Belgium: Activity falls into contractionary territory in Q4
March 1, 2021
A second release showed GDP contracted 0.1% in seasonally-adjusted quarter-on-quarter terms in the fourth quarter of last year (previously reported: +0.2% s.a. qoq), contrasting 11.6% growth in the third quarter, in a period marked by a tightening of social distancing measures. Consequently, GDP fell 6.3% in 2020, marking the worst annual drop since the Second World War.
The downturn was broad-based, with private consumption, public spending, fixed investment and exports all weakening. Private consumption contracted 5.6% in Q4, swinging from a 15.8% expansion in Q3, as the lockdown imposed in November weighed on retail sales. Public consumption declined 3.1% in Q4 (Q3: +4.8% s.a. qoq), while fixed investment growth softened to 4.0% from 19.6% in the prior quarter.
Growth in exports of goods and services waned to 3.8% in Q4 (Q3: +9.8% s.a. qoq), although they were still likely supported somewhat by higher demand from the UK as businesses built up inventories in preparation for the end of the Brexit transition period. In addition, growth in imports of goods and services moderated to 2.0% in Q4 (Q3: +10.8% s.a. qoq).
On an annual basis, GDP dropped 5.1% in Q4 (previously reported: -4.8% year-on-year), worsening from the previous quarter’s 4.3% contraction.
Moving to Q1, tough and prolonged restrictions—first reimposed at the tail end of last year amid raging cases in Europe—are continuing to suppress activity. On this, Philippe Ledent, senior economist at ING, commented:
“With the number of Covid cases in Belgium on the rise again, a rapid relaxation of restrictions and curfews is not to be expected. Should the situation deteriorate further, additional measures cannot be excluded. […] The start of a recovery can certainly be expected from the second quarter onwards, but this will also depend on the speed of vaccination. Unfortunately, European countries are lagging considerably behind the United States and the United Kingdom in this respect. […] It will therefore be more reasonable to wait until the second half of the year to see a real acceleration in economic growth, and above all in household consumption, which has a lot of catching up to do.“
Author: Frederico Teixeira de Abreu, Junior Economist