Belgian business investment in the context of the crisis

Against the backdrop of the worst economic crisis since the Great Depression of the thirties, the article analyses developments in business investment in Belgium. Firstly, it should be noted that, in 2009, Belgian business investment witnessed the biggest slump since 1980. However, when this sharp fall is considered in relation to GDP, it appears that it was not of an exceptional magnitude, given the sheer scale of the fall in GDP during the recession. Investment in Belgium exhibits a pro-cyclical pattern, following GDP movements, albeit with a larger magnitude. Furthermore, Belgian business investment has done relatively well in an international context. During the recession, Belgian investment saw a smaller cumulative decline than in the neighbouring countries and the euro area as a whole. The factors that lie behind the biggest decline in investment since 1980 include the huge slump in demand and economic activity during the recession, the sharp decline in the gross operating surplus of Belgian firms in 2009, the rise in external borrowing costs for businesses and the tightening up of credit conditions in the run-up to and throughout the financial crisis. The high degree of uncertainty and unstable expectations as a result of the crisis played a role here, too. The decline in investment nevertheless remained relatively small, especially in an international context and the Belgian economy’s resilience to the crisis and the sound financial position of Belgian firms seem to be the main factors behind this. Finally, given the importance of investment as a factor of innovation and technological progress, which contribute to balanced and sustainable economic growth, the article describes several factors that could become a threat to the gradual recovery of investment and, thus, to the Belgian economy’s growth potential in the longer term.