IMF Concludes 2026 Article IV Review With Belgium

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Belgium. [1] The authorities have consented to the publication of the Staff Report prepared for this consultation.

Economic activity has remained solid amid shocks and heightened uncertainty. Growth decelerated to 1.1 percent in 2024 and is expected at 1.1 percent in 2025. Headline inflation eased, to 2.2 percent y/y at end 2025, but services price inflation has been slower to recede. Labor market performance remains strong but shows signs of softening while the deterioration in labor-cost-competitiveness has halted.

Weaker external demand, geopolitical tensions, and prolonged uncertainty will continue weighing on the outlook, which is subject to important risks. Growth is expected to slow in 2026 but return to its 1.3 percent potential in the medium term, mainly driven by private consumption and private investment. Lower energy costs and slower wage growth should help inflation stabilize around the 2 percent target. The external current account deficit is projected to narrow gradually as external demand recovers over the medium term.

Important risks could worsen the outlook. Growth could be lower due to global and trade uncertainties, higher tariffs, or tighter financial conditions. Supply-chain disruptions could raise inflation, while implementation challenges may hinder much-needed reforms and fiscal consolidation. Risk premia could rise more than expected, and debt dynamics worsen.

Executive Board Assessment [2]

Executive Directors welcomed that the Belgian economy has remained resilient amid successive shocks. Noting significant structural challenges and social and political constraints, Directors emphasized that sustained fiscal consolidation combined with well-sequenced, deeper structural reforms will be essential to reduce vulnerabilities, strengthen fiscal and external balances, and safeguard the sustainability of Belgium's social model.

Directors welcomed the authorities' measures under the EU economic governance framework and in the 2026 fiscal budget aimed at strengthening public finances. They noted rising age-related and defense spending pressures and considered that additional fiscal adjustment is needed to stabilize public debt and place it on a firm downward path. Directors encouraged the authorities to prioritize further reductions in current spending, increase the efficiency of public investment and social spending, and streamline tax expenditures while preserving growth-enhancing investment. Effective implementation of pension reform will also be critical in this regard. Directors concurred that strengthening coordination across federal, regional and community governments would help achieve a durable multi-year consolidation.

Directors noted that the financial sector remains resilient, while pockets of vulnerability warrant continued close monitoring. They emphasized that macroprudential policies should continue to focus on maintaining sufficient buffers and concurred that a further increase in the counter-cyclical capital buffer would be needed if overall risks do not abate. Directors encouraged continued progress in implementing the 2023 FSAP recommendations—including those that require legislative action—and further strengthening the AML/CFT framework.

Directors welcomed recent progress in tax, pension, labor market and healthcare reforms. They emphasized that steadfast implementation of ongoing structural reforms, complemented by additional efforts, is essential to boost potential growth. Directors concurred that further domestic measures are needed to lift employment amid population aging and enhance productivity and competitiveness. In that context, they encouraged the authorities to further amend employment protection legislation, strengthen active labor market policies, and revisit the wage-setting mechanism to better align wage growth with productivity. Deepening the EU single market, advancing the savings and investment union, and integrating the energy market would also strengthen competitiveness and resilience.

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chair of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .