Economic Analysis
Belgium

Belgium

Population 11.4 million
GDP per capita 43,488 US$
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Synthesis

major macro economic indicators

  2016 2017 2018 (e) 2019 (f)
GDP growth (%) 1.5 1.7 1.4 1.2
Inflation (yearly average, %) 1.8 2.2 2.3 1.6
Budget balance (% GDP) -2.4 -0.8 -0.7 -1.3
Current account balance (% GDP) -0.6 0.7 -1.3 -1.6
Public debt (% GDP) 106.1 103.4 102 101.4

 

(e): Estimate. (f): Forecast.

STRENGTHS

 

  • Optimal location between the United Kingdom, Germany and France
  • Presence of European institutions, international organisations and global groups
  • Ports of Antwerp (second largest in Europe) and Zeebrugge, canals and motorways
  • Well-trained workforce through vocational education, multilingualism

WEAKNESSES

  • Political and financial tensions between Flanders and Wallonia
  • Complex institutional structure and multiple administrative levels
  • Highly dependent on the Western European economy (exports of goods and services = 82% of GDP)
  • Exports concentrated on intermediate products
  • High structural unemployment
  • Heavy public debt
  • Tight housing market
  • Saturated transport infrastructure

RISK ASSESSMENT

Growth to slow down again in 2019

 

Belgium’s economic expansion faltered slightly in 2018, echoing the performances of other eurozone countries. Domestic demand remained buoyant, driven by resilient household consumption and increased investment. Unlike in 2017, exports made a small contribution to activity. Growth should continue to decline slightly in 2019 with domestic demand still its main driver. A less supportive European environment and weaker business confidence are expected to temper private investment. At the same time, the increase in public investment observed following the October 2018 municipal elections is expected to be temporary and this will be only slightly compensated for by the measures contained in the Investment Pact projects (September 2018). Following the government’s collapse in December 2018, some of the investments announced by Prime Minister Charles Michel will likely be withdrawn. Indeed, the caretaker government will only be able to deal with projects approved by the former coalition, such as the completion of the RER rail project. However, consumption is expected to fill in the gap: household disposable income is poised to continue growing. This is thanks to a buoyant labour market, a further reduction in social charges – in particular that of employer contributions reflected in wage increases (as part of the last phase of the tax shift) – and by higher indexation of wages in the private sector, combined with a decrease in inflation. External demand is anticipated to make a less robust contribution due to the slowdown experienced by Belgium’s main eurozone partners. At the same time, export competitiveness will likely further erode due to the rise in domestic wages and a decline in productivity growth.

 

Slight deviation from the medium-term budgetary objectives

 

After falling in 2017, the government deficit stabilised in 2018, with public debt reaching 102% of GDP at the end of the year. In the Stability Programme for the period 2019-2022 submitted to the European Commission in April 2019, the government states that the debt will be reduced to 100.6% in 2019, 98.5% in 2020, 96.2% in 2021 and finally 94% in 2022. However, the EC is less optimistic: it forecasts public debt at 101.3% by the end of 2019 and 100.7% in 2020. The EC appears to believe that the reduction in Belgian public debt is not significant enough, and has asked for clarification on the envisaged measures. Prime Minister Michel’s caretaker government has limited power. The government's monthly budget is only the provisional twelfths calculated based on the voted budget. As a result, it cannot take any corrective action to adapt to the current conjecture. On a no-policy change basis, the government deficit is therefore expected to deteriorate in 2019 from 0.7% to 1.3% of GDP, due to both the decline in growth that is weakening revenues and the increasing cost of an ageing population.
The current account is poised to remain slightly negative, following the current account for goods and services.

 

Towards a sustainable political crisis?

 

Belgium has been experiencing a political crisis since December 2018, which has resulted in a long period of uncertainty. Prime Minister Michel – who lost a vote of no confidence in Parliament following the departure of the main Flemish party (NV-A) of the coalition government in disagreement over the ratification of the Marrakech Global Migration Pact – submitted his resignation to King Philippe, who reappointed him as head of the caretaker government. The triple elections (federal, regional and European legislatives) held on May 26 further fragmented the Belgian political landscape with the rise of extremist parties, notably the Flemish far right, as well as the weakening of the major political parties. The winner of the federal legislative elections is undoubtedly Vlaams Belang, a xenophobic and separatist party, which has seen a rapid increase from 3 to 18 seats in the Chamber of Deputies (which has 150 elected members) and from 6 to 23 in the Regional Parliament of Flanders, with 18.5% of the vote (+12.6). All the parties in the outgoing coalition, led by Charles Michel, are in decline: the N-VA (Flemish Nationalist) with 25% of the vote, far from the 31.9% of 2014, but also the French-speaking Reform Movement of the head of government (losing 6 of its 20 seats), the Flemish Christian Democrats (12 deputies, -6) and the Dutch-speaking Liberals (12, -6). The renewal of the alliance, known as the "Swedish" alliance, therefore seems to be ruled out. The formation of the federal government is expected to be complicated, raising concerns that the record of 541 days without a government (2010-2011) will be broken. The King commissioned a mission composed of two royal informants to identify the challenges, opportunities and conditions necessary for the formation of a government. This mission has not yet been able to change the lines between Belgian policies. This makes the scenario of a long period of crisis more likely.

