Belgian Economy’S Openness Is Reflected Through Its Integration Into the European Union As Well As Through Its Growing Focus on the Markets Outside the European Union
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27 January 2017 Edition – Analysis up to January 13 Belgium’s economy in a nutshell Introduction Belgium is one of the six founding countries of the European Union. Located in the heart of Western Europe, its position undoubtedly constitutes a key aspect of its economy and its capital, Brussels, is home to a large number of European and international institutions. With a surface area of 31,000 km² and 11 million inhabitants, Belgium, along with the Netherlands, has the highest population density in Europe. Belgium is divided into three Regions: the Brussels-Capital Region, Flanders and Wallonia. Its population is also broken down into three language groups (Dutch, French and German) and therefore Belgium has also three communities: the Flemish Community, the French Community and the German-speaking Community. The communication infrastructure is highly developed across the country in terms of major roads, railways, waterways, international airports (Brussels, Liege, Charleroi, Ostend, Antwerp and Courtrai) and sea ports (Antwerp, Zeebrugge, Ghent and Ostend). Belgium has one of the most developed “broadband” telecommunication networks in Europe. Furthermore, Belgium is among the top 25 most competitive nations according to the Institute for Management Development (IMD World Competitiveness Yearbook 2016 Results1) and is ranked 17th according to the World Economic Forum (Global Competitiveness Report 2016–20172). Belgium has land resources and a highly-qualified workforce. It is a quintessential “small open economy”: “small”, with a gross domestic product (GDP) of 410.3 billion euro in 2015, accounting for 3% of the total GDP of the European Union and “open” with a level of openness3 of 82% in 2015. The Belgian economy’s openness is reflected through its integration into the European Union as well as through its growing focus on the markets outside the European Union. From 2008 to 2012, the Belgian share of international trade has increased with countries outside the European Union at the expense of the internal market trade, for both exports and imports. This has been an ongoing trend for imports since then while for exports, this share has decreased both inside and outside the EU. Table 1 Share of exports and imports (Belgium, in %) 2008 2009 2010 2011 2012 2013 2014 2015 Share of exports Intra EU-28 9,0 9,1 8,8 8,7 8,6 8,7 8,6 8,4 (Belgium in EU-28) Extra-EU-28 5,6 5,9 6,1 6,2 6,2 6,1 6,1 5,6 Share of imports Intra EU-28 8,3 8,3 8,2 8,2 8,3 8,2 7,8 7,1 (Belgium in EU-28) Extra EU-28 6,0 6,1 6,0 6,3 6,2 6,8 7,1 7,3 Source : Eurostat 1 http://www.imd.org/wcc/news-wcy-ranking/ 2 https://www.weforum.org/reports/the-global-competitiveness-report-2016-2017-1 3Average value of its imports and exports of goods and services divided by GDP, multiplied by 100 FPS Economy - DG E4 – Economics Division – Analysis and Economic Forecasting Service Page 1 27 January 2017 Edition – Analysis up to January 13 The Belgian economy, just like any modern industrialized economy, is characterized by the growing importance of services: the share of trade services in the total gross value added represented 54.5% in 2015 (including wholesale and retail), while this share amounted to 14.3% for industry (including energy) and 5.4% for construction. The balance is distributed between non-market services (including healthcare) and agriculture. Despite its more limited size than before, the manufacturing industry is still key to the Belgian economy because, in addition to the fact that it generates a large share of trade services, it also generates strong domestic wealth by satisfying foreign demand for Belgian exports. The strong sectors of the Belgian industry are the chemical industry (17% of the total manufacturing value added), the food industries (15%), the manufacture of basic metals and fabricated metal products (12%) and the pharmaceutical industry (11%). Fig 1 : Breakdown of the Belgian industry in 2015 (gross value added as a % share of total industry) Source: National accounts institute (NAI) According to European structural indicators, Belgium’s GDP per capita, expressed in purchasing power standards, amounted to 119 in 2015 compared to the EU-28 average set equal to 100 and was not far from 120, its best performance over the last 10 years. Belgium is one of the richest countries in Europe, just behind Germany4. The openness of the Belgian economy and its membership to a single monetary zone justify a generally moderate inflation rate. Nonetheless, inflation has risen quicker compared to its main trade partners (France, Germany and the Netherlands) since various years. 