PUBLISHED June 28, 2026
A Temporary Shock From the War in Iran
According to the National Bank of Belgium’s (NBB) latest economic projections, published on 12 June 2026, the war in Iran is causing a temporary shock to the Belgian economy. Headline inflation is set to average 3.4% in 2026, mainly due to rising oil prices, though it should gradually ease back to 2% in 2028. GDP growth is expected to fall temporarily to 0.6% in 2026, down from 1% last year, but should pick up to 1.3% in 2028. The budget deficit, meanwhile, will widen further by 2028 due to rising interest expense, as fiscal consolidation measures are largely offset by growing ageing-related costs and defence expenditure.
The Global Economy Holds Up Better Than Feared
Despite the tariff shock and associated uncertainty throughout 2025, the global economy and trade held up well, partly bolstered by investment in new technologies and artificial intelligence. Uncertainty in the spring of 2026 surrounding the new shock caused by the war in Iran was initially very high, particularly regarding energy supply and supply chains. However, so far, the impact has proved less severe than feared, in part owing to a shift to alternative supply routes. Current market expectations suggest that oil prices will normalise relatively quickly and that the shock will be short-lived and limited in scope.
Growth Nearly Stalls Before Recovering
Based on current assumptions, economic growth in Belgium will fall sharply, to around zero in the second quarter of 2026, but will pick up again rather quickly thereafter. On an annual basis, GDP growth is expected to come in at 0.6% this year, down from 1% last year. Thereafter, growth should be close to potential, at 1.1% in 2027 and 1.3% in 2028 — though admittedly below its long-term average in the 2010s. Belgian growth is expected to remain somewhat lower than that of the euro area as a whole in the coming years.
In the short term, higher oil prices are likely to dampen household consumption in particular. Purchasing power is expected to decline temporarily in 2026, driven by the limitation on the duration of unemployment benefits, the partial indexation of higher wages and benefits from June 2026, and the fact that petrol prices are not included in the health index used for wage indexation. As is usually the case with volatile income trends, households are expected to use their savings as a buffer: consumption should continue to rise in 2026 despite falling purchasing power, implying a temporary decline in the saving rate, before both accelerate again in 2027 and 2028.
In the short term, higher oil prices are likely to dampen household consumption in particular. Purchasing power is expected to decline temporarily in 2026, driven by the limitation on the duration of unemployment benefits, the partial indexation of higher wages and benefits from June 2026, and the fact that petrol prices are not included in the health index used for wage indexation. As is usually the case with volatile income trends, households are expected to use their savings as a buffer: consumption should continue to rise in 2026 despite falling purchasing power, implying a temporary decline in the saving rate, before both accelerate again in 2027 and 2028.
Business investment has held up reasonably well in recent years and is expected to remain relatively robust going forward. Residential investment, however, continued to contract in 2025, and only a modest recovery is expected — not enough to offset recent years’ losses, leaving housing investment 10% below its 2019 level by 2028. On the trade side, Belgian exports have clearly lagged behind relevant export market growth in recent years, partly because Belgium is not a key link in AI-related global supply chains. Imports, by contrast, are forecast to grow faster than exports due to robust domestic demand and import-intensive defence investment, meaning net exports will continue to weigh on activity throughout the forecast horizon.
Job creation remained limited in 2025, shored up mainly by the self-employed and the non-market sector, while the number of wage earners in market sectors actually declined. Between January and June 2026, around 100,000 unemployed people lost their benefits under the new time limits, with a further 70,000 set to follow by mid-2027 — though their integration into the labour market is expected to be only partial and gradual. Job creation is expected to pick up gradually but only really gain momentum from 2027 onwards, with around 90,000 additional jobs projected between 2026 and 2028. The unemployment rate is projected to rise to 6.6% in 2026 before falling back slightly to 6.4% in 2028.
Inflation had fallen below 2% at the start of this year but rebounded sharply from March under the impetus of higher energy prices. It is expected to average 3.4% this year before gradually moderating to 2% in 2028. Core inflation is set to remain high in 2026 and 2027 partly due to second-round effects from the new energy price shock, though energy inflation itself is expected to turn negative next year. Higher inflation will push up wage growth via indexation, particularly in 2027 — though the effect should be more limited than during the 2022 energy crisis, given that this is an oil price shock rather than a gas price shock.
Business investment has held up reasonably well in recent years and is expected to remain relatively robust going forward. Residential investment, however, continued to contract in 2025, and only a modest recovery is expected — not enough to offset recent years’ losses, leaving housing investment 10% below its 2019 level by 2028. On the trade side, Belgian exports have clearly lagged behind relevant export market growth in recent years, partly because Belgium is not a key link in AI-related global supply chains. Imports, by contrast, are forecast to grow faster than exports due to robust domestic demand and import-intensive defence investment, meaning net exports will continue to weigh on activity throughout the forecast horizon.
Job creation remained limited in 2025, shored up mainly by the self-employed and the non-market sector, while the number of wage earners in market sectors actually declined. Between January and June 2026, around 100,000 unemployed people lost their benefits under the new time limits, with a further 70,000 set to follow by mid-2027 — though their integration into the labour market is expected to be only partial and gradual. Job creation is expected to pick up gradually but only really gain momentum from 2027 onwards, with around 90,000 additional jobs projected between 2026 and 2028. The unemployment rate is projected to rise to 6.6% in 2026 before falling back slightly to 6.4% in 2028.
Inflation had fallen below 2% at the start of this year but rebounded sharply from March under the impetus of higher energy prices. It is expected to average 3.4% this year before gradually moderating to 2% in 2028. Core inflation is set to remain high in 2026 and 2027 partly due to second-round effects from the new energy price shock, though energy inflation itself is expected to turn negative next year. Higher inflation will push up wage growth via indexation, particularly in 2027 — though the effect should be more limited than during the 2022 energy crisis, given that this is an oil price shock rather than a gas price shock.
