Impact of COVID-19 on Belgium Economy Research and Forecast 2019-2025

Belgium is among one of the smallest and densely populated economies in Europe. The major industries that contribute to the economy include energy, chemical, and food and beverage. The country has made significant progress in the competitive natural gas and electricity markets. It has increased share in renewable energy and thereby reduced the use of fossil fuels. The country’s gas market is well integrated with its neighbors and therefore, it has better gas transport infrastructure. The emergency oil stock levels of the country are also high. The share of nuclear energy is around half of the country’s electricity generation.

However, the country has decided to phase out nuclear power plants during the period 2022 and 2025. This could be challenging for the country to ensure the supply of electricity and deliver cost-effective low carbon electricity. The Belgium government is making efforts to reduce power generation capacity from nuclear plants and increasing focus on renewable energy and natural gas, as well as increased interconnection with neighboring countries. However, the total primary energy supply and production have been declined due to the lack of investment security and inconsistency in energy policy.  As per the International Energy Agency (IEA), the electricity final consumption decreased from 89 terawatt-hours (TWh) in 2017 to 88.6 TWh in 2018.

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In addition, the energy production in the country may significantly affect in the future owing to the operational and supply chain issues amid COVID-19 outbreak. One of the major electricity company operating in the country, ENGIE SA has stated that due to COVID-19, its energy operations may be affected by merchant price movements, sell-downs, finance partnering constraints on capacity building, as well as operational and supply chain concerns. Supply is influenced by a significant rise in bad debts and lower volumes. In addition, the negative impact of foreign exchange will likely impact the company’s profitability. Hence, the COVID-19 pandemic is expected to increase operational concerns of the energy sector, which in turn, may negatively affect the economy.

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As of 25th March 2020, the Belgium government declared a fiscal package of an average $8.6 billion to 10.8 billion (nearly 2% of GDP) and nearly $54 billion (approximately 10% of GDP) of guarantees for new bank loans to companies and self-employed. Some crucial fiscal support measures include encouraging healthcare expenditure and accelerate providing support to those who are self-employed or temporarily unemployed. Other measures include liquidity support through delays of tax payments and social security for companies. The country’s regional governments have also announced extra financial assistance to sectors and firms that are affected by the crisis and provide bank-loan guarantees.

The study on the effect of COVID-19 on Belgium economy is classified based on industries, including BFSI, food and beverage, chemical, energy, automobile, and others. Due to the COVID-19 crisis, most of the European banks have suspended dividend payments and share buybacks. To increase the capacity of banks’ to absorb losses and promote lending to corporates, households, and small businesses during the epidemic, the banks should not pay dividends for the FY 2019 and 2020 up to October 2020. As a result, KBC Bank and BNP Paribas Fortis declared to not provide dividends to the shareholders and focus on increasing flexibility to support its customers and society during the crisis.

The operations of some crucial companies getting affected by COVID-19 outbreak include AB Volvo, Audi AG, Solvay SA, ENGIE SA, and KBC Bank. On 1st April 2020, Solvay SA declared the supply of high-performance medical grade transparent film to the aerospace company, Boeing for its manufacturing of face shields. This aims to support the urgent requirement for protective equipment by healthcare professionals to combat COVID-19. Boeing selected Solvay owing to its skills in the adhesive materials and advanced composites for use in several commercial and defense programs. Further, the automobile companies, including Volvo have temporarily stopped production in Belgium, as the government imposes a restriction to shut down nearly all non-essential operations to reduce the spread of COVID-19.

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Verticals Affected Most

• BFSI
• Food and Beverage
• Chemical
• Energy
• Automobile
• Others (IT and Telecomand Healthcare)

Company Profiles

• AB Volvo
• Anheuser-Busch InBev SA/NV
• Audi AG
• BNP Paribas Fortis SA
• ENGIE SA
• KBC Group N.V.
• Proximus PLC
• Puratos NV/SA
• Solvay SA
• Agfa-Gevaert N.V.

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