Economic Analysis
Belgium

Belgium

Population 11.2 million
GDP per capita 40528 US$
A2
Country risk assessment
A1
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Synthesis

major macro economic indicators

  2014 2015  2016 (e) 2017 (f)
GDP growth (%) 1.7 1.5 1.2 1.5
Inflation (yearly average) (%) 0.5 0.6 1.8 1.9
Budget balance (% GDP) -3.1 -2.5 -3.0 -2.5
Current account balance (% GDP) -0.1 0.2 1.3 1.0
Public debt (% GDP) 106.5 105.8 107.0 107.0

 

(f) Forecast

STRENGTHS

  • Ideally located between the United Kingdom, Germany and France
  • Presence of European institutions, international organisations and global groups
  • Ports of Antwerp (2nd busiest in Europe) and Zeebrugge, canals and motorways
  • Well-qualified, multilingual workforce thanks to vocational training
  • Net external creditor position
  • Excellent business environment

WEAKNESSES

  • Political and financial tensions between Flanders and Wallonia
  • Highly dependent on the western European economic cycle (exports of goods and services = 82% of GDP)
  • Exports concentrated on intermediate products and the European Union
  • High structural unemployment
  • Heavy public debt burden
  • Tight housing market (over-valuation estimated at 6.8% by BNB in Q2 2016)

RISK ASSESSMENT

Modest but stable growth 

Growth is expected to remain modest in 2017. The contribution of external trade will shift from positive to nil. Exports, (82% of GDP), consisting to a large extent of intermediate products, machines and transport equipment, will be subject to another increase in the real, effective exchange rate, associated with the depreciation of UK sterling while the unit cost of labour is edging up. While they will benefit from the modest advance in growth in the neighbouring countries, the UK market is likely to be less buoyant. Tourism income will struggle to return to pre-terrorist attack levels. With stronger domestic demand, imports will pick up somewhat. Private employment growth, sustained by the prospect of lower social security contributions (2018), together with the indexing of wages to inflation (reintroduced in April 2016), is expected to accelerate private consumption. Given its large share of GDP (52%), its contribution to growth will be similar to that of investment. Business investment will continue to be buoyed by accessible, cheap credit, as well as a high capacity utilisation rate. Construction will be sustained by local authority infrastructure spending, especially on housing and schools.

 

Slow budget restructuring 

The level of public debt exceeds GDP, which is reflected in an interest burden equivalent to more than 2% of GDP, despite low interest rates. The authorities want to both bring down the cost of the debt by cutting the overall deficit and, as a priority, transfer levies on labour to consumption. Their goal is to achieve structural equilibrium (i.e. excluding cyclical effects) in 2018, based on fiscal economies amounting to 2.7% of GDP. They have chosen to limit the cut to be made in 2017 to 0.7% and to postpone the main measures until 2018, which seems challenging. In 2017, action will mainly be taken on spending by means of reform of the health system, cuts to current public expenditure and subsidies. The rest of the restructuring will come from raising tax on investment income from 27% to 30%.

 

A current account surplus based on a fragile trade surplus

Although not turning into a deficit, as between 2008 and 2014, the trade in goods surplus could decline. The main cause will be the downturn in UK demand affected by sterling's depreciation and uncertainty over the future. Moreover, whereas in 2014 and 2015, labour costs rose less than did labour productivity putting an end to a decade of lost of competitiveness and market share, especially on European markets, the process seemed to have reversed in 2016. Services will remain in surplus thanks to IT, telecommunications, royalties, transport and wholesale trade. Because of its location at the heart of Europe and with its ports providing easy access to its markets, Belgium plays a major role in the re-export of goods destined for or arriving from its neighbours. Substantial investments held abroad by Belgian interests generate considerable income, which offsets transfers by foreign workers and the net contribution to the European budget. Finally, the current account balance is in surplus.

 

A government dominated by Flemish parties and focused on the economy

Since October 2014, the country has been governed by a centre-right coalition dominated by the Flemish Parties made up of the conservative Nieuw-Vlaamse Alliantie (N-VA, New Flemish Alliance), the leading party in Flanders and at federal level, the Christen-Democratisch en Vlaams (CD&V, Christian Democratic and Flemish) and the Open Vlaamse Liberalen en Democraten (open VLD, Open Flemish Liberals and Democrats) and led by Prime Minister Charles Michel from the French-speaking Mouvement réformateur (Reformist Movement). The socialist party, the main French-speaking political force, is in opposition. So as not to upset its partners and the majority of the population, the N-VA has toned down its wish to abolish the Brussels-Capital region and marginalise the federal state, which retains, in addition to its sovereign powers, most social spending, including pensions and health spending i.e. about half of public spending as well as financial oversight, competition, collection of the main taxes and the mechanism for index-linking incomes. The government is focusing on the economy, specifically on fiscal consolidation and structural reforms aimed at making business more competitive again, such as making working time more flexible and reducing employer contributions (30%), process expected to resume in 2018. This does not exclude disagreements, for example over the proposal to introduce a tax on capital gains, which are currently tax-exempt. In this context, the number of insolvencies should continue to fall. 

 

 

Last update : January 2017

Payment

Bank transfers(SEPA & SWIFT) andelectronic paymentsare the means of payment most used by companies.

Thechequerepresents less than 0.5% of payment transactions in Belgium (private consumers and businesses).  Cheques are still issued in fairly limited cases and in some sectors (wholesale trade in fruit and vegetables, transport companies, etc.).

They no longer benefit from the bank guarantee previously acquired.

