Belgium

AA1

LOW RISK for entreprise

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

GDP USD492.681bn (World ranking 24, World Bank 2017)
Population 11.37mn (World ranking 79, World Bank 2017)
Form of state Federal Parliamentary Democracy, Constitutional Monarchy
Head of government Charles Michel (MR)
Next elections 2019, legislative elections
  • 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

2019: Lowest real GDP growth in six years

Belgium is a strong and stable European performer. Since 2014, GDP growth in Belgium has hovered around +1.5% on average, which places it above France, close to Austria and not so far below Germany. In addition, Belgium suffered the least among the top 10 Eurozone countries during the Great recession (half of the Eurozone fall in GDP).

After +1.7% in 2017, the highest level since 2011, real GDP growth slowed down to +1.4% in 2018 and should reach +1.2% in 2019, the lowest level in six years. Belgium usually grows in line with the Eurozone average as it is quite exposed to the weakness of the region (sluggish external demand and disappointing consumption). In 2018, consumer spending barely grew (+0.6%, lowest since 2014) as households have been impacted by high inflation (+2.1%), despite the acceleration in wage growth. We only expect a mild acceleration in consumer spending in 2019 (+1.0%). External demand should remain resilient as exports are expected to accelerate in H2, driven by higher demand from China but also a catch-up effect in the region (notably in France and Germany) as the intra-EU trade represents more than two-thirds of Belgian exports. However, the technical recession we expect in H1 2020 in the US should again push Belgian export growth lower (+2.8% in real terms after +3.4% in 2018). While being a negative contributor to Belgian export growth in 2018, the UK should also provide some relief as we expect import growth to accelerate moderately from its lowest level since 2011 last year. However, the Brexit impact on Belgian exports intensified in 2018. Overall, Belgian exports to the UK, its 4th biggest export market worldwide, have fallen by almost -2% in value terms since the referendum (equal to EUR0.5bn of loss). Looking at the pre-referendum average pace of growth, we estimate the missed export opportunities for Belgian companies into the UK market at around EUR7.5bn.

Overall, lower volume growth and a slowdown in price growth should continue to put downside pressures on firms’ turnover growth, which have come down from a +10% y/y high in 2017 to below +5% in 2018. We expect them to remain in the band of +2% to +3%, much above the 2014 lows.

The fall in business insolvencies is expected to end, given the low level of economic growth

Business insolvencies fell by +5% in 2018 after a strong rise in 2017 (+9%). They should stabilize to a total of 9 878 cases - 16% below the 2013 highs. Despite the record low number over the past 10 years in Flanders and Wallonia, insolvencies are at a record high in Brussels (+15% in 2018 after +35% in 2017), partly due to a strong increase in business creation over the past years. Among the most impacted sectors are transport (33% of total business insolvencies), trade (24%), construction and hotels and accommodation (20% each). 

Belgian corporate debt stands at very high level (161% of GDP, the 3rd highest corporate debt stock in the Eurozone after Luxembourg and Ireland), which is indeed a sign of vulnerability, especially once the economic outlook deteriorates and the ECB starts to progressively normalize its monetary policy in late 2020. Resilience could come from the firms’ high margins (at 43% of the value added, +2pp above the Eurozone average), high cash holdings and high equity ratios. Wage acceleration (+2.4% y/y in Q4 2018) after two years of stabilization is a downside for margins. However, we expect past reforms to keep this acceleration in check going forward. In addition, the corporate tax reform voted in 2017 has been re-confirmed and aims at lowering corporate tax to 29% in 2018-19 and 25% in 2020. It is estimated to support company turnover by +1pp by end-2019 with a further +0.5pp in 2020. 

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 6%
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
5% 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

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.

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Collection Complexity Belgium

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