Economic projections for Belgium

The National Bank of Belgium publishes economic projections for Belgium twice a year. The main results are reproduced here. These results are explained in more detail in the June 2020 issue of the Economic Review.

The projections are produced as part of a joint Eurosystem exercise and are based on technical assumptions and international forecasts formulated jointly by the ECB and the euro area national central banks. They only take account of measures that have been – or are very likely to be - formally approved and for which the implementing arrangements have been set out in sufficient detail at the cut-off date of the projections. The projection period runs to year t+3 (in this case up to 2022); the margin of error surrounding the projections increases for the later years, partly owing to the greater uncertainty about the assumptions, especially those concerning the international environment. Owing to the uncertainty over how the Covid-19 public health crisis will develop and over the revival of demand, these forecasts are associated with substantial downside risks which are greater than usual.

The latest projections for Belgium, published on 8 June 2020, were finalised on 25 May 2020. The corresponding results for the euro area are published on a dedicated webpage on the ECB’s website.

This year, economic activity in Belgium is down by 9 % as a result of the containment measures imposed to prevent the spread of the Covid-19 pandemic. As the restrictions are eased, the economy should gradually pick up and grow by 6.4 % in 2021 and 2.3 % in 2022. The economy’s recovery will be supported mainly by household consumption, as a result of pent-up demand but also thanks to rising purchasing power. Conversely, business investment will take somewhat longer to recover and net exports will continue to drag down growth throughout the projection period. On the labour market there will be numerous job losses, especially in the short term, although job creation will pick up again from the spring of 2021. Unemployment, which was still at a historically low level last year, is set to exceed 8% next year. Inflation in 2020 will barely reach 0.3%, mainly owing to the fall in energy prices. By 2022 it is expected to rise to 1.8 %. The government deficit for 2020 is estimated at 10.6% of GDP and although it will diminish thereafter, it will still amount to around 6% of GDP.

Projections for Belgium: summary of the main results

 

2018

2019

2020e

2021e

2022e

Real GDP
(percentage change)

1.5

1.4

-9.0

6.4

2.3

Domestic employment
(average year-on-year change, in persons)

65 700

76 800

-66 700

-22 700

60 600

Unemployment
(in % of the labour force)¹

6.0

5.4

7.3

8.3

7.6

Inflation
(HICP – percentage change)

2.3

1.2

0.3

1.4

1.8

Government budget balance
(in % of GDP)

-0.8

-1.9

-10.6

-6.0

-5.9

Public debt
(in % of GDP)

99.9

98.7

118.1

116.5

 119.0

Source NBB
1 15-64 age group, gross data.

Cut-off date: 25 May 2020. Next publication: December 2020.