Belgium: Economy enters recession in Q2
August 31, 2020
GDP shrank 12.1% on a seasonally-adjusted quarter-on-quarter basis in Q2, following Q1’s 3.5% decline and marking the sharpest contraction on record. The economy was hit hard by the pandemic and related restrictive measures.
Household spending plunged 12.7% in Q2, marking a record drop (Q1: -6.4% s.a. qoq), while public spending fell 8.3% (Q1: -3.5% s.a. qoq). Moreover, fixed investment collapsed, diving 18.2% in Q2, compared to the 3.9% decrease clocked in Q1.
Exports of goods and services declined 13.3% in the second quarter, after the first quarter’s 1.7% contraction. Meanwhile, imports of goods and services declined 13.9% in Q2 (Q1: -2.5% s.a. qoq).
On an annual basis, economic activity dropped 14.4% in Q2, down from Q1's 2.4% decrease.
There should be some recovery throughout the rest of the year. However, political uncertainty and a resurgence of Covid-19 cases pose downside risks. Commenting on the outlook, Daniela Ordonez, chief French economist at Oxford Economics, stated:“We continue to expect a marked post-lockdown rebound in Q3, but the pace should then cool as the ongoing political deadlock will prevent meaningful fiscal support to be deployed swiftly. […] Risks remain on the downside as the threat of a second wave of infections may be looming.”
Author: Frederico Teixeira de Abreu, Junior Economist