Economic studies
Belgium

Belgium

Population 11.4 million
GDP per capita 46,696 US$
A2
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Synthesis

major macro economic indicators

  2017 2018 2019 (e) 2020 (f)
GDP growth (%) 2.0 1.5 1.2 1.2
Inflation (yearly average, %) 2.2 2.3 1.3 1.3
Budget balance (% GDP) -0.8 -0.7 -1.3 -1.4
Current account balance (% GDP) 1.2 -1.0 -0.9 -1.0
Public debt (% GDP) 101.8 100.0 99.3 99.1

 

(e): Estimate. (f): Forecast.

STRENGTHS

  • Optimal location between the United Kingdom, Germany and France
  • Presence of European institutions, international organisations and global groups
  • Ports of Antwerp (second-largest in Europe) and Zeebrugge, canals, motorways
  • Well-trained workforce through vocational education, multilingualism

WEAKNESSES

  • Political and financial tensions between Flanders and Wallonia
  • Complex institutional structure and multiple administrative levels
  • Highly dependent on the Western European economy (exports of goods and services = 84% of GDP)
  • Exports concentrated on intermediate products
  • High structural unemployment
  • Heavy public debt
  • Tight housing market
  • Saturated transport infrastructure

RISK ASSESSMENT

Growth to hold up in 2020 thanks to household consumption

Growth is expected to be resilient in 2020, supported by strong domestic demand, particularly household consumption, which is set to accelerate amid low unemployment (5.5% in August 2019) and resulting wage increase. Household disposable income, which has been supported since 2016 by a phased-in reduction in income tax through changes to tax brackets conducted as part of a “tax shift”, will get a final boost as the 40% bracket is widened at the expense of the 45% bracket. However, consumption may be curbed, to the benefit of savings, if household confidence continues to deteriorate in 2020. While production constraints remain high (81% capacity utilisation rate in the third quarter of 2019), the reduction in the corporate tax rate from 29.58% to 25% will only partially translate into an increase in investment, due to the unfavourable European economic situation and waning business confidence. In addition, the impasse in the negotiations to form a government following the May 2019 federal parliamentary elections, precludes any new measures and has forced the caretaker government to repeat the 2019 budget. However, resilient domestic demand should make it possible to offset the difficulties caused by the unsupportive international environment. In a context of weak growth among the main Eurozone partners, particularly Germany (18% of total exports), exports will continue to cool. At the same time, with strong household consumption driving imports, the contribution of foreign trade may even turn negative in 2020.

 

A budget conditional on the formation of a new government

Pending the formation of a new government, the caretaker government operates using only a budget based on monthly tranches, each of which is one-twelfth of the 2019 budget. However, after widening significantly in 2019, the government deficit will continue to deteriorate, due to further corporate and income tax cuts planned in the last phase of the tax shift. Resilient economic activity and low unemployment will contribute to revenues, but not enough to prevent a deterioration in public finances in 2020. Accordingly, in the absence of a new government and fiscal corrections, which the European Commission requested in October 2019, public debt will decline slowly, thanks to very low interest rates, while remaining very high.

In addition, the current account will remain in deficit in 2020, reflecting the deterioration in the trade balance. After a three-year hiatus, the goods balance has been in deficit again since 2018. Meanwhile, the services surplus has evaporated since 2010, mainly due to the growing deficit in business services (consulting, R&D). In addition, the income deficit has widened steadily in recent years, in line with the growing gap between dividends from foreign investments in the country and the much lower dividends from Belgian investments abroad. However, as during the last two years, foreign investment should comfortably be able to finance the resulting current account deficit.

 

An impossible coalition?

Following the resignation of Prime Minister Charles Michel in December 2018 due to the departure of the Flemish Nationalists (N-VA) from the governing coalition, the triple elections (federal, regional and European legislative elections) held in May 2019 left the country with an even more fragmented political landscape. All the major political parties emerged from the elections weakened. While the N-VA won only 25 seats out of 150 in the Chamber of Deputies (down 8 seats), this did not benefit any of the other main parties, namely the leftist Socialist Party (PS, French-speaking, 20 seats, down 3), the prime minister’s Reformist Movement (centre-right, French-speaking 14 seats, down 6), the Flemish Christian Democrats (12 seats, down 6) and the Liberals (Dutch-speaking, 12 seats, down 2). However, parties at both ends of the political spectrum, namely the PTB (far left, unitary) and, above all, the VB (extreme right-wing, separatist), recorded huge surges, climbing from 2 to 12 seats and from 3 to 18 seats respectively. Early January 2020, after the failure of the negotiations between the N-VA and the PS, special advisors commissioned by the king to identify possible coalitions to form a government were not ruling out any configuration between all the parties sitting in the Chamber of Deputies, with the exception of the PTB and the VB, but had still not found a way out of the crisis. As a result, the country is heading towards new elections or, failing that, a potential new record, beating the 541 days spent without a government in 2010/2011. Whatever the king's decision, political instability seems destined to continue, as the landscape is so fragmented and that there is also a growing divergence between Flanders, which is leaning increasingly towards the right, and Wallonia, which is moving left.

