Economy loses momentum in Q2

GDP growth decelerates quarter on quarter: A second release confirmed that GDP growth ebbed to 0.2% on a seasonally adjusted quarter-on-quarter basis in the second quarter, down from 0.4% in the first quarter. On an annual basis, economic growth moderated to 1.0% in Q2 from the previous period's 1.1% expansion, marking the slowest growth since Q2 2024.

Economy faces headwinds on multiple fronts: The moderation in sequential growth was driven by weaker private consumption, fixed investment and exports. Domestically, household spending growth fell to 0.4% in Q2, marking the weakest expansion since Q2 2024 (Q1: +0.5% s.a. qoq). Moreover, fixed investment swung into contraction, falling 0.5% in Q2 and contrasting the 0.4% increase logged in the prior quarter. More positively, government spending bounced back, growing 0.6% in Q2 (Q1: -0.4% s.a. qoq). On the external front, exports of goods and services fell 1.1% on a seasonally adjusted quarterly basis in the second quarter, which was deeper than Q1's 0.2% contraction. In addition, imports of goods and services slid at a steeper rate of 1.0% in Q2 (Q1: -0.4% s.a. qoq). As a result, the external balance detracted from overall GDP growth.

2024’s momentum to carry over into 2025: GDP growth should hover near 2024’s level in 2025. Private consumption should rise more than last year due to robust wage growth, lower interest rates and easing inflation. In contrast, fixed investment and exports will likely take a hit from a 15% U.S. tariff on EU pharmaceuticals—Belgium’s top export. Political instability and weaker-than-expected EU demand pose downside risks.

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