The account of the cheque issuer must therefore have sufficient funds when the cheque is cashed.

Issuing an uncovered cheque is punishable by law.

Thebill of exchangeis almost no longer used as a means of payment in Belgium, but is still used in international transactions and in some sectors.

The issuer of the bill of exchange (the drawer, the customer) unconditionally guarantees the lawful bearer (supplier, bank) that a person named in the security (the drawee) will pay him a stated amount (the amount stated in the bill of exchange) on a certain date (on maturity) or demand, i.e., upon presentation thereof.

The Letter of credit isexclusively used in international business transactions.

 

Debt collection

  1. A.     The debtor is not insolvent (or equivalent procedure)

1. The debtor will generally be summoned by the creditor before the court to hear the case.

The subject-matter and territorial jurisdiction of the courts are governed by law.

However, the parties may waive the territorial jurisdiction of the court by inserting a jurisdiction attribution clause in the general terms and conditions of sale or stipulate that the dispute will be submitted to an arbitration body.

The law on the use of languages also defines the territorial jurisdiction of the court based on the location of the head office of one of the parties or the place where the parties' obligations must be performed.

Proceedings are carried out in the presence of all the parties, except for unilateral proceedings for an order to pay.

In principle, the judgment will be delivered within 30 days from the date of deliberation of the case , which takes place at the end of the hearing. The judgment will be rendered by default if the debtor is not present or represented during the proceedings.

The recovery is governed by the following contractual and/or legal provisions:

1. The general terms and conditions of sale of one of the parties (usually those of the creditor), which are legally binding on the parties.

2. The law of 21 April 2007 (MB 31/05/2007) on the entitlement to claim back fees and legal costs.

This law, which came into force on 1st January 2008, stipulates that the procedural indemnity is a fixed contribution to the fees and expenses of the counsel for the successful party.

3. The European Directive of 16 February 2011 on combating late payment in commercial transactions. (Reform of the law of 2 August 2002 on combating late payment in commercial transactions)The reform aims to encourage companies and public authorities to adopt stricter discipline with regard to payments.

Furthermore, the directive stipulates that if the creditor has not received the payment within legal or contractually agreed payment periods, he is entitled to payment of interest.

The directive also provides compensation for recovery costs. The creditor who is entitled to obtain interest may receive a minimum payment of a fixed sum for the recovery costs, without any reminder being necessary and irrespective of proceedings or the assistance of a lawyer.

Besides this fixed sum, the creditor is entitled to reasonable compensation for all other recovery costs that may have been incurred due to a late payment including the procedural indemnity in accordance with the provisions of the Belgian Judicial Code.

 

The directive has been transposed into Belgian Law by the law of 22nd November 2013 (MB/10/12/2013)

 

2. Order to pay proceedings.

The order is introduced on the basis of a unilateral application. The Judge renders his judgment within 30 days after the application is filed without having heard the parties.

Two possibilities:

-The Judge acknowledges completely  the request of the creditor. The debtor then has a period of one month from service of the decision to lodge an objection. If not, the order to pay is final.

If, however, the debtor lodges an objection, the case will be reassigned to the court, which will then make a judgment.

The creditor or the debtor, who has his application dismissed, may appeal within one month from service comprising the order to pay.

-The Judge can partially or fully dismiss the creditor. In this case, the law does not allow the possibility of an appeal or objection.

 

3. Retention of title clause.

This is a contractual provision stipulating that the seller retains title until full payment by the debtor.

The unpaid creditor may make a claim on the goods kept by the debtor.

The principle of enforceability of retention of title clauses foreseen in the Bankruptcy law of 8 August 1997 (effective as of 1 January 1998) is now part of the Belgian Civil Code (new Articles 69et seq.)

It is therefore appropriate to conclude that the retention of title clause is enforceable in all situations of creditors bearing the loss arising from insolvency (see below Bankruptcy/Judicial Reorganisation) and this, whatever the nature of the underlying contract.

When the goods sold under retention of title are converted into a debt (e.g. after a sale), the seller-owner's right refers to this debt (e.g. selling price). This is  called real subrogation.

  1. B.     The debtor is insolvent (or equivalent proceedings)

1. The debtor can be declared bankrupt (law of 8 August 1997) if he experiences continuous difficulties (payment default and collapse in credit.)

By the bankruptcy judgment all outstanding debts become due immediately.

Once the bankruptcy judgment is pronounced, the creditor is no longer entitled to receive payment from the debtor.

The retention of title clause can be used by the creditor to claim his property.

2. The debtor may also seek the benefit of application of the law of 31 January 2009 (effective as of 1 April 2009) on Business Continuity if experiencing temporary difficulties.

This law replaces the former Belgian law on judicial arrangement with creditors.

This law proposes pre-procedural measures and the actual judicial reorganisation procedure itself.

The purpose of the latter is to preserve, under the supervision of a delegated judge, the continuity of a company in difficulty. The debtor makes a reasoned application to the Commercial Court in order to be granted an extended period to pay the debt. This extended period is normally set at six months, a period during which the debtor must propose a reorganisation plan to all of its creditors.

Outstanding creditors, i.e. those whose claim arose before the commencement of the extended period cannot begin any execution procedure for the sale of real estate or personal estate of the debtor.

In accordance with the foregoing, the outstanding creditor could request enforcement of his retention of title clause.

However, the extended period is not an obstacle to the voluntary payment of the outstanding creditors or of some of them by the debtor.

However, the extended period does not release co-debtors and guarantors of their obligations.

Insolvency trend Belgium
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