4 http://donnees.banquemondiale.org/indicateur/NY.GDP.PCAP.CD FPS Economy - DG E4 – Economics Division – Analysis and Economic Forecasting Service Page 2 27 January 2017 Edition – Analysis up to January 13 1. Gross Domestic Product Belgium has experienced moderate economic growth in 2015. GDP increased by 1.5% (compared to 1.7% in 2014) supported by a turnaround observed in the construction and in the industry. The rebound of business investment (mainly in 2014) and the rise of household consumption expenditures increased domestic demand and hence rekindled economic activity. Foreign trade has proved to be more dynamic in 2015 than in 2014 while net exports of goods and services stabilizing in 2015. Economic activity in the third quarter of 2016 expanded by 0.2% compared to the previous quarter and by 1.3%5 on an annual basis. The value added increased in all the activity sectors and GDP growth was supported by domestic expenditures (consumer) and external demand. The net exports of goods and services were positive for the fourth consecutive quarter. As far as the Eurozone is concerned, the GDP growth has accelerated in 2015 reaching 2.0% compared to 1.2% in 2014. The GDP growth reached at 1.6% in the third quarter 2016 (yoy). Member States located in Eastern Europe have experienced improved growth performance over the past three years. Fig. 2: GDP development (index and annual growth rate) Source: Eurostat 5 https://www.nbb.be/doc/dq/f/dq3/histo/nfat16iii.pdf FPS Economy - DG E4 – Economics Division – Analysis and Economic Forecasting Service Page 3 27 January 2017 Edition – Analysis up to January 13 2. Foreign Trade – Overview of Trade Flows The share of the EU as a whole (EU28) in the world trade exports has slightly decreased between 2008 and 2014, as a direct consequence of the growing importance of China. Indeed, its share grew by one third during the same period of time, from 12.4% in 2008 to 16.5% in 2014. However, in recent years the share of the EU28 in world trade exports remained quite stable. The share of the United States followed the same pattern. Table 2: Share of national exports in world exports (%) 2008 2009 2010 2011 2012 2013 2014 EU - 28 16.6% 17.1% 16.0% 15.9% 15.5% 16.3% 15.9% USA 11.2% 11.8% 11.4% 10.9% 11.1% 11.1% 11.4% China 12.4% 13.5% 14.0% 14.0% 14.7% 15.6% 16.5% Japan 6.8% 6.5% 6.9% 6.1% 5.7% 5.0% 4.9% India 1.6% 2.0% 2.0% 2.2% 2.1% 2.4% 2.2% Source: Eurostat The European Union is the first destination of Belgian exports representing 70.8% of total Belgian exports in 2015. This share grew moderately between 2011 and 2015, similar to the USA, but contrary to what can be observed for other European countries and Asia (and more precisely China). TableTotal 3: T Belgianhe share Exportsof Belgian - exportsClassification going to bythe areamain areas 2011 2012 2013 2014 2015 World (all entities) 100% 100% 100% 100% 100% European Union 70.0% 69.5% 69.7% 70.0% 70.8% Other European countries 5.8% 5.7% 5.7% 5.0% 4.3% Africa 2.7% 2.8% 2.9% 2.9% 2.9% America 6.6% 7.3% 7.0% 7.1% 7.9% United States 4.4% 5.0% 4.3% 4.8% 5.6% Asia 12.5% 12.3% 12.1% 12.6% 12.1% China 2.4% 2.4% 2.3% 2.3% 2.0% India 3.2% 3.2% 3.1% 3.4% 3.1% Japan 0.9% 0.8% 0.8% 0.8% 0.8% Australia and Oceania 0.6% 0.5% 0.5% 0.5% 0.5% Other 1.9% 1.9% 2.0% 1.8% 1.5% Source: National Accounts Institute (NAI) FPS Economy - DG E4 – Economics Division – Analysis and Economic Forecasting Service Page 4 27 January 2017 Edition – Analysis up to January 13 In 2015, there were four main sectors that dominated the total exports of Belgium. These were chemical products (17.5%), vehicles and transport equipment (11.8%), machinery and equipment (11.5%) and mineral products (9.4%). Together, those four sectors represented more than the half of all Belgian exports. Fig.3: Breakdown of Belgian exports in 2015 Source: National Accounts Institute (NAI) FPS Economy - DG E4 – Economics Division – Analysis and Economic Forecasting Service Page 5 27 January 2017 Edition – Analysis up to January 13 3. Industrial Production In Belgium, the industrial production is well above its pre-crisis level, in contrast to what can be observed for the European Union or the Eurozone (the fall in activity in some sectors raises question in terms of market positioning, innovation or competitiveness). To put a halt to the deindustrialization, the European Commission wanted to increase the share of the EU industry in GDP to 20% by 2020, compared with less than 16% registered in 20136.