Belgium Economic Forecast

Seasonally adjusted quarter on quarter GDP growth slowed to 0.2% in Q2 from 0.4% in the previous quarter. The headline figure was negatively impacted by weakening private consumption, fixed investment and exports. Meanwhile, public spending contracted at a more moderate rate. In Q3, the economy is expected to grow at a similar pace to Q2. In July–August, consumer sentiment averaged higher than in Q2, which—together with a tight labor market, wage indexation and decreasing price pressures—should have supported consumer spending. Additionally, government spending is likely to rise in the run-up to elections set for June 2024. However, there was a broad deterioration in business confidence in July–August, while goods exports contracted at a sharper pace in July than in Q2. The latter was likely driven by the weak momentum of trading partners and a loss of competitiveness due to wage indexation.

Harmonized inflation rose to 2.4% in August (July: 1.7%). Price pressures for transportation picked up, while housing and utilities prices fell at a more moderate pace. Average inflation should fall this year compared to 2022 on higher interest rates and a tougher base of comparison. The impact of wage indexation on core inflation is a key factor to watch