Belgium, a highly developed market economy, belongs to the Organization for Economic Cooperation and Development (OECD), a group of leading industrialized democracies. With a geographic area about equal to that of Maryland, and a population of 10.8 million, Belgian per capita GDP ranks among the world's highest. In 2010, per capita income (PPP) was estimated to be €32,592 (approx. $43,220). The federal government ran large primary surpluses in recent years until 2009. Public debt remains high, at about 97.2% of GDP at the end of 2010. GDP growth in 2010 was estimated to be 2.1%.
Densely populated Belgium is located at the heart of one of the world's most highly industrialized regions. The first country to undergo an industrial revolution on the continent of Europe in the early 1800s, Belgium developed an excellent transportation infrastructure of ports, canals, railways, and highways to integrate its industry with that of its neighbors. One of the founding members of the European Community (EC), Belgium strongly supports deepening the powers of the present-day European Union to integrate European economies further.
With exports and imports approximately equal to GDP, Belgium depends heavily on world trade. Belgium's trade advantages are derived from its central geographic location and a highly skilled, multilingual, and productive work force.
The Belgian industrial sector can be compared to a complex processing machine: It imports raw materials and semi-finished goods that are further processed and re-exported. Except for its coal, which is no longer economical to exploit, Belgium has virtually no natural resources. Nonetheless, most traditional industrial sectors are represented in the economy, including steel, textiles, refining, chemicals, food processing, pharmaceuticals, automobiles, electronics, and machinery fabrication. Despite the heavy industrial component, services account for 77.4% of GDP (2009). Agriculture accounts for only 1% of GDP.
Belgian Economy in the 20th Century
For 200 years through World War I, French-speaking Wallonia was a technically advanced, industrial region, while Dutch-speaking Flanders was predominantly agricultural. This disparity began to fade during the interwar period. As Belgium emerged from World War II with its industrial infrastructure relatively undamaged, the stage was set for a period of rapid development, particularly in Flanders. The postwar boom years contributed to the rapid expansion of light industry throughout most of Flanders, particularly along a corridor stretching between Brussels and Antwerp (now the second-largest port in Europe after Rotterdam), where a major concentration of petrochemical industries developed.
The older, traditional industries of Wallonia, particularly steelmaking, began to lose their competitive edge during this period, but the general growth of world prosperity masked this deterioration until the 1973 and 1979 oil price shocks sent the economy into a period of prolonged recession. In the 1980s and 1990s, the economic center of the country continued to shift northward to Flanders.
Foreign investment contributed significantly to Belgian economic growth in the 1960s. In particular, U.S. firms played a leading role in the expansion of light industrial and petrochemical industries in the 1960s and 1970s. The Belgian Government encourages new foreign investment as a means to promote employment. With regional devolution, Flanders, Brussels, and Wallonia now have substantial autonomy in courting potential foreign investors, as each deems appropriate.
Foreign direct investment (stock) totaled more than $705 billion (cumulative) in 2009. U.S. and other foreign companies in Belgium account for approximately 11% of the total work force, with the U.S. share at about 6%. U.S. companies are heavily represented in the chemical sector, automotive assembly, petroleum refining, and pharmaceutical sectors. A number of U.S. service industries followed in the wake of these investments--banks, law firms, public relations, accounting, and executive search firms. The resident American community in Belgium now exceeds 20,000. Attracted by the EU 1992 single-market program, many U.S. law firms and lawyers have settled in Brussels since 1989.
On May 1, 1998, Belgium became a first-tier member of the European Monetary Union. Belgium switched from the Belgian franc (BF) to the Euro as its currency after January 1, 2002.
Most of Belgium's trade is with fellow EU member states. As a result, Belgium seeks to diversify and expand trade opportunities with non-EC countries. Through November 2010, Belgium ranked as the 14th-largest market for the export of U.S. goods.
Bilaterally, there are few points of friction with the U.S. in the trade and economic area. The Belgian authorities are, as a rule, anti-protectionist and try to maintain a hospitable and open trade and investment climate. As a result, the U.S. Government focuses its market-opening efforts on the EU Commission and larger member states. Moreover, the Commission negotiates on trade issues for all member states, which in turn lessens bilateral trade disputes with Belgium.
