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Belgium Country Risk Report Q1 2020

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.

Key Risks

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.


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Economy Will Slow In 2019 Before Mild Recovery In 2020
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Monetary Policy
Eurozone's Monetary Policy More Accommodative For Longer
Currency Forecast
EUR: Retreating On Dollar Strength
TABLE: EUROZONE CURRENCY FORECAST
Regional Economic Outlook
Eurozone Domestic Demand Remains Resilient, But External Headwinds Mounting
10-Year Forecast
The Belgian Economy To 2028
Tepid Outlook Compared To Eurozone Peers
TABLE: LONG-TERM MACROECONOMIC FORECASTS
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.Belgium Country Risk Q1 2020ContentsPolitical Outlook
Domestic Politics
Prospects For Coalition Creation Remain Bleak
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Separatism And Terrorism To Remain Key Issues
Global Macro Outlook
Downside Revisions To Stabilise Somewhat, But Policy Risks Remain
TABLE: GLOBAL MACROECONOMIC FORECASTS (2018-2023)
TABLE: DEVELOPED MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: BELGIUM – MACROECONOMIC DATA AND FORECASTS

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