National Bank of Belgium projects war in Iran will lift 2026 inflation to 3.4 percent and slow GDP growth to 0.6 percent

The National Bank of Belgium has published updated economic projections showing the war in Iran as a temporary shock to the Belgian economy, driven mainly through higher oil prices. It expects headline inflation, measured by the harmonised index of consumer prices, to average 3.4 percent in 2026 before easing to 2 percent in 2028, while GDP growth slows to 0.6 percent in 2026 from 1 percent in 2025 and then recovers to 1.1 percent in 2027 and 1.3 percent in 2028. The projections also point to a further deterioration in public finances, with the budget deficit widening from 5.2 percent of GDP in 2025 to 5.7 percent in 2028 and the debt ratio rising to 114.8 percent. The baseline assumes the energy shock is temporary and that oil prices normalise relatively quickly, limiting the hit to activity. Household purchasing power is expected to fall in 2026 because of higher oil prices, limits on unemployment benefit duration and partial indexation of wages above EUR 4,000 a month and benefits above EUR 2,000 a month from June 2026, although consumption should still grow as households draw on savings. Business investment is expected to remain relatively robust, residential investment to recover only modestly, and net exports to keep weighing on growth as imports outpace exports, partly because defence investment is import-intensive. On the labour market, job creation is projected to strengthen mainly from 2027 onward, with about 90,000 net new jobs over 2026 to 2028, while the unemployment rate rises to 6.6 percent in 2026 before easing to 6.4 percent in 2028.