Belgium in 2025: A Nation at the Crossroads of Major Economic and Political Reform

New Government Charts Course for Reform

Belgium has successfully formed a new government, bringing stability to the nation and demonstrating its capability to make crucial decisions regarding economic support and public finance improvements. This development has been positively received by financial markets and rating agencies.

Economic Outlook and Challenges

The Belgian economy is projected to grow at a modest 0.8% in 2025, with expectations of a slight increase to 0.9% in 2026, primarily driven by improving external demand. Inflation is expected to decrease to 2.8% in 2025 and further drop to 1.8% in 2026.

The country faces significant challenges, including pressures from an aging population affecting its social model and fiscal deficit. The economic outlook remains uncertain, with risks including potential deepening of geoeconomic fragmentation and adverse energy price developments.

Defense and Security Initiatives

In a significant policy shift, the new Belgian coalition government has announced plans to address the country’s historically deficient defence spending. The nation aims to reach NATO’s 2% spending threshold by 2029, marking an end to what Defence Minister Theo Franken described as a ‘period of national shame’ regarding NATO commitments.

Energy and Climate Policy

In the energy sector, nuclear power is set to regain prominence in Belgium’s energy mix. Following previous reactor restart decisions, the government is now exploring additional reactor restarts and the possibility of constructing two new nuclear plants. Simultaneously, there’s continued focus on offshore wind power and hydrogen development, aimed at ensuring competitive energy prices for industry.

Labor Market Reforms

A key reform targets unemployment benefits, with plans to limit the current indefinite benefit period to two years, marking a significant change in Belgium’s social security system.

Future Outlook

Looking ahead, employment is projected to increase by approximately 263,000 persons, with the employment rate expected to rise from 72.3% in 2024 to 74.7% by 2030. Notably, more than a third of this increase will come from individuals aged 65 and over.