. Regarding exports of goods and services, Belgium is estimated to lose more than EUR85bn in 2020, which represents about 30% of its exports in 2019, whereas in normal times Belgium would normally record EUR20bn in export gains. The largest export losses are expected in the sectors most affected by the Covid-19 crisis: energy, metallurgy, transport, automotive and machinery. Finally, we estimate that the household savings rate is currently at 22% of gross disposable income (+10% above the pre-crisis level), which is equivalent to an excess of savings of EUR25bn , or 25% of domestic investment. Without measures to stimulate demand, household spending will remain well below pre-crisis levels until the end of the year. 

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Lower support measures compared to peers

Budgetary support during the Covid-19 outbreak was limited compared to other Western European countries. The Belgian government has put in place public guarantees to the tune of around EUR50bn (11% of GDP, a level similar to France, for example) but has remained timid with regard to direct support measures (reduction of charges, temporary employment schemes) for which 6% of GDP has been implemented, half as much as in France and more than three times less than in Germany. We therefore expect the unemployment rate to rise to 8.5% by the end of 2021. Furthermore, we estimate that 7% of employment in Belgium is at risk of zombification (around 320,000 people) due to temporary employment schemes and a very slow recovery in the hard-hit sectors. Preventing the unemployment of these people will depend on stimulus measures and training and redirecting them to the most dynamic sectors. On the other hand, the government's financial support measures will elevate already-high levels of public debt and will probably restrict fiscal policy once the Covid-19 crisis has passed.
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We expect a spike in business insolvencies in late 2020

 

Business insolvencies are likely to reach a new record high over the next 12-18 months. The trend was already on the rise in 2019, with a rebound of +7% for nearly 10,600 companies, a high point since 2014. The rise was seen across almost all sectors (+11% for services, +4% for trade, +8% for construction, +2% for hotels and restaurants). Over 2020, the final balance sheet will be misleading, with a limited increase in insolvencies due to (i) the impact of the lockdown on the activity of commercial courts (insolvency registrations fell by 68% in April 2020 compared to April 2019), (ii) temporary adjustments to bankruptcy legislation and (iii) emergency business support measures. But these factors are temporary in nature and fundamentals are on the rise: We expect a surge in insolvencies over the second half of the year, which will continue into 2021 with more than 13,000 cases in the end, representing an increase of more than 20% compared to 2019. 

 

 

Belgian companies also suffer from a very high debt stock: 154% of GDP. This constitutes a debt stock as high as France and is the highest in Europe after Luxembourg, Ireland, the Netherlands and Sweden. The introduction of public guarantees was therefore essential to avoid a liquidity crisis.

 

 

Trade structure by destination/origin

(% of total)

Exports Rank Imports
Germany 15%
1
15% Germany
France 14%
2
15% Netherlands
Netherlands 13%
3
10% France
United Kingdom 10%
4
7% United States
Italy 10%
5
6% United Kingdom

Trade structure by product

(% of total)

Exports Rank Imports
Pharmaceuticals 11%
1
10% Pharmaceuticals
Cars 8%
2
9% Cars
Plastic Articles 7%
3
7% Basic Organic Chemicals
Basic Organic Chemicals 7%
4
5% Refined Petroleum Products
Refined Petroleum Products 5%
5
4% Plastic Articles
Payment terms in Belgium are 35 days on average, though DSO could be improved and the transposition of EU rules on late payment in domestic law is not as demanding as in other EU countries.

  • Low

  • Medium

  • Sensitive

  • High

  • Payments

  • Court proceedings

  • Insolvency proceedings

  • Payments

  • Court proceedings

  • Insolvency proceedings

Court proceedings are reliable and benefit from EU standards, but enforcing domestic judgments remains time consuming and costly, so pre-legal action conducted by collection specialists remains the most efficient option when it comes to recovering debt.

Although domestic insolvency law aims at rescuing companies to increase the chances of recovering debts, it provides no limitations as to how much of the debt may be written off in restructuration negotiations. It is rare for unsecured creditors to recover from insolvent debtors in practice.

Download the entire collection complexity PDF:

Collection complexity Belgium 6 MB

LATEST NEWS ABOUT BELGIUM

Contacts

Euler Hermes
Euler Hermes Economic Research
research@eulerhermes.com
Ana Boata 
Head of Macroeconomic Research
ana.boata@eulerhermes.com

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