Belgian Economy Flatlines with First Zero Growth Since COVID

The Belgian economy recorded zero growth in the second quarter of 2026, the first quarter of stagnation since the COVID-19 crisis, according to the flash estimate published by the National Bank of Belgium (NBB) on 29 July. The reading marks a significant deceleration from the 0.2% growth recorded in Q1 2026 and signals mounting headwinds for the Belgian economy.

On a year-on-year basis, GDP stood 0.5% higher compared to Q2 2025. The NBB’s full-year forecast remains at 0.6% growth for 2026, contingent on a rebound in the second half of the year.

A Slowdown Long Anticipated

The stagnation came as little surprise to economists. The NBB had been signaling the downturn for weeks, with its Business Echo survey published on 2 June 2026 revealing that business leaders expected a sharp deceleration. The NBB’s Business Cycle Monitor, released shortly after, projected Q2 growth would land between -0.1% and 0.2%, with the most probable outcome around zero.

As Het Laatste Nieuws reported, citing NBB data, the stagnation is the first time since the height of the pandemic in Q2 2020 that Belgian GDP has failed to expand quarter-on-quarter. The Belgian economy had been progressively slowing since early 2024, when quarterly growth stood at 0.4%, before declining quarter by quarter to the current standstill.

Industry and Construction Drag Down Growth

The flash estimate revealed a stark divergence between sectors:

Industry contracted by 0.8%, under structural pressure from weak demand, high energy costs, and global trade uncertainties.
Construction declined by 0.5%, with residential new builds particularly subdued amid high borrowing costs and permitting delays.
Services posted modest growth of 0.2%, driven primarily by ICT and digitalisation-related demand.

According to the NBB’s Business Echo survey, business leaders identified several factors behind the slowdown: a fragile and uneven demand environment, renewed geopolitical uncertainty stemming from conflicts in the Middle East and trade disruptions linked to US tariffs, and a sharp rise in energy prices squeezing profit margins. Labour market cooling was also noted, with firms exercising greater caution in hiring and relying more on natural attrition, though shortages persist for technical and specialised occupations.

Budget Pressures Intensify

The economic stagnation compounds Belgium’s already significant fiscal challenges. In June 2026, NBB Governor Pierre Wunsch warned that without intervention, the budget deficit could reach 5.7% of GDP by 2028.

“Yes, especially in the second quarter you see growth fall back to almost zero,” Wunsch told VRT NWS on 12 June. “But according to current projections, it will pick up again afterwards.”

Wunsch estimated the government needs to find approximately €13 billion in savings or additional revenue to put the deficit on a sustainable path. He noted that the “desalarisation” of the workforce — the shift of workers to management company structures rather than salaried employment — is eroding the tax base. Lower growth further reduces tax revenues while expenditure pressures from defence, an aging population, and rising debt service costs continue to mount.

Consumer Confidence Wanes

Consumer confidence has deteriorated markedly in recent months, according to the NBB’s analysis. The indicator reached a four-year high in January 2026 but has since fallen back below its long-term average, with expectations around unemployment worsening sharply and willingness to make major purchases dropping to levels last seen during the 2022 energy crisis.

As 21 News reported, the NBB’s Business Cycle Monitor highlighted that household consumption — which had grown by 0.6% in Q1 — is expected to slow markedly in Q2, weighed down by renewed energy price pressures and the impact of government reforms on purchasing power.

Outlook and Risks

The NBB projects a moderate recovery in the second half of 2026, with full-year GDP growth of 0.6%, followed by 1.1% in 2027 and 1.3% in 2028, assuming no major external shocks. However, this outlook depends heavily on geopolitical stability, energy price trajectories, and whether business investment and consumer confidence rebound.

For now, the Belgian economy finds itself at a critical juncture. The return of zero growth after six years of — albeit modest — expansion raises questions about whether the current soft patch will prove temporary or marks the beginning of a more prolonged period of economic weakness, particularly given the structural headwinds facing the country’s manufacturing base and public finances.