The new government has great ambitions on the socio-economic level. But it is beginning its mandate in the context of the resurgence of the Covid-pandemic. Its first decisions are therefore focused on the health situation. Economic growth in Belgium is set to be hit hard by the COVID-19 outbreak in 2020 but should rebound strongly in 2021.
Coronavirus strongly affects Belgian economy due to international chain reaction and weakening confidence. With the sharp rise in the number of infections in Europe, the coronavirus crisis has taken a new turn in recent days. A precise estimation of its economic impact remains very difficult due to the great uncertainty about the further spread of the virus. But now that the virus is beginning to have more and more visible effects on financial markets and the real economy, it is becoming clear that the economic impact will be much greater than initially estimated.
The new federal government, which took office a month ago, has agreed on an agenda for “a united, prosperous and secure country”. Given that the new government brings together four political families (Socialists, Liberals, Greens and Christian democrats), the government’s programme reflects the many themes of these different families.
On the economic front, the will to support the economic recovery through investment is highlighted, with tax reductions for companies that invest, but also with the ambition to increase public investment to 4% of GDP by 2030 (currently 2.6%). These investments should revolve around mobility, digitalization and sustainable development. These last two themes are central to the agreement, and are fully aligned with the objectives of the European recovery plan.
In terms of the labour market, the new government is committed to raising the activity rate of 25-64 year olds from 77.2% today to 80% in 2030. However, the agreement does not detail what measures will be taken to achieve this. Given that Belgium is mainly characterized by a very low activity rate among 55-64 year olds, it is on this category of people that measures will essentially have to be taken.
Brussels Airport is preparing, as Europe’s No. 1 pharmaceutical hub, for the fast and safe transport of billions of doses all over the world
Consequences for Belgium
Belgium is vulnerable, both on the supply and the demand side. As a small open economy, the country obviously cannot escape the consequences of the coronavirus. The Belgian economy is highly integrated in global supply chains which are disrupted by the virus outbreak. More specifically, Belgium’s strong ties with Germany pose major risks in this respect.
Moreover, Belgium has the second largest port in Europe and many international companies, including logistics groups, are active there. If economic activity slows down elsewhere, this will quickly seep through to the Belgian economy. Belgium is one of the European countries where a global demand shock for service activities, as it is currently occurring, has the heaviest impact.
Serious but not dramatic
Quantifying precisely the impact of the virus outbreak on the Belgian economy remains difficult. After all, the final effect will strongly depend on the extent to which the virus will continue to spread. For the time being, consistent with different scenario for the euro zone, the impact will be serious, but not dramatic. Specifically, a negative impact on growth in the first and second quarters: in both quarters real GDP growth is no more than 0.1% quarter-on-quarter. In short, even if the situation is not (yet) comparable to the one in March, the fourth quarter is likely to be marked by further stoppages in certain sectors, and thus by a slowing economy again. What happens in the next two months in terms of contaminations will be crucial. Depending on the new measures to be taken, we do not rule out revising our growth forecast for the fourth quarter downwards. It could even become negative.
Brussels Airport Largest European Pharmaceutical Hub
While pharmaceutical companies are working feverishly on the development of COVID-19 vaccines, Brussels Airport is preparing, as Europe’s No. 1 pharmaceutical hub, for the fast and safe transport of billions of doses all over the world. Of all European airports, Brussels Airport has the most adequate equipment for large-scale distribution: self-developed mobile cool boxes on batteries and solar panels, high-tech containers and no less than 30,000m² of temperature-controlled storage space. However, given the volumes to be produced and the specific transport conditions, which may be different for each vaccine, the question arises as to whether the available flight capacity will suffice. Finally, some figures that speak for themselves. 25 of the 100 logistics companies at Brussels Airport specialise in the treatment of medicines and vaccines. Pharmaceutical transport has grown by 85% since 2016 and now accounts for 8% of Brussels Airport’s total air freight, far outstripping all other European airports.