Belgium Economic Outlook
Quarter-on-quarter economic growth accelerated in Q1 to 0.4% from 0.1% in Q4 2022. The upturn was largely driven by stronger expansions in services and construction activity, which more than offset sharp contractions in industrial output and retail activity. Meanwhile, the number of new companies decreased year on year in Q1, despite 2022 being the worst year in a decade in this regard. Turning to Q2, although economic momentum is likely slowing somewhat from the previous quarter, it should remain resilient. Both average consumer and business sentiment in April–May were higher than in Q1, which should lead to resilient consumption activity and investment. Moreover, declining inflationary pressures in April should buttress private spending further, while lower energy prices and easing supply bottlenecks should support an industrial activity recovery.
Harmonized inflation slowed to 3.4% in April (March: 4.9%), its lowest rate since July 2021, on falling energy prices. However, core inflation remained far above the headline rate, likely on second-round effects. Inflation should ease this year compared to 2022 on higher interest rates and lower commodity prices, but a potential wage-price spiral is an upside risk.