Belgium Country Risk Report Q1 2020
We at Fitch Solutions maintain our real GDP growth forecast for Belgium at 1.1% in 2019, despite relatively strong growth during the first half of the year as domestic demand and the external sector look set to lose momentum. In 2020 we continue to expect a mild recovery for economic activity, as monetary and fiscal stimulus support domestic demand. However, risks to our forecasts remain tilted to the downside, with a 'no-deal' Brexit still possible and the eurozone's key trading partners slowing in 2020.
We reiterate our view that the creation of a Belgian federal coalition will be an extremely challenging task in the aftermath of May's election, and we see little prospect for progress over the coming months. The rise of the far right and the far left in the Flemish and French speaking regions respectively, coupled with a broader fragmentation in support for major parties, will make Belgium's perennially difficult coalition-building climate ever more complicated. During coalition negotiations, policy implementation will be virtually non-existent, and even if and when a government is finally formed, divergent political ideologies of likely coalition partners mean that the policy environment is unlikely to improve markedly.
The risk of additional terror attacks and the rise of eurosceptic, nationalist movements across Europe leave Belgian politics vulnerable to renewed fragmentation.
The 2019 election underlined the stark differences in political ideology between French-speaking Wallonia and Flemish-speaking Flanders. In the short term this will weigh on policymaking, which could hurt reforms aimed at increasing productivity. In the longer term, this highlights the ongoing risk of the country breaking up.
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