Economic projections for Belgium – Autumn 2016

The article presents the new macroeconomic projections for Belgium, produced by the Bank as part of the Eurosystem forecasting exercises. Despite an environment affected by manifold – primarily political – uncertainties, the global economy has appeared to recover somewhat in recent months and is set to gain momentum from 2017. The medium-term growth prospects for the euro area are favourable and stable : according to the Eurosystem projections, the volume of GDP will expand by around 1.6 -1.7 % over the period 2017-2019. In Belgium, growth was down slightly in 2016 at 1.2 % and is expected to strengthen somewhat in 2017 to 1.4 % before reaching 1.6 % in 2018 and 1.5 % in 2019. Investment and private consumption are likely to be the main factors supporting growth in the medium term. Households should benefit both from renewed wage growth and from the measures to cut taxes, that should bolster their disposable income. Firms should continue to invest steadily thanks to the improving outlook for demand and continuing extremely favourable financing conditions. The very positive dynamic on the labour market – that has been evident for more than two years – is set to continue, albeit at a more moderate pace. Some 120 000 new jobs are likely to be created over the next three years, implying a decrease in the unemployment rate from 8.2 % this year to 7.6 % by 2019. HICP inflation will have averaged 1.8 % in 2016, mainly backed by the increase in indirect taxes and factors affecting inflation in services. Over the period 2017-2019, Belgian inflation is projected to average 2 %. The public deficit should fall to 2.3 % of GDP in 2017 (from 3.0 % in 2016),notably as a result of the consolidation measures announced, but will hardly improve at all thereafter.