 

 

Last update : February 2019

Payment

Bank transfers (SEPA & SWIFT) and electronic payments are the most frequently used methods of payment for businesses.

Cheques are seldom used and only in certain sectors (e.g. transport, fruit and vegetable wholesale). As cheques no longer benefit from a guarantee from the issuing bank, the cheque issuer’s account needs to contain sufficient funds in order to be for the cheque to be cashed. Issuing a cheque with insufficient funds is a criminal offence.

Bills of exchange are no longer used for payment in Belgium, except in certain sectors and in international transactions.

Payment defaults are no longer recorded in the Moniteur belge (MB, Belgian Official Journal), but they can be consulted on the National Chamber of Bailiffs’ website, where data is available to banks and professional organisations.

Debt Collection

Amicable phase

There are no special provisions for out-of-court debt recoveries between businesses. Creditors should attempt to gain payment from debtors by sending written reminders. Before beginning legal action against a debtor company, it is often worthwhile asking a lawyer to check the database of seizures.

 

Legal proceedings

Judgments are normally delivered within 30 days after closure of the hearings. A judgment is rendered by default in cases where debtors are neither present nor represented during the proceedings.

Fast track proceedings

This procedure is rarely used in business-to-business cases, and cannot be implemented when the debt is disputed. A 2016 law implemented a new set of procedural rules, creating an out-of-court administrative procedure for non-disputed debts. When an order of payment has been issued, the debtor has a month to pay the amount. If the debtor refuses, the creditor can request a bailiff to issue a writ of execution. Moreover, under the new rules, lodging an appeal against a judgment will no longer suspend the enforceability of this judgment. Consequently, even if the debtor starts appeal proceedings, the creditor will be able to pursue the recovery of the debt.

 

Retention of title clause

This is a contractual provision stipulating that the seller retains title of goods until receipt of full payment from the buyer. Unpaid creditors can make claims on goods in the debtor’s possession. It therefore follows that the retention of title clause is enforceable in all situations where creditors bear losses arising from insolvencies, whatever the nature of the underlying contract. When goods sold under retention of title are converted into a claim (after a sale), the seller-owner’s rights referring to this claim (the selling price) are known as real subrogation.

 

Ordinary proceedings before the commercial court

All disputes between companies can be tried by the Commercial Court in Belgium. In cases of cross-border claims using European legislation, a European execution for payment proceedings can be enabled. Claimants also have recourse to European small claims proceedings.

 

Summon on the merits

The bailiff assigns the debtor a court date for the introduction of the case. If discussions do not take place, judgement will follow within four to six weeks. If there are discussions pending, parties need to put their intentions in written conclusions. After judgement, there is a possibility to appeal – if no appeal is filed, the execution will follow through the bailiff.

 

Attachment procedure

This judicial proceeding is conducted for the benefit of only one party (ex parte). There are three essential conditions to proceed with an attachment:

  • urgency of the measure;
  • prior authorisation of the judge is required to lay a conservatory attachment;
  • the debt must be certain, collectable and liquid.

A debtor may request the cancellation of the attachment if it has been unjustly imposed. However, once an attachment has been imposed, it remains valid for a period of three years. Subsequently, a conservatory attachment may be transformed into an execution order.

 

Enforcement of a Legal Decision

A judgment becomes enforceable once all venues of have been exhausted. If the debtor refuses to execute payment, a bailiff can attach the debtor’s assets or obtain payment through a third party (Direct Action).

Foreign awards can be recognised and enforced in Belgium, provided that various criteria are met. The outcome will vary depending on whether the award is rendered in an EU country (in which case it will benefit from particularly advantageous enforcement conditions), or a non-EU country (for which normal exequatur procedures are applied).

Insolvency Proceedings

Bankruptcy proceedings

Debtors can file for bankruptcy when they have ceased making payments for some time, or when the creditor’s confidence has been lost. If bankruptcy is granted, creditors must register their claims within the time prescribed in the court’s insolvency declaration. Failure to do so on the part of a creditor will result in the cancellation of their priority rights. The court then appoints a trustee, or official receiver, to verify the claims. The retention of title clause can be cited by the creditor, in order to claim his property.

Since 2017, submissions of claims where bankruptcy procedures are involved must be made electronically, via the Central Solvency Register (www.regsol.be), which records all bankruptcies over the last 30 years.

 

Judicial restructuring process

The judicial restructuring process (reorganisation judiciaire), designed to reorganise a company’s debts with its creditors, can be granted by the court upon request of any debtor facing financial difficulties that threaten its continued business in the short- or medium-term. The debtor makes a reasoned application to the Registry of the Commercial Court in order to be granted an extended period to pay the debt. This extended period is normally set at six months, during which the debtor must propose a reorganisation plan to all of its creditors.

Outstanding creditors (those whose claims arose before the commencement of the extended period) cannot begin any execution procedure for the sale of real or personal property of the debtor, but can request enforcement of their retention of title clause. Nevertheless, the extended period does not prevent the debtor from making voluntary payments to any the outstanding creditors. In addition, the extended period does not benefit co-debtors and guarantors, who are still required to meet their commitments.

Insolvency trend Belgium
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