Belgium has a well-developed free market economy, based on both industrial and service sectors. It is heavily dependent on international trade and most of its economic sectors are geared toward exporting products. The nation's exports are equivalent to almost two-thirds of its GNP. On a per capita basis, Belgium exports twice as much as Germany and 5 times as much as Japan. In 1999, the nation ranked number 11 among the world's top exporters. In spite of its small size, Belgium's economy has consistently placed among the top 20 economies of the world and remains strong. The kingdom's exports have given it an account surplus that is the sixth largest among the highly developed economies of the world.
For most of its history, Belgium's economy was based on the nation's manufacturing capabilities. The country was the first in continental Europe to undergo the Industrial Revolution, and through the 19th century it was a major steel producer. Large coal deposits helped fuel the industrialization. At the same time, agriculture began to decline. This decline was even more pronounced after World War II, and by 2000, agriculture only accounted for a small percentage of the economy. Currently, agriculture is concentrated in West Flanders, Liege, and Eastern Namur. In the post-World War II era, heavy manufacturing and mining declined. However, there was significant growth in the service sector, and the country switched from heavy production to light manufacturing and began producing finished products instead of steel, textiles, and raw materials. Belgium imports basic or intermediary goods, adds value to them through advanced manufacturing and then exports the finished products. With the exception of its remaining coal resources, Belgium has no significant natural resources.
Belgium's economic strength is based on its geographic position at the crossroads of Western Europe, its highly skilled and educated workforce, and its participation in the EU. During its industrial period, Belgium developed a highly efficient and capable transportation infrastructure that included roads, ports, canals, and rail links. The multilingual nature of the workforce and its industriousness has made the workforce one of the most productive in the world.
The oil crisis of the 1970s and economic restructuring led to a series of prolonged recessions . The 1980-82 recession was particularly severe and resulted in massive unemployment. Personal and consumer debt soared, as did the nation's deficit. Meanwhile, the king-dom's main economic activity shifted northward into Flanders. In 1990, the government linked the Belgian franc to the German mark through interest rates. This spurred a period of economic growth. In 1992-93, another recession plagued Belgian history. During this period, the kingdom's real GDP declined by 1.7 percent. Foreign investments have provided new capital and funds for businesses and have consistently helped maintain the economy. Consequently, the government has consistently implemented programs to encourage foreign investment. Since Brussels is the capital of the EU, many multinational firms have relocated to the city so they can be near the bureaucracy and regional body's government seat.
There are major regional differences in the king-dom's economy. In the former industrial and agricultural areas of the countryside, unemployment rates tend to be higher. However, in the newer urban centers (where the service economy is dominant), unemployment rates are lower. For instance, in Wallonia and Brussels, unemployment rates are 2 to 3 times higher than in Flanders. Nevertheless, overall national unemployment rates continue to be lower than the EU average. In addition, wage levels are among the highest in Europe. In 1993, in an effort to give the regions greater flexibility to deal with economic problems, each region was given broad economic powers to control trade, industrial development, and environmental regulation. Each region has also endeavored to attract foreign investment, often to the detriment of other regions.
The government has also engaged in initiatives to privatize many companies that were formally owned by the state. Ongoing efforts are underway to privatize 2 of the largest remaining companies: Sabena (the national airline) and Belgacom (the main communications company). Since 1993, successive governments have privatized some 280 billion Belgian francs worth of business.
The kingdom has few energy sources. Consequently, it must import a substantial amount of fossil fuel (which provides 42.48 percent of Belgium's total energy needs). The country has a well-developed nuclear industry that provides more than half of Belgium's energy needs (in 1998, some 55.72 percent of total energy usage). The remaining energy needs are met by a limited number of hydroelectric and coal plants.
As the profitability of many industries declined in the post-World War II era, the government attempted to support them in order to maintain employment. Among the strategies used were subsidizing certain industries, mainly steel and textile companies. In addition, the government reduced interest rates and offered tax incentives and bonuses to attract foreign businesses. All of these measures helped maintain the economy by preventing massive unemployment, but they also led to drastic government deficits in the 1970s and 1980s. The government was then forced to borrow funds from international sources in order to maintain their imports and to continue social welfare programs. By the 1990s, successive governments diligently worked to reduce the debt. In fact, they even shifted from foreign to domestic sources in underwriting their debts. In 1999, Belgium's external debt was $28.3 billion or about 10 percent of the nation's total debt. Belgium is a net contributor of foreign aid. In 1997, the kingdom provided $764 million in foreign assistance.
Belgium was one of the founding members of the European Community (later the EU), and has been one of the foremost proponents of regional economic integration. In 2000, 80 percent of Belgium's trade was with other members of the EU. Membership in the EU was the culmination of longstanding national support for economic cooperation. For instance, in 1921, Belgium joined with Luxembourg to form the Belgian-Luxembourg Economic Union (BLEU). This economic union provides for an interchangeable currency and it established a joint customs union. Belgium and Luxembourg have also joined with the Netherlands to form the BENELUX customs union. This organization oversaw cross-border trade between the 3 nations. Belgium is also a member of the Organization for Economic Cooperation and Development (OECD), an organization of the world's most highly developed industrialized democracies.
Belgium has supported the main economic initiatives of the EU, including the elimination of trade barriers, such as tariffs , between the organization's 15 member states. The EU also coordinates the external trade of its member states. In 1999, Belgium was one of the founding members of the European Monetary Union (EMU). EMU will replace the national currencies of its members with a single currency, the euro. This is designed to further ease trade among the nations that adopt the euro by eliminating currency fluctuations.