Belgium Economic Forecast

According to a preliminary estimate, in Q3, GDP growth increased to 0.5% on a quarter-on-quarter basis, up from 0.3% in Q2. The reading was driven by growth in the services and construction sectors. However, manufacturing experienced a decline. In Q4, growth is expected to slow slightly. Economic sentiment remained pessimistic in October, primarily due to challenges in the retail sector. More positively, inflation continued to slow during the month. The ongoing deceleration of price pressures, coupled with the wage indexation mechanism, is expected to support private consumption. On the other hand, the subdued external environment, along with strong imports driven by robust domestic demand, are likely to limit the growth contribution of the external sector. Furthermore, tight financial conditions and higher wage-related costs for companies should hit private investment.

Harmonized inflation fell to minus 1.7% in October from 0.7% in September. The decline was driven by a more pronounced contraction of housing and utilities prices. Our panelists see inflation picking up slightly in 2024 relative to this year’s projected average level. Gas prices and the impact of wage indexation on core inflation are key factors to watch.