January 2009

Economic Profile - Belgium

Capital: Brussels
Currency: Euro (EUR)
Language: Dutch, French, German

Key Data	2006	2007	2008
Population (millions)	10.6	10.6	10.6
GDP (USD billions)	$400.3	$458.4	$513.4
Per capita GDP (USD)	$37,764	$51,736	$48,434
Real Growth in GDP	1.1	1.2	1.1
Inflation (CPI)	2.3	1.8	4.6
Exchange Rate (1 USD= ... €)	0.79	0.73	0.68
Exchange Rate (1 CAD = ...€)**	0.70	0.68	0.64
Current Account (GDP)	3.2	-1.0	-1.4
Fiscal Balance/GDP	0.3	-0.2	-0.8
Lending interest rates	7.5	8.6	8.0

**Source : Bank of Canada

Source : Economist Intelligence Unit Country Report - December 2008

Key Economic Trends

Since last elections in June 2007, Belgium went through a series of political crises which have not been favourable both in terms of domestic economy and on international level as the risks of instability discouraged foreign investors. With the recent appointment of a new Prime Minister, end of 2008, the political context changed and finally regained the necessary serenity allowing the Belgian government to tackle urgent issues in terms of politics, economy and social matters.

The Belgian economy, as the whole of global economy, has indeed been exposed to the negative impacts of the global financial crisis and showed, during the last two semesters, a slowdown of the activity in all sectors. Many companies go bankrupt. Flanders, which is traditionally more reactive to economic conditions fluctuations than other Belgian regions, experiences a bigger increase of its employment rate (than other Belgian regions). Important to note is the fact that subject unemployment rate was near to zero until recently. The Belgian Parliament issued a report on the first effects of the crisis. (PDF Version).

The Bureau du Plan produces the following analysis: 'Next year, Belgian GDB growth should amount to 1.2 % in volume (against 1.6 % in 2008). The trimestrial economic growth should be near zero in the last term of 2008 and then move upwards again to reach 0.5% in the second semester of 2009. This slowdown of the Belgian economic growth can be explained by a downturn of both exports and domestic demand. The exports growth, which was slowed down by the international downturn, should reach 2.9% this year. Given the recent Euro depreciation, exports should increase by 3% in 2009, this despite the slackening of external prospects increase. As regards domestic demand, it should decrease from 2.7% in 2008 to 1.1 % in 2009 under the effect of private consumption and investment. In 2008, the national employment should have increased by an average 68,500 units. In 2009, job creations should not exceed 27,900 units due to the economic slow down. The harmonized unemployment rate (as defined by Eurostat) should consequently increase from 6.8% in 2008 to 6.9% in 2009 (against 7.5% in 2007). Inflation, when measured based on the National Consumption Prices Index, should amount to respectively 4.7% in 2008 and 2.7% in 2009.'

Bureau du Plan also forecasts the following trends (in French only) for the Belgian economy in 2008-2013.

Source: Bureau du Plan and Canadian Embassy to Belgium, January 2009

Economic Structure

This modern, private-enterprise economy has capitalized on its central geographic location (the hearth of Europe), its highly developed transport network, and very diversified industrial and commercial fabric. It often presents itself as the entry gate to the European market. The port of Antwerp is indeed one of the leading ports in the world. Industry is now concentrated mainly in the populous Flemish area (north of Belgium), the south of Belgium having experienced sort of an industrial decline in the past decades. But in all regions of the countries, high level universities lead to the creation of highly dynamic spin offs of worldwide reputation. High tech sectors are blooming and Belgian expertise is well known in these areas. With few natural resources, Belgium must import substantial quantities of raw materials and export a large volume of manufactured goods, making its economy highly dependent on the state of world markets. Roughly three-quarters of its trade is with other EU countries. Public dept is high. On the positive side, the government has succeeded in balancing its budget and income distribution is relatively equal. Belgium joined the Euro zone in january 2002. Economic growth, which had moderately recovered in 2004-2007, dropped again in 2008 due to the current global economic context and this trend will most probably be confirmed in 2009 due, among other factors to falling consumer and business confidence and an above average inflation rate.

