It is a rule of life in Brussels that one must not judge by appearances. A decrepit façade can hide a chic interior. Great wealth is to be found in close proximity to squalor and decay. The country is a mass of contradictions — and so, too, is the Belgian economy.

On Wednesday, the World Economic Forum published its global index of 138 countries’ relative economic competitiveness. The top three places were unchanged from last year — taken by Switzerland, Singapore and the United States — but there was movement further down: Belgium had risen two places to 17th position, the seventh highest of the 28 European Union member countries.

A day later, on Thursday, Brussels came to a standstill, the victim of a transport strike and a mass demonstration by Belgium’s trade unions — the fourth in two years. Another general strike was scheduled for October 7 but has been scaled back, awaiting publication of the government’s budget for 2017, which has been delayed.

Earlier this month, the American industrial giant Caterpillar announced that it was closing its production plant at Charleroi in the south of Belgium, with the loss of 2,200 jobs. Production is being switched, not to some competitive hotspot of Eastern Europe or Asia, but to Grenoble in eastern France. This same month, the insurance giant Axa announced it will cut 650 jobs in the coming year.

So how should we think of Belgium — as the country that has overtaken Qatar and Malaysia in the global competitiveness stakes, and is still ahead of Austria, Luxembourg, France and Ireland, or a country beset with industrial unrest and high labor costs?

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A lot depends on what happens in the coming weeks. The government, a four-party coalition now two years into its precarious existence, faces some important tests. The first is the budget, which will be submitted to the European Commission for it to assess compliance with EU rules on fiscal rectitude on October 15. The unions have already given notice of their intention to fight its expected cutbacks. The chance of confrontation was magnified on September 22 when the finance ministry admitted that tax receipts were much lower than expected and that without remedial action the deficit would not be the previously forecast €2.4 billion, but €4.2 billion.

The second political test is over the corporate tax rate, where the government is scheduled to take decisions that are supposed to reduce the competitive disadvantage relative to its neighbors.

And thirdly, by the end of the year, the government wants a new competitiveness law — to moderate the effects of an existing law (dating back to 1987) which ties wage increases to developments in the neighboring countries.

Francophone Wallonia has higher levels of unionization and social deprivation, while the Flemish nationalist N-VA is the most fiscally conservative of the coalition parties.

The government’s critics — and there were plenty on the streets of Brussels on Thursday — argue that it is hell-bent on dismantling the social compact between employers and unions that has stood since 1945 and has ensured high levels of social protection, a good health service and schools, and low levels of inequality. They see threats both to working hours and pension entitlements. The country’s linguistic tensions simmer beneath the service, as the francophone south, Wallonia, has higher levels of unionization and social deprivation, while the Flemish nationalist N-VA is the most fiscally conservative of the coalition parties. The finance minister, Johan Van Overtveldt, is from the N-VA.

The country’s linguistic tensions simmer beneath the surface as the francophone south, Wallonia, has higher levels of unionization and social deprivation, while the Flemish nationalist N-VA is the most fiscally conservative of the coalition parties. The finance minister, Johan Van Overtveldt, is from the N-VA.

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As Prime Minister Charles Michel, a francophone liberal, contemplates the political battles ahead, he knows that he would be starting from a stronger position were it not for the blight of terrorism.

The Belgian economy took a hit in November 2015, when the country’s international reputation sank to an all-time low in the wake of terrorist attacks in Paris. The perpetrators had traveled from Brussels to carry out their murderous deeds, and some returned to hide out in the Belgian capital. Television pictures of soldiers patrolling the deserted streets as Brussels went into lockdown knocked the Christmas stuffing out of the hotel, restaurant and tourist trades.

Then, on March 22, terrorists detonated bombs at Brussels Airport and on the city’s metro system, killing 32 people and wounding another 300. As well as inflicting immeasurable human misery, the attacks constituted a further attack on the Belgian economy.

The federal ministry of the economy commissioned an analysis of the terrorism’s economic impact — itself a follow-up to a study of the effects of November’s lockdown. Published in July, the study looked at bankruptcy and unemployment filings, hotel occupancy rates, travel statistics and VAT returns.

