Belgium Economic Outlook
Quarter-on-quarter economic growth eased to 0.1% in Q4 from 0.2% in Q3 due to falling exports and a deeper contraction in fixed investment. That said, growth in both private and government consumption accelerated. Turning to Q1 2023, sequential growth is likely accelerating due to seemingly higher private spending: Inflation receded in both January and February, while wage indexation took full effect at the end of January. Accordingly, average consumer sentiment improved in January–March compared to Q4. Business sentiment also strengthened slightly in Q1 from its Q4 trough, likely supporting investment. That said, in January the industrial sector contracted at the quickest rate since November 2021, likely due to lower foreign demand. Meanwhile, the IMF concluded an Article IV visit in February, pointing to the country’s elevated fiscal deficit and declining competitiveness as concerns.
Harmonized inflation slowed to 5.4% in February (January: 7.4%), its lowest rate in sixteen months, on falling energy prices. However, core inflation remained above the headline rate for the second month in a row on second-round effects. Inflation should ease this year on higher interest rates and lower commodity prices, but a potential wage-price spiral is an upside risk.