Macro Watch: Belgium, a small but very rich European country, has been without a government since 13 June 2010, and the possibility for the formation of a coalition is still slim. The country, nevertheless, is still performing fairly well, in part due to the well-functioning system of regional and local governments and an incumbent federal caretaker government that has the ability to perform its day-to-day responsibilities.
Main Economic Indicators: Belgium
Chart provided by: CEIC Data
The core of the political crisis lies in the differences between the two main regions in Belgium. Dutch-speaking Flanders in the north and French-speaking Wallonia in the south have been in constant conflict with each other, fuelled both by cultural and linguistic differences and asymmetrical economic development. The larger (in terms of population) and richer Flanders is in favor of more powers shifting to the regions in Belgium, while Wallonia is more in favor of a centralized system of power.
Belgium’s political crisis is not affecting its economic performance, at least for the present moment. With real GDP growth at 3%, seasonally adjusted unemployment rate at 7.3%, and inflation measured by seasonally adjusted GDP deflator growth at 2.55%, Belgium is outperforming the EU average. The lack of formal government will, however, have implications for the medium- and long-term outlook for the country as the current caretaker government has limited powers to implement a longer-term economic plan or much needed reforms to address such issues as an ageing population, among others.
By Elena Bachvarova in Bulgaria – CEIC Analyst