It showed that all three of Belgian’s regions — Brussels, Wallonia and Flanders — were affected, albeit not to the same degree: Brussels most severely and Flanders least. Within those regions, the effect was uneven on different sectors of the economy.

Eric Catry of Horeca Brussels — the trade association of hotels, restaurants and the catering industry — says it is the smaller, independent hotels that have suffered most, dependent as they are on leisure tourism. The bigger hotel chains have more business tourism to help them through the difficult times — and Brussels’s role as a seat of international organizations, such as the European Union and NATO, ensured the business visitors soon resumed travel.

But leisure tourism dropped sharply in November and has not recovered. Brussels Airport reports passenger numbers are still down, year on year, with reduced numbers of visitors from America and Asia.

Edward Roosens, chief economist of the Belgian employers’ organization, VBO-FEB, says other Belgian tourist centers, notably Ghent and Bruges, also suffered. City festivals and music festivals, which nowadays are economically important to Belgium, also met reduced demand. Catry says that August was a disaster: The attack in Nice, in the south of France, on July 14 triggered another drop-off in tourism. He sees no short-term prospect of recovery, certainly not until 2017.

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The effect on retail trade is harder to assess accurately. The sector is economically important, but fluctuations are normal. Turnover was down in large shopping centers, but some trade may have migrated online. E-commerce has been slow to develop in Belgium, partly because of laws restricting night-working that make it harder for companies to fulfill demands quickly.

The Belgian National Bank estimated early on that the effect of the terrorist attacks was “temporary and limited,” but that may have been overly optimistic. Roosens estimates, on the basis of figures recently garnered from VBO-FEB members that the effect will be to have reduced GDP growth by 25-30 percentage points.

“Without these terrorist attacks we would have been close to GDP growth of 2 percent in 2016, which by Belgian standards is quite good,” Roosens said. The Belgian national bank’s prediction is for GDP growth of 1.3 percent in 2016, recovering to 1.5 percent in 2017.

Roosens argues that the Belgian economy was getting into shape when the terrorists struck. Its high tax rates and high labor costs have long put it a competitive disadvantage compared to its neighbors — of about 14 percent — but that competitiveness gap was narrowing, he says.

The government’s socialist critics accuse it of cutting off growth with misplaced austerity.

And it is, he says, still the case that there are positive signs. Industrial employment has stopped declining. Some quite traditional industrial sectors — textiles, chemicals, pharmaceuticals — are doing well. The start-up tech sector is flourishing. The number of people starting up their own businesses is growing.

Again, however, the picture is nuanced. The U.K.’s vote in favor of leaving the EU, which triggered a fall in the value of the pound, will make life more difficult for exporters to the U.K. (carpet-makers, for example) and could also knock back tourism from Britain. The monthly index of consumer confidence has fallen to its lowest level for a year, particularly affected by the announcement of mass job losses.

The government’s socialist critics accuse it of cutting off growth with misplaced austerity. “On the economic front, Belgium is really not working well,” Rudy De Leeuw, president of the Flemish socialist trade union ABVV, told the demonstrating crowds on Thursday. He said the government should be stimulating the economy with public investment and accused Michel of being soft on corporate tax-avoidance while bearing down on individual taxpayers.

Belgium’s advantages as identified in the World Economic Forum’s competitiveness index — a well-educated population, strong universities, a high level of technical expertise, developed market infrastructures, low levels of inequality — have not gone away. But the government faces some difficult headwinds.

If Michel’s government is to continue its economic reforms, then it will have to avoid a political crisis in the coming weeks. The Flemish Christian Democrats will be put in a painful position. In European terms, they would be considered center-right, but they are positioned on the left wing of this government and have a significant trade union wing — the ACV.

Michel will need all his peace-making skills to achieve a budget agreement and corporate tax reform. And even those will not be enough to transform the Belgian economy. His best, modest hope is to ensure that improvements become more generalized. Much will depend on the health of the wider eurozone economy.