Belgium has a highly developed high-income mixed economy. The Belgian economy has capitalised on the country's central geographic location, and has a well-developed transport network, and diversified industrial and commercial base. Belgium was the first European country to join the Industrial Revolution in the early 19th century. It has since developed a highly-developed transportation infrastructure made up of ports (most notably the Port of Antwerp), canals, railways, and highways, in order to integrate its industry with that of its neighbours. Among OECD nations, Belgium has a highly efficient and strong social security system; social expenditure accounts for roughly 29% of GDP.

Belgium's industry is concentrated mainly in the populous region of Flanders in the north, around Brussels and in the two biggest Walloon cities, Liège and Charleroi, along the Sillon industriel. Belgium imports raw materials and semi-finished goods that are further processed and re-exported. Except for its coal, which is no longer economical to exploit, Belgium has few natural resources other than fertile soil. Despite the heavy industrial component, services dominate the country's economy and account for 77.2% of Belgium's gross domestic product (GDP), while agriculture accounts for 0.7%.

With exports equivalent to over two-thirds of the country's gross national income (GNI), Belgium depends heavily on world trade. Belgium's trade advantages are derived from its central geographic location and a highly skilled, multilingual, and productive work force. One of the founding members of the European Community, Belgium strongly supports deepening the powers of the present-day European Union (EU) to integrate European economies further. About three-quarters of its trade is with other EU countries. In 2021, Belgium's public debt was about 108% of the country's gross domestic product (GDP).

History In the twentieth century

For 50 years through World War II, French-speaking Wallonia was a technically advanced, industrial region, with its industry concentrated along the sillon industriel, while Dutch-speaking Flanders was predominantly agricultural with some industry, mainly processing agricultural products and textiles. This disparity began to fade during the interwar period. When Belgium emerged from World War II with its industrial infrastructure relatively undamaged thanks to the Galopin doctrine, the stage was set for a period of rapid development, particularly in Flanders. The postwar boom years, enhanced by the establishment of the European Union and NATO headquarters in Brussels, contributed to the rapid expansion of light industry throughout most of Flanders, particularly along a corridor stretching between Brussels and Antwerp, which is the second-largest port in Europe, after the port of Rotterdam.

Foreign investment contributed significantly to Belgian economic growth in the 1960s. In particular, U.S. firms played a leading role in the expansion of light industrial and petrochemical industries in the 1960s and 1970s.

The older, traditional industries of Wallonia, particularly the steel industry, began to lose their competitive edge during this period, but the general growth of world prosperity masked this deterioration until the 1973 and 1979 oil price shocks and resultant shifts in international demand sent the economy into a period of prolonged recession. In the 1980s and 1990s, the economic center of the country continued to shift northwards to Flanders with investments by multinationals (automotive industry, chemical industry) and growing local industrial agriculture (for textiles and food).

The early 1980s saw the country facing a difficult period of structural adjustment caused by declining demand for its traditional products, deteriorating economic performance, and neglected structural reform. Consequently, the 1980–82 recession shook Belgium to the core—unemployment mounted, social welfare costs increased, personal debt soared, the government deficit climbed to 13% of GDP, and the national debt, although mostly held domestically, mushroomed.

Against this grim backdrop, in 1982, Prime Minister Martens' center-right coalition government formulated an economic recovery program to promote export-led growth by enhancing the competitiveness of Belgium's export industries through an 8.5% devaluation. Economic growth rose from 2% in 1984 to a peak of 4% in 1989. In May 1990, the government linked the Belgian franc to the Deutsche Mark, primarily through closely tracking German interest rates. Consequently, as German interest rates rose after 1990, Belgian rates have increased and contributed to a decline in the economic growth rate. In 1992–93, the Belgian economy suffered the worst recession since World War II, with the real GDP declining 0.96% in 1993.

On 1 May 1998, Belgium became a first-tier member of the European Monetary Union.

In the twenty-first century Belgium switched from the Belgian franc to the euro as its currency after 1 January 2002. Belgian per capita GDP ranks among the world's highest. In 2008, the per capita income (PPP) was $37,500. The federal government has not managed to present balanced budgets in recent years and public debt remains high, at 99% of 2009 GDP. In 2009, during the Great Recession, Belgium suffered negative growth and increased unemployment. GDP growth in 2009 was −1.5%.