GDP by sector	agriculture: 1.0% industry: 24.2% services: 74.9%	Key Imports	mineral fuels, motor vehicles, pharmaceuticals and chemicals, machinery and equipment, diamonds, foodstuffs
Major Industries	engineering and metal products, motor vehicle assembly, transportation equipment, scientific instruments, processed food and beverages, chemicals, basic metals, textiles, glass, petroleum	Major export destinations	Germany 20.10%, France 17.28%, Netherlands 12.29%, UK 7.25%, Italy 4.79%, US 4.74% (2008)
Key Exports	motor vehicles, pharmaceuticals and chemicals, mineral fuels, machinery and equipment, diamonds, metals and metal products, foodstuffs	Major import sources	Netherlands 19.72%, Germany 17.13%, France 10.99%, UK 5.74%, US 5.34%, China 4.06% (2008)

Source: World Trade Atlas (Eurostat) and
CIA World Factbook, January 2009 http://www.cia.gov

Economic Policies

The Belgian new government, with PM Van Rompuy, is committed to implementing the policies and priorities established by the outgoing government Leterme. One of the first tasks will be to implement the economic recovery package agreed on December 11th, 2008. The package may be subdivided into two main parts, the first one focussing on the inter-professional accords between trade unions and employers in an attempt to achieve wage moderation in2009-10, the second one providing a strategy for stimulating the economy through some measures to encourage lending, boost purchasing power, support public investment and provide export credit support. After having taken urgency measures to rescue major local banks (Fortis, Dexia and KBC), the government now focusing on further measures to shore up the whole of the banking sector. On October 10th it increased its guarantee of savings deposits from €20,000 to €100,000, in line with increases in several other EU member states. Belgium also announced its intention to create a "bad bank" which would concentrate all of the banking sector’s toxic assets in order to restore some financial investors confidence.

Source : *Economist Intelligence Unit, Belgium Country Report Update (Feb 2009)

An Open Economy

Belgium is the third most open economy in the EU (after Luxembourg and Ireland), based on value of exports and imports relative to GDP. It also is one of the most open in the world. Main reason for that is Belgium’s high economic integration and interdependence with its three main neighbouring countries (Germany, France and the Netherlands).Nearly one-half of all Belgian trade in goods is with neighbouring countries, while, on a more general level, slightly more than three-quarters is with the whole of other members of the EU.The Belgian economy was one of the first in Europe to industrialise. It built up considerable strengths in the coal, textile, steel and heavy-engineering sectors, and the industrial structure in once-thriving Wallonia is still affected by the legacy of this development. In parts of Wallonia, the decline of these first generation industries has been only partly offset by the growth of new industrial sectors and of the services sector. But some regions of the South of the country build on a strong university base to foster clusters in aerospace, biomedical, pharmaceutical, space and environmental technologies and, hence doing, are more successful. Important to note also is that thanks to linguistic and cultural affinities, there are many linkages to Quebec. In contrast, Flanders, which is now more prosperous than Wallonia, has been successful in developing a more modern industrial base (automotive, e-business & telecom, life sciences, logistics, multimedia and petrochemichals) and in attracting high-technology investment. In terms of the number of workers employed in high-tech and research-intensive industries, Flanders is the third-most-advanced region in the EU and Belgium has the largest petrochemical complex in the world outside of Houston, not to speak about the importance of the Port of Antwerp as a major entry gate to the EU. As regards Foreign investment, from the 1950s to the 1970s, US companies favoured Belgium as a base for investment in European operations. Since then, French and Dutch companies also invested in Belgium. As a consequence, much of Belgian manufacturing has long been dominated by foreign companies. Since the mid-1990s, a new wave of mergers and acquisitions, in particular with French and Dutch companies, has had a substantial impact on the financial services sector.

