Belgium’s Inflation Eases to 2.2% as Services Prices Remain Sticky — IMF
The Executive Board of the International Monetary Fund (IMF) has concluded its Article IV Consultation for Belgium, with the authorities consenting to the publication of the accompanying Staff Report.
According to the IMF, Belgium’s economy has remained resilient despite successive shocks and heightened uncertainty. Economic growth slowed to 1.1 percent in 2024 and is projected to remain at 1.1 percent in 2025, reflecting weaker external demand and ongoing geopolitical pressures. Headline inflation eased to 2.2 percent year-on-year by the end of 2025, although services inflation has declined more gradually.
Labour market conditions remain strong but are beginning to show signs of softening, while the earlier deterioration in labour-cost competitiveness has stabilised, the Fund noted.
Looking ahead, the IMF expects economic growth to moderate further in 2026 before returning to its estimated potential growth rate of 1.3 percent over the medium term. The recovery is projected to be driven primarily by private consumption and private investment. Lower energy prices and slower wage growth are expected to support inflation stabilisation around the 2 percent target, while the external current account deficit is forecast to narrow gradually as global demand improves.
However, the outlook remains subject to significant downside risks. The IMF cautioned that growth could weaken further due to prolonged global uncertainty, higher trade barriers or tighter financial conditions. Supply-chain disruptions could reignite inflationary pressures, while implementation challenges may delay fiscal consolidation and structural reforms. Rising risk premia could also worsen public debt dynamics.
In its assessment, the IMF Executive Directors welcomed Belgium’s economic resilience but stressed that sustained fiscal consolidation, combined with well-sequenced and deeper structural reforms, will be critical to reducing vulnerabilities and safeguarding the sustainability of the country’s social model.
Directors acknowledged recent measures taken under the EU economic governance framework and the 2026 fiscal budget to strengthen public finances. However, they noted that rising age-related and defence spending pressures will require additional fiscal adjustment to stabilise public debt and place it on a firm downward trajectory.
The IMF urged the authorities to prioritise further reductions in current spending, improve the efficiency of public investment and social expenditure, and streamline tax expenditures while preserving growth-enhancing investments. Effective implementation of pension reforms and stronger coordination across federal, regional and community governments were also highlighted as essential to achieving durable fiscal consolidation.
On the financial sector, Directors observed that the system remains broadly resilient, although pockets of vulnerability warrant continued close monitoring. They emphasised the need to maintain adequate macroprudential buffers and indicated that a further increase in the countercyclical capital buffer may be required if risks persist. Continued implementation of the 2023 Financial Sector Assessment Program (FSAP) recommendations, including those requiring legislative action, was also encouraged.
The IMF further welcomed progress in tax, pension, labour market and healthcare reforms, stressing that steadfast implementation, alongside additional measures, will be necessary to lift potential growth. Directors called for reforms to boost employment amid population ageing, strengthen productivity and enhance competitiveness, including adjustments to employment protection legislation, stronger active labour market policies and a review of wage-setting mechanisms to better align wage growth with productivity.
They added that deeper integration of the EU single market, advancement of the savings and investment union, and further energy market integration would help strengthen Belgium’s economic resilience.