Economic policy & impact of COVID-19 During the Covid-19 Pandemic, the Belgian government implemented a number of safety measures such as the temporary closing of non-essential businesses, mandatory work from home, as well as heavily limiting international travel. The disruptions caused by the Covid-19 pandemic, as well as the measures to contain it, affected most businesses in the country, although not necessarily to the same extent. The sectors most impacted by the pandemic were entertainment, non-food trade, and accommodations, experiencing around 70% - 90% (2020) loss of revenue, while sectors like public administration and education experienced a 4% - 21% loss of revenue. These conditions caused the GDP to decrease by 3.3% as the end of the first quarter neared, then by 11.9% by the second quarter. After a pickup through the third quarter and stabilization during the fourth, the GDP collectively dropped 6.3% (2020).

Maritime trade, which makes up about 7% of Belgium's GDP, fell approximately 3.4% (2020). Sectors like automotive declined and continue to see a decline to this day.

Household incomes experienced drops in the face of COVID-19, with an approximate 40% who became unemployed and about a 65% decrease in market incomes overall (2020). During this time employment began to shift from on-site labor to off-site from home labor, with an approximate 62% working remotely.

Belgium adopted various support policies as a response to the virus' shut down of various businesses and to tackle the rising unemployed population. They extended the duration of unemployment benefits from June to August, increased the benefits from 65% - 70% of previous wage, and provided a daily supplement of 5.63 euro (2020). Following their economic implementations, they also faced a debt of 117.8% of their GDP (2021).

Trade unions

With 65% of the workers belonging to a union, Belgium is a country with one of the highest percentages of trade union membership. Only the Scandinavian countries have a higher trade union density. The biggest union with around 1.7 million members is the Christian democrat Confederation of Christian Trade Unions (ACV-CSC) which was founded in 1904. The origins of the union can be traced back to the "Anti-Socialist Cotton Workers Union" that was founded in 1886. The second biggest union is the socialist General Federation of Belgian Labour (ABVV-FGTB) which has a membership of more than 1.5 million. The ABVV-FGTB traces its origins to 1857, when the first Belgian union was founded in Ghent by a group of weavers. This and other socialist unions became unified around 1898. The ABVV-FGTB in its current form dates back to 1945. The third major multi-sector union in Belgium is the liberal (classical liberal) union General Confederation of Liberal Trade Unions of Belgium (ACLVB-CGSLB) which is relatively small in comparison to the first two with a little under 290 thousand members. The ACLVB-CGSLB was founded in 1920 in an effort to unite the many small liberal unions. Back then the liberal union was known as the "Nationale Centrale der Liberale Vakbonden van België". In 1930, the ACLVB-CGSLB adopted its current name.

Besides these "big three" there are a number of smaller unions, some more influential than others. These smaller unions tend to specialize in one profession or economic sector. Next to these specialized unions there is also the Neutral and Independent Union that rejects the pillarization of the "big three" trade unions (their affiliation with political parties). There is also a small Flemish nationalist union that exists only in the Flemish-speaking part of Belgium, called the Vlaamse Solidaire Vakbond. The last Belgian union worth mentioning is the very small, but highly active anarchist union called the Vrije Bond.

Employment The social security system, which expanded rapidly during the prosperous 1950s and 1960s, includes a medical system, unemployment insurance coverage, child allowances, invalid benefits, and other benefits and pensions. With the onset of a recession in the 1970s, this system became an increasing burden on the economy and accounted for much of the government budget deficits. The national unemployment figures mask considerable differences between Flanders and Wallonia. Unemployment in Wallonia is mainly structural, while in Flanders it is cyclical. Flanders' unemployment levels are generally only about half those of Walloon. The southern region continues a difficult transition out of sunset industries (mainly coal and steel), while sunrise industries (chemicals, high-tech, and services) dominate in Flanders.

Belgium's unemployment rate was 6.5% in 2008. A total of 4.99 million people make up Belgium's labor force. The vast majority of these people (80%), work in the service sector. The Belgian Industry claims 19% of the labor force; and agriculture claims 1%. As in other industrialized nations, pension and other social entitlement programs have become a major economic and political concern as the baby boomers approach retirement age.

Budget

Although Belgium is a wealthy country, public expenditures far exceeded income for many years, and taxes were not diligently pursued. The Belgian Government reacted to the 1973 and 1979 oil price hikes by hiring the redundant work force into the public sector and subsidizing industries like coal, steel, textiles, glass, and shipbuilding, which had lost their international competitive edge. As a result, cumulative government debt reached 121% of GDP by the end of the 1980s. However, thanks to Belgium's high personal savings rate, the Belgian Government financed the deficit from mainly domestic savings, minimizing the deleterious effects on the overall economy.