Among most successful companies, are: petrochemical groups (Exxonmobil, PetroFina), the Belgian-Brazilian Anbev (breweries), CBR Cimenterie and Umicore (raw materials), pharmaceutical and chemical companies (Janssen Pharmaceutica, GSK Biologicals, UCB, Solvay, Omega Pharma), energy distribution companies (Electrabel, Suez-Tractebel), fix and mobile telecom companies (Proximus Belgacom Mobile, Mobistar), retail chains companies (Colruyt, Delhaize, Carrefour), financial groups (KBC, ING), Bekaert (metals and advanced materials), Barco and Agfa-Gevaert (imaging)... More information on the following web site: www.trendstop.be

Source : Economist Intelligence Unit, Belgium Country Profile (Dec 2008)

Trade Agreements and Canadian Trade with Belgium

• Membership in trade agreements and other multilateral or trade agreements.
• As a member of the European Union (EU), Belgium is part of the European common market. Belgium is a member of the World Trade Organization (WTO) and of the Organization for Economic Co-operation and Development (OECD).
  
• Main Canadian exports to Belgium; sectors, products and services.
• Canadian exports to Belgium were CAD 2.97 billion in 2007, making Belgium Canada’s 11th largest export market (its 6th largest in the EU). Compared with 2006, this represents an increase of over 23%. The main export products include gemstones/diamonds and ore, oleaginous seeds and fruits, cereals, and nickel. It is important to note that the port of Antwerp is a major point of entry for Canadian goods in Europe. Belgium also serves as a point of entry to Europe as 75% of Belgium’s trade is conducted with its European Union (EU) partners.
  
• Main Canadian imports from Belgium; sectors, products and services.
  That same year, Belgian exports to Canada reached CAD 2.35 billion, ranking Belgium 23rd (and 7th for the EU) among the main countries exporting to Canada. Compared with 2006, this represents an increase of 20%. The main products exported to Canada are pharmaceuticals, fuels and mineral oils, automobiles, beverages and machinery.
  
• Canadian Investments in Belgium/Luxembourg and Belgian/Luxembourg Investment in Canada
  Canadian investments in Belgium reached CAD 2.59 billion in 2007, making Belgium the 8th most favoured destination for Canadian investment in Europe (and the 21st worldwide). That same year, direct Belgian investments in Canada reached CAD 2.3 billion. Belgium thus ranks 7th in Europe and 15th worldwide among Canada’s main foreign investors. The Belgian sectors in which Canada invests the most are ICTs, plastics, chemicals, industrial materials and services. For its part, Belgium invests primarily in the following sectors: plastics, chemicals and new materials, ICTs, consumer goods, and construction products. If we include the Grand-Duchy of Luxembourg in the equation, this ranks the Belgium-Luxembourg pair as Canada’s 9th largest investor, just after Germany, with a total of CAD 9.3 billion in combined investment in Canada in 2007. There are over 70 Belgian subsidiaries in Canada and about the same number of Canadian subsidiaries in Belgium.

Source : Industry Canada Trade Data Online Stats and World Trade Atlas Stats

Synergies and opportunities

Canada and Belgium enjoy good collaborative relations in science and technology, mostly based on similar approaches to development and synergies in a range of sectors, including biotech, aeronautics and aerospace, microelectronics, multimedia and new media, ICT applications and environmental techniques. Numerous cooperative agreements have been signed in this area between the three Belgian regions and the provinces of Quebec, Ontario and Alberta.

Source: Canadian Embassy to Belgium, January 2009

Additional sources of economic information in Belgium:

• World Bank: http://www.worldbank.org
• OECD: http://www.oecd.org/home/
• IMF: http://www.imf.org/
• Belgium (Administration of the Treasury): http://treasury.fgov.be/interthes/
• Belgium (Foreign Affairs): http://www.diplomatie.be
• Statistics Belgium (general): http://statbel.fgov.be/
• Belgium Ministry of Economy: http://www.mineco.fgov.be/
• Bureau du Plan: http://www.plan.be