Belgian economic activity is expected to increase by 1.3 % in the second quarter of 2021
The Belgian recovery in the first quarter continued to outpace that in the euro area, as real GDP increased by 1 % while the euro area economy contracted further. Our forecasts point to a further acceleration to 1.3 % in the current quarter. The gradual lifting of the containment measures will reinforce the rebound of private consumption in particular.
Belgian quarterly growth came in at 1 % in the first quarter of 2021 according to the current data. This is better than the estimate in the previous Business Cycle Monitor (+0.5 %) but also constitutes a significant upward revision from the NAI’s flash estimate of +0.6 %. Growth was supported by the expected rebound in domestic demand and private consumption in particular and was reinforced by a marked decline in imports.
Private consumption should accelerate in the second quarter. The containment measures are gradually being lifted against a background of an improving health situation, which allows for more opportunities to consume. At the same time, confidence is high and income prospects remain robust, also due to the remarkably resilient labour market. The first hard data for April are promising and the reopening of bars and restaurants will have positive knock-on effects on non-food retail.
Business investment growth surprised on the upside and should remain buoyant in the second quarter. The overall business sentiment indicator is now well above its pre-crisis level. Government and housing investment should also continue to expand in the second quarter of 2021.
The contribution of net exports to second-quarter GDP growth is expected to turn negative despite the continuing strength of foreign demand. Import growth is likely to shoot up due to accelerating domestic demand.
The NBB nowcasting model “BREL” predicts a quarterly growth rate of about 1.7 % in the second quarter of 2021, while the “R2D2” model is clearly more pessimistic with a growth rate of just 0.1 %. The uncertainty of these nowcasting models is still exceptionally large in the current circumstances: the massive shock of the COVID-19 crisis constitutes a challenge for the estimation of standard time-series models. Therefore, these model-based estimates need to be complemented with information gathered from other sources, as well as expert judgment.
All in all, taking into account other information, we currently estimate that Belgian economic activity will increase by 1.3 % in the second quarter.