PUBLISHED June 28, 2026
Inflation Rebounds Sharply After a Calm Start
According to the National Bank of Belgium’s latest macroeconomic projections, inflation was below 2% at the start of this year but rebounded sharply as from March, under the impetus of higher energy prices. It is projected to average 3.4% this year before gradually moderating back to 2% by 2028. The European Commission’s parallel assessment confirms the picture: headline inflation is projected to rise from 3% in 2025 to 3.4% in 2026, driven by higher energy prices stemming from the conflict in the Middle East, before decreasing in 2027 due to lower price pressures for energy.
A Surprisingly Resilient Start to the Year
Real GDP increased by 0.2% in the first quarter of 2026, confirmed by the National Accounts Institute. The figure implies a strengthening of quarterly growth compared to the previous quarter and was broadly in line with growth of the euro area economy. Household consumption was the primary driver of Q1 GDP growth, rising 0.6% quarter-on-quarter following a stagnation in Q4 2025. Investment in dwellings edged up by 1.3% — the first positive quarterly growth of that component since Q1 2024 — while trade flows surprised on the upside, with exports and imports both increasing by around 2.7%.
Consumer Confidence Collapses as the War Begins
Overall sentiment has weakened markedly since the start of the war in the Middle East at the end of February. The worsening has been most pronounced for consumer confidence, which fell below its long-term average following a rally throughout 2025. The impact of higher inflation and government reforms on real incomes — and hence purchasing power — is expected to weigh further on household spending in the coming quarters, undoing much of the momentum built up over the past year.
Belgium’s economic growth is set to decelerate in 2026, mainly due to weakening private consumption, before rebounding in 2027 as domestic demand improves. Overall, real GDP growth is projected to decelerate to 0.7% in 2026, before increasing to 0.9% in 2027. Market estimates from KBC are even more cautious, expecting only meagre growth of 0.6% for the Belgian economy this year, with the economy virtually stagnating in Q2 before gradually recovering in subsequent quarters. Despite optimism surrounding the US-Iran agreement on reopening the Strait of Hormuz, considerable uncertainty remains regarding its full implementation.
Belgium’s economic growth is set to decelerate in 2026, mainly due to weakening private consumption, before rebounding in 2027 as domestic demand improves. Overall, real GDP growth is projected to decelerate to 0.7% in 2026, before increasing to 0.9% in 2027. Market estimates from KBC are even more cautious, expecting only meagre growth of 0.6% for the Belgian economy this year, with the economy virtually stagnating in Q2 before gradually recovering in subsequent quarters. Despite optimism surrounding the US-Iran agreement on reopening the Strait of Hormuz, considerable uncertainty remains regarding its full implementation.
The harmonised unemployment rate fell from 6.4% at the end of 2025 to 6.2% in March and April 2026. However, caution is warranted when interpreting these figures, as employment growth likely has been incentivised under the new two-year cap on unemployment benefits. Soft data are already signalling that the outlook for the labour market has worsened: the National Bank’s monthly surveys show employment expectations by businesses and unemployment expectations by consumers both becoming more pessimistic, pointing to weaker employment growth in the coming quarters.
Investment is projected to grow modestly, weighed down by tighter financial conditions, uncertainty stemming from geopolitical tensions, and the surge in energy prices. Household investment is expected to decline further in 2026, as building permits continue their downward trend. Exports are expected to slightly recover from 2026 onward, but imports are also projected to pick up, particularly due to defence-related deliveries — meaning net exports will continue to subtract from GDP growth even as the export side gradually improves.
The Belgian economy grew by 1% in 2025, mainly driven by robust private consumption, even as investment slowed and net exports remained negative. As a result of fiscal consolidation measures, a stabilisation in the general government deficit is projected for 2026 — but the deficit is expected to rise again in 2027 due to higher defence and interest expenditure. These persistently high deficit levels translate into a further increase in Belgium’s already elevated government debt-to-GDP ratio, a structural vulnerability that the National Bank has repeatedly flagged as one of the country’s most pressing medium-term challenges.
The harmonised unemployment rate fell from 6.4% at the end of 2025 to 6.2% in March and April 2026. However, caution is warranted when interpreting these figures, as employment growth likely has been incentivised under the new two-year cap on unemployment benefits. Soft data are already signalling that the outlook for the labour market has worsened: the National Bank’s monthly surveys show employment expectations by businesses and unemployment expectations by consumers both becoming more pessimistic, pointing to weaker employment growth in the coming quarters.
Investment is projected to grow modestly, weighed down by tighter financial conditions, uncertainty stemming from geopolitical tensions, and the surge in energy prices. Household investment is expected to decline further in 2026, as building permits continue their downward trend. Exports are expected to slightly recover from 2026 onward, but imports are also projected to pick up, particularly due to defence-related deliveries — meaning net exports will continue to subtract from GDP growth even as the export side gradually improves.
The Belgian economy grew by 1% in 2025, mainly driven by robust private consumption, even as investment slowed and net exports remained negative. As a result of fiscal consolidation measures, a stabilisation in the general government deficit is projected for 2026 — but the deficit is expected to rise again in 2027 due to higher defence and interest expenditure. These persistently high deficit levels translate into a further increase in Belgium’s already elevated government debt-to-GDP ratio, a structural vulnerability that the National Bank has repeatedly flagged as one of the country’s most pressing medium-term challenges.