The social security system, which expanded rapidly during the prosperous 1950s and 1960s, includes a medical system, unemployment insurance coverage, child allowances, invalid benefits, and other benefits and pensions. With the onset of a recession in the 1970s, this system became an increasing burden on the economy and accounted for much of the government budget deficits. The national unemployment figures mask considerable differences between Flanders and Wallonia. Unemployment in Wallonia is mainly structural, while in Flanders it is cyclical. Flanders' unemployment level equals only half that of Wallonia. The southern region continues a difficult transition out of sunset industries (mainly coal and steel), while sunrise industries (chemicals, high-tech, and services) dominate in Flanders.
Belgium's unemployment rate was 8.3% in November 2010. A total of 4.47 million people make up Belgium's labor force. The majority of these people (73%) work in the service sector. Belgian industry claims 25% of the labor force and agriculture only 2%. As in other industrialized nations, pension and other social entitlement programs have become a major concern as the "baby boom" generation approaches retirement.
Although Belgium is a wealthy country, public expenditures far exceeded income for many years, and taxes were not diligently pursued. The Belgian Government reacted with poor macroeconomic policies to the 1973 and 1979 oil price hikes by hiring the redundant work force into the public sector and subsidizing industries like coal, steel, textiles, glass, and shipbuilding, which had lost their international competitive edge. As a result, cumulative government debt reached 121% of GDP by the end of the 1980s. However, thanks to Belgium's high personal savings rate, the Belgian Government financed the deficit from mainly domestic savings, minimizing the deleterious effects on the overall economy.
The federal government ran a 7.1% budget deficit in 1992 at the time of the EU's Treaty of Maastricht, which established conditions for Economic and Monetary Union (EMU) that led to adoption of the common Euro currency on January 1, 2002. Among other criteria spelled out under the Maastricht treaty, the Belgian Government had to attain a budget deficit of no greater than 3% of GDP by the end of 1997; Belgium achieved this, with a total budget deficit in 2001 (just prior to implementation of the Euro currency) that amounted to 0.2% of GDP.
The government had a positive primary balance between 1993 and 2007, during which time Belgium's debt to GDP level fell from 133% to just over 84%. In 2009, due to the financial and economic crisis, Belgium's deficit and debt levels increased to 6% and 96.2% of GDP respectively, with debt rising to close to 97% of GDP in 2010. Thanks to improving economic growth, Belgium's budget deficit was 4.6% in 2010. According to the country's Stability Program, the deficit is planned to be 4.1% in 2011 and 3.0% in 2012, although the government signaled in early 2011 that it wants to bring the 2011 deficit to below 4.0%.
GDP (PPP, 2010 est.): €352 billion (approx. $466 billion).
Annual real growth rate (2010 est.): 2.1%.
Per capita income (PPP, 2010 est.): €32,592 (approx. $43,220).
Natural resources: Coal.
Agriculture: (1% of GDP) Products--livestock, including dairy cattle, grain, sugarbeets, milk, tobacco, potatoes, and other fruits and vegetables.
Industry: (24.3% of GDP) Types--engineering and metal products, motor vehicle assembly, transportation equipment, scientific instruments, processed food and beverages, chemicals, basic metals, textiles, glass, petroleum
Trade: Exports (2010 est.)--$261 billion: transportation equipment, diamonds, metals and metal products, foodstuffs, chemicals. Export partners: Germany 19.6%, France 17.7%, Netherlands 11.8%, U.K. 7.2%, U.S. 5.4%, Italy 4.7%. Imports (2010 est.)--$261 billion: Machinery and equipment, chemicals, diamonds, foodstuffs, pharmaceuticals, transportation equipment, oil products. Import partners (2010 est.): Netherlands 17.9%, Germany 17.1%, France 11.7%, Ireland 6.3%, U.S. 5.7%, U.K. 5.1%, China 4.1%.