Financial Crime World

Risk Assessment in Finance: Belgium

Overview

Belgium has been navigating a complex economic landscape marked by changes in its political and financial environment. Despite being considered a stable business hub, the country still faces several challenges that can impact corporate payment behavior.

Risk Rating

According to Coface, Belgium’s risk rating is A3, indicating a generally good but somewhat volatile environment. While the business climate is very good, with reliable corporate financial information and efficient debt collection, the country’s institutional quality is also high.

Strengths


  • Optimal Location: Belgium’s location between the UK, Germany, and France makes it an attractive business destination.
  • Strong Foundation: The presence of European institutions, international organizations, and global groups provides a strong foundation for companies.
  • Well-Trained Workforce: Belgium boasts a well-trained workforce thanks to vocational education and multilingualism.

Weaknesses


  • Political Tensions: Political tensions between Flanders and Wallonia can create challenges for businesses.
  • Complex Institutional Structure: The country’s complex institutional structure and multiple administrative levels can be a challenge.
  • Dependence on Western European Trade: Belgium is heavily dependent on Western European trade, with exports of goods and services accounting for 105% of GDP.

  • Supply Issues: Supply issues have held back economic recovery in recent months.
  • Weaker Demand: Weaker demand has also impacted the economy.
  • High Uncertainty: High uncertainty has weighed on growth prospects, particularly due to the war in Ukraine.

Public Finances


  • Public Deficit Reduction: The public deficit is expected to be gradually reduced in 2022, thanks to increased tax revenues and moderate economic recovery.
  • Gross Public Debt: Gross public debt remains very high and further expansionary measures could jeopardize the positive trend.

Trade Balance


  • Current Account Surplus: Belgium’s current account should switch to a small surplus in 2022, driven by imports moving in line with exports.
  • Soaring Oil and Gas Prices: Soaring oil and gas prices will weigh on the trade surplus.

Government Stability


  • Vivaldi Coalition Government: The Vivaldi coalition government is still vulnerable despite some important agreements.
  • Government Instability: The disparate nature of the coalition makes it highly susceptible to instability, particularly given the presence of opposition parties that have recorded significant growth in recent years.

Conclusion

While Belgium’s risk assessment is generally good, its dependence on Western European trade and complex institutional structure make it a challenging business environment. Companies operating in the country must be prepared for potential volatility and uncertainty.