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COUNTRY FOCUS year. While the IMF estimated an overall growth of 2.4 percent, the EU’s Economic forecast for Belgium, last updated in May 2023, outlined growth of 3.2 percent in 2022, a forecast of 1.2 percent for 2023 and a projected rate of 1.4 percent in 2024. In dollar terms, GDP hasn’t grown much (despite peaks and troughs) since 2008 when it stood at $517.33bn; in 2022 it was listed as being $578.6bn. In comparison, GDP more than doubled between 2001 ($236.75bn) and 2008 according to the World Bank. The problem for Belgium is that it is highly exposed to the performance of its main trading partners who, according to Worldtopexports.com – citing May 2023 data – were Germany (21.2 percent of exports), the Netherlands (13.8 percent), France (13.1 percent), the US (5.9 percent) and the UK (5.2 percent). Another ten countries made up the top fifteen countries that generated 78.4 percent of Belgian exports. As for inflation, EU data recorded this as 10.3 percent in 2022, 3.4 percent for 2023 and an estimated 3.5 percent for 2024. The unusually high inflation rate has been attributed to sharp increases of wholesale gas and electricity prices that quickly fed into retail prices. Unemployment in 2022 stood at 5.6 percent, is expected to be 5.8 percent for 2023 and is predicted to drop to 5.7 percent in 2024. A low labour market participation rate could be a problem for Belgium in the coming years; worryingly, unemployment disproportionately affects the young, non-European immigrants and those in Wallonia. The World Bank reckoned that Belgian GDP per capita for 2022 was $49,582.80. In comparison, the World Bank puts Burundi bottom at $238.40, Romania at $15,892.10, Italy at $34,158, the UK at $45,850.40 and Monaco top at $234,317.10. All things are relative. Industry and business sectors A Belgian Government agency, Federal Public Service Economy, noted in its Economic Outlook of May 2022, that the Belgian economy, just like any modern industrialised economy, is characterised by the growing importance of services. It stated that the share of market services (including wholesale and retail, financial activities and insurance) represented 55.4 percent in 2020, compared to only 13.8 percent for industry and 5.3 percent for construction with the rest split between non-market services (including healthcare), energy and agriculture. Stanbic Bank interestingly draws attention to significant discrepancies between the three Belgian regions. Flanders has succeeded in developing the AUTHOR – Adam Bernstein second largest petrochemical industry in the world. Wallonia is in the middle of restructuring, following the closure of its collieries and a large number of steel plants. Brussels distinguishes itself in the areas of telecommunications, software development and the pharmaceutical and automobile industries. It commented that the Belgian economy is largely oriented towards services. In fact, the tertiary sector accounts for 68.8 percent of GDP and employs 78 percent of the active population. The EU in a recent, but undated, EURES post commented that there are few major industrial companies in Belgium. There is steel giant ArcelorMittal, which is based mainly in Wallonia. In Flanders there is a Volvo Cars factory in Ghent, and an Audi factory in the Brussels municipality of Forest. The post added that the top 10 is made up entirely of service businesses in the transport and communications, finance, and distribution/retail sectors. And in backing the data from Stanbic, the EU noted that the service sector is mostly based on commerce, transport and hospitality along with public administration, education and business services: ‘The most common occupations in Belgium are office workers in both the public and private sectors (general duties); shop assistants; home help; maintenance staff in offices, hotels and other businesses; and teachers.’ Chemical, plastics and life sciences The European Chemical Industry Council (Cefic) states that the Belgian chemical sector is worth some €74bn and directly employs 97,400 workers in more than 720 companies with another 220,000 employed indirectly. The sector accounts for more than one third of all Belgian exports, ‘40 percent of the industrial value-added and two thirds of all private investment in research and development.’ Cefic details that the sector is spread out through the country with a chemical cluster at the port of Antwerp which is in turn connected with sub-clusters in the Feluy-Seneffe-Manage triangle, Jemeppesur- Sambre, along the Albert Canal, Tessenderlo, Ghent and elsewhere. Beyond that are life sciences in the Walloon-Brabant province east of Brussels and around Antwerp. Ghent has biotech and medical, industrial and agricultural biotechnology. Plastic and rubber processing is spread across the country. Interestingly, Agro&Chemistry noted, in April 2022, that the sector saw its strongest growth in 20 years and that within the EU, Belgium has even become the second most important exporting country for chemicals, plastics and pharmaceuticals, following Germany. It added that chemistry and life sciences also account for 40 percent of all Belgian patent applications; 982 were filed with the European Patent Office in 2021. Brave | Curious | Resilient / www.cicm.com / October 2023 / PAGE 36
