Economic projections for Belgium – Autumn 2013

The article presents the Bank’s new macroeconomic projections for 2013 and 2014. They were produced in a context of deceleration of growth in the emerging economies and a hesitant revival of activity in the advanced countries. According to the Eurosystem’s projections, real GDP is likely to be down by 0.4 % in the euro area at the end of 2013, and growth is predicted at 1.1 % in 2014. Inflation in the euro area is set to remain weak, rising by 1.4 % in 2013 and by 1.3 % in 2014, against a backdrop of import price moderation, and control over domestic costs, namely wage costs. In Belgium, following a lengthy period of stagnating activity, the recovery emerged in the second quarter of 2013 and should continue, in line with the expectations for the euro area. The volume of GDP is forecast to grow by 0.2 % this year and 1.1 % in 2014. Given the weakness of foreign markets, Belgium’s exports will have produced hardly any growth in 2013, while imports are actually estimated to have fallen slightly, so that foreign demand will make a positive contribution to growth. Belgian exports are likely to regain some momentum in 2014, on the back of world trade. The improvement in confidence and the rise in households’ purchasing power promoted by the fall in inflation are the reasons for the increase in household consumption expenditure in 2013, following an unusually long period of expenditure restraint. Private consumption is expected to progress at the same rate as household disposable income next year, implying a more or less stable savings ratio. Business investment also began a hesitant recovery in the spring of this year. However, it is likely to be down again year-on-year in 2013 before a clearer revival in 2014, supported by the improvement in the outlook for sales and the steady rise in capacity utilisation rates. Finally, public spending is set to continue making a positive contribution to GDP growth in 2013 and 2014, though it will be moderate. Despite the fragile signs of recovery in the Belgian economy, the labour market situation is unlikely to improve in the immediate future. The revival will first be conveyed by firms stepping up their working hours and restoring their level of productivity before taking on new recruits. Following a decline of around 17 000 units in 2013, domestic employment will record only a very small rise in 2014, of barely 2 500 units. The unemployment rate will continue to rise, reaching 9.1 % of the labour force in 2014. Inflation, which is down sharply in Belgium, too, is put at 1.2 % in 2013 and is only forecast to edge up to 1.3% in 2014. That is due partly to the downward trend in energy prices – owing to the expected fall in the oil price and changes taking place on the Belgian gas and electricity markets – and partly to the low level of underlying inflation, influenced by labour costs’ moderation. Given the assumptions relating to fiscal measures, in accordance with the rules applicable to the Eurosystem’s forecasting exercises, public finances are expected to end the year 2013 with a deficit of 2.8 % of GDP and remain at that level in 2014.