 

 

 

Last update : February 2020

Payment

Bank transfers (SEPA & SWIFT) and electronic payments are the most frequently used methods of payment for businesses.

Cheques are seldom used and only in certain sectors (e.g. transport, fruit and vegetable wholesale). As cheques no longer benefit from a guarantee from the issuing bank, the cheque issuer’s account needs to contain sufficient funds in order to be for the cheque to be cashed. Issuing a cheque with insufficient funds is a criminal offence.

Bills of exchange are no longer used for payment in Belgium, except in certain sectors and in international transactions.

Payment defaults are no longer recorded in the Moniteur belge (MB, Belgian Official Journal), but they can be consulted on the National Chamber of Bailiffs’ website, where data is available to banks and professional organisations.

Debt Collection

Amicable phase

There are no special provisions for out-of-court debt recoveries between businesses. Creditors should attempt to gain payment from debtors by sending written reminders. Before beginning legal action against a debtor company, it is often worthwhile asking a lawyer to check the database of seizures.

 

Legal proceedings

Judgments are normally delivered within 30 days after closure of the hearings. A judgment is rendered by default in cases where debtors are neither present nor represented during the proceedings.

Fast track proceedings

This procedure is rarely used in business-to-business cases, and cannot be implemented when the debt is disputed. A 2016 law implemented a new set of procedural rules, creating an out-of-court administrative procedure for non-disputed debts. When an order of payment has been issued, the debtor has a month to pay the amount. If the debtor refuses, the creditor can request a bailiff to issue a writ of execution. Moreover, under the new rules, lodging an appeal against a judgment will no longer suspend the enforceability of this judgment. Consequently, even if the debtor starts appeal proceedings, the creditor will be able to pursue the recovery of the debt.

 

Retention of title clause

This is a contractual provision stipulating that the seller retains title of goods until receipt of full payment from the buyer. Unpaid creditors can make claims on goods in the debtor’s possession. It therefore follows that the retention of title clause is enforceable in all situations where creditors bear losses arising from insolvencies, whatever the nature of the underlying contract. When goods sold under retention of title are converted into a claim (after a sale), the seller-owner’s rights referring to this claim (the selling price) are known as real subrogation.

 

Ordinary proceedings before the commercial court

All disputes between companies can be tried by the Commercial Court in Belgium. In cases of cross-border claims using European legislation, a European execution for payment proceedings can be enabled. Claimants also have recourse to European small claims proceedings.

 

Summon on the merits

The bailiff assigns the debtor a court date for the introduction of the case. If discussions do not take place, judgement will follow within four to six weeks. If there are discussions pending, parties need to put their intentions in written conclusions. After judgement, there is a possibility to appeal – if no appeal is filed, the execution will follow through the bailiff.

 

Attachment procedure

This judicial proceeding is conducted for the benefit of only one party (ex parte). There are three essential conditions to proceed with an attachment:

  • urgency of the measure;
  • prior authorisation of the judge is required to lay a conservatory attachment;
  • the debt must be certain, collectable and liquid.

A debtor may request the cancellation of the attachment if it has been unjustly imposed. However, once an attachment has been imposed, it remains valid for a period of three years. Subsequently, a conservatory attachment may be transformed into an execution order.

 

Enforcement of a Legal Decision

A judgment becomes enforceable once all venues of have been exhausted. If the debtor refuses to execute payment, a bailiff can attach the debtor’s assets or obtain payment through a third party (Direct Action).

Foreign awards can be recognised and enforced in Belgium, provided that various criteria are met. The outcome will vary depending on whether the award is rendered in an EU country (in which case it will benefit from particularly advantageous enforcement conditions), or a non-EU country (for which normal exequatur procedures are applied).

Insolvency Proceedings

Bankruptcy proceedings

Debtors can file for bankruptcy when they have ceased making payments for some time, or when the creditor’s confidence has been lost. If bankruptcy is granted, creditors must register their claims within the time prescribed in the court’s insolvency declaration. Failure to do so on the part of a creditor will result in the cancellation of their priority rights. The court then appoints a trustee, or official receiver, to verify the claims. The retention of title clause can be cited by the creditor, in order to claim his property.

Since 2017, submissions of claims where bankruptcy procedures are involved must be made electronically, via the Central Solvency Register (www.regsol.be), which records all bankruptcies over the last 30 years.

 

Judicial restructuring process

The judicial restructuring process (reorganisation judiciaire), designed to reorganise a company’s debts with its creditors, can be granted by the court upon request of any debtor facing financial difficulties that threaten its continued business in the short- or medium-term. The debtor makes a reasoned application to the Registry of the Commercial Court in order to be granted an extended period to pay the debt. This extended period is normally set at six months, during which the debtor must propose a reorganisation plan to all of its creditors.

Outstanding creditors (those whose claims arose before the commencement of the extended period) cannot begin any execution procedure for the sale of real or personal property of the debtor, but can request enforcement of their retention of title clause. Nevertheless, the extended period does not prevent the debtor from making voluntary payments to any the outstanding creditors. In addition, the extended period does not benefit co-debtors and guarantors, who are still required to meet their commitments.

Insolvency trend Belgium
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