Belgian Economy Update: Signs of Softening Global Activity and Record-Breaking State Note Issuance

After a robust start to the year, global growth is showing signs of moderation, particularly in the Chinese economic recovery. PMI indicators have fallen, indicating a mild weakening of growth. According to the ECB, the world economy (excluding the euro area) is projected to grow by slightly more than 3% in the coming years. The euro area economy has essentially flatlined over the past three quarters.

In Belgium, economic activity has slowed somewhat, with a 0.2% quarterly growth. The consensus forecast for real GDP growth in Belgium is 1% in 2023, with a slight pickup in 2024 and 2025. The labor market has expanded robustly, and the harmonized unemployment rate is expected to stay below 6%.

Inflation in Belgium has cooled since the peak at the end of the previous year but temporarily ceased its downward trend in August, coming in at 2.4%. The consensus forecast expects the headline inflation rate in Belgium to be 2.7% in 2023 and 3.5% in 2024, dropping to just below 2% in 2025.

SPECIAL TOPIC: The Most Successful Issuance of a State Note in History

The Belgian Debt Agency achieved a historic milestone with the issuance of a one-year State Note, maturing on September 4, 2024. The issuance, the most successful in history, aimed to stimulate competition among banks, send a positive signal to financial markets, and offer households a safe short-term investment opportunity.

The State Note’s 3.3% gross coupon attracted massive demand, with over 500,000 savers subscribing and €21.9 billion raised. This operation marked “Europe’s biggest-ever debt offering targeted exclusively at retail investors.” The success led to a significant shift by retail savers to State Notes, representing a sizable outflow of funding for Belgian banks.

In response to the success, the Belgian Debt Agency adjusted its funding plan, scaling back Treasury Certificates and lowering planned OLO issuance. The impact on public finances is expected to be positive, with the yield on the State Note determined based on the federal government’s financing costs.


Sovereign bond yields rose in the context of persistently high inflation. The ECB and the Federal Reserve took steps to address inflation concerns, leading to interest rate hikes. Long-term sovereign bond yields in the US and the euro area rose in the second quarter of 2023.

Despite mixed stock market performances, financial markets adjusted to tighter financing conditions. Corporate spreads indicated the possibility of a soft landing. However, crude oil prices rose above $90 per barrel, and the euro weakened against the dollar.

In the euro area, sovereign spreads remained broadly stable, with Belgium, France, and the Netherlands showing spreads vis-à-vis Germany at 0.67%, 0.57%, and 0.36%, respectively.

TREASURY HIGHLIGHTS: 90% of the 2023 Funding Plan Raised

The Belgian Debt Agency successfully raised 90% of the 2023 funding plan through three OLO auctions and one ORI facility. The OLO auctions raised a total of €9.617 billion, contributing to a structural positive cash position.

The issuance of the one-year State Note influenced the Agency’s decision to scale back planned issuances of Treasury Certificates and lower the planned OLO issuance. The Agency’s cash reserves are expected to structurally increase by around €9.0 billion.

In summary, Belgium is navigating through signs of global economic softening, achieving a historic milestone in retail State Note issuance, and adapting its funding plan in response to successful debt operations.