Manufacturing Federal Public Service Economy data for 2020 recorded that the biggest segments within the manufacturing sector were the pharmaceutical industry (20.4 percent of the total value added), food and beverage industry (15.3 percent), chemical industry (15 percent), and basic metals and fabricated metal products (11 percent). In more detail, Federal Public Service Economy noted other elements of the Belgian manufacturing sector included electrical equipment, textiles and leather goods, furniture and machinery equipment, transport equipment, wood and paper products, and computer and optical equipment. Overall, the World Bank reckons that the entire manufacturing sector is worth around $72.95bn which equates to around €66.68bn (at the time of writing). However, that doesn’t quite stack up with data from the Federal Public Service Economy and Cefic. Indeed, the Federal Public Service Economy detailed that (in 2020) pharma and chemicals were worth a collective 35.4 percent of GDP which equates to around €204bn. Agriculture Agricultural activity in Belgium has continued to shrink – both in terms of employment and in its contribution to the GDP. However, it’s key crops are sugar beets, chicory, flax, cereal grains and potatoes. The country also cultivates fruits, vegetables and ornamental plants. Back in 2019 the OECD said that farms were mainly owner operated, but that the share of corporate farms was increasing and had reached 15.8 percent in 2016. Some 44 percent of the land surface of Belgium is cultivated with farmland increasingly concentrated. In 37 years, the average utilised agricultural area per farm holding has more than tripled in Flanders (from 8.4 ha in 1980 to 26.4 ha in 2017) and in Wallonia (from 20.7 ha to 56.6 ha). Livestock farming has become significantly more intense. The problem for the sector, according to FPS Foreign Affairs (April 2022) is that agricultural land is subject to competition from housing, industrial areas and road infrastructure, even in the countryside, which is forcing up land prices. This is why Belgian Common Agricultural Policy (CAP) financial support is aimed at investments in agricultural holdings and the setting up of young farmers. CAP also introduced an obligation on farmers to put into place practices that are good for the environment. Similarly, a Common Fisheries Policy seeks to preserve marine biological COUNTRY FOCUS resources while managing the European Union's fishing fleet – even so, some fish stocks are overexploited; €6.1bn will be given to sustainable fishing and the survival of fishing communities between 2021 and 2027. Tourism in Belgium Statista recently commented that Belgium's accessibility is what makes it a popular travel destination in Europe. It has a coastline, historically interesting cities as well as a decent cuisine. In other words, it has much to offer in the way of attractions and cultural activities for tourists. In 2019, the number of overnight tourist stays in Belgium peaked at approximately 42.5m before understandably declining to around 20m in 2020 following COVID. Some 313,600 people work in the sector – a figure which Statista says is almost identical to the level pre- COVID. The sector was worth €25.9bn in 2022, down 11 percent on 2019’s €29.1bn. However, more recently, in July 2023, the Brussels Times wrote that Belgium's tourism sector clocked a record 51m overnight stays last year, largely in coastal areas and Brussels. The growth, however, was spread unevenly across Belgium with West Flanders seeing over 14m overnight stays, followed by Brussels and Antwerp province at seven million and six million a piece. The Belgian Ardennes's Luxembourg province saw over 4.1m overnight stays. Tax (Corporate) The general rate of corporate income tax (CIT) is levied at a rate of 25 percent. This rate applies to both Belgian companies and Belgian permanent establishments of foreign companies. A reduced rate applies to small and medium-sized enterprises (based on article 1:24 of the Code for Companies and Associations or on article 15 of the old Companies Code, and provided several other conditions are met). Such businesses are able to benefit from a reduced rate of 20 percent on the first €100,000 of profit. A surcharge is due on the final CIT amount upon assessment. The surcharge can be avoided if sufficient advance tax payments are made. Currently, the surcharge is 6.75 percent. There is also a tax of 100 percent that is applicable to so-called ‘secret commissions’ - any expenses where the beneficiary is not identified properly by means of official forms filed with the Belgian tax authorities. Belgium Value Added Tax The standard rate of VAT is 21 percent. However, there is a 12 percent rate that applies almost randomly to phytopharmaceutical products, inner tubes, certain combustible material, margarine, social housing and certain renovation works, and restaurant and catering services. There is also a six percent rate on numerous other supplies such as basic necessities (food and medicines), passenger transport, repair of bicycles, some medical supplies and prostheses, and hotels and camping. Beyond that there is a VAT exemption for supplies that include education, banking, insurance and cultural services. Personal Tax Tax brackets apply to net taxable income after the deduction of social security charges and professional expenses. There are four bands – 25 percent for income under €15,200, 40 percent on income from €15,201 to €26,830, 45 percent on income between €26,831 and €46,440, and 50 percent on income over €46,440. Interest and dividends paid out and collected via Belgian financial institutions are, in principle, subject to a flat-rate tax of 30 percent. Up to €980 can be earned interest free; interest exceeding this amount is subject to 15 percent tax. Dividend payments are exempted for the first €800. Summary On the face of it, Belgium has much to offer British firms. However, while the common thread that holds Belgians together is Europe, as is the case elsewhere, Belgium is a little fractured. Applying some common sense and regional sensitivities to discussions would be a worthwhile move. Adam Bernstein is a freelance finance writer for CM magazine. Brave | Curious | Resilient / www.cicm.com / October 2023 / PAGE 37
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