GlobalData projects Belgium's economic growth to slow to 0.4% in 2023 due to cost pressures, high financing costs and elevated inflation; food prices rise significantly over past year, with some food experiencing high inflation rates between 12.2%-23.8%

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June 19, 2023 (press release) –

Economic prospects for Belgium remain uncertain as businesses face cost pressures and tighter financial conditions, and the residential construction sector is burdened by high financing costs. Elevated inflation is expected to impact domestic demand, while muted global trade prospects will weigh on its net exports. Against this backdrop, the Belgian economy is projected to grow at a slower pace of 0.4% in 2023, says GlobalData, a leading data and analytics company.

GlobalData’s latest report, “Macroeconomic Outlook Report: Belgium,” reveals that in 2022, the Belgian economy grew at a rate of 3.1%, but faced challenges in the latter part of the year due to high inflation and volatile energy prices. This led to slower growth rates of 0.3% and 0.1% in Q3 and Q4 2023, respectively. However, in Q1 2023, GDP growth improved to 0.5% driven by fixed investment, while household consumption and government spending slowed down. Moving forward, elevated inflation and high borrowing costs will continue to impede growth for the remainder of 2023.

According to GlobalData, Belgium is projected to experience high inflation in 2023, with a forecast rate of 3.6%, which is much higher than the target set by the European Central Bank. Simultaneously, the unemployment rate is expected to marginally increase from 5.6% in 2022 to 6% in 2023, reflecting a sluggish economic environment. These factors are likely to dampen domestic demand, leading to a meagre growth of 0.6% in real household consumption expenditure in 2023, compared to the 4% growth observed in 2022.

Bindi Patel, Economic Research Analyst at GlobalData, comments: “Despite a decrease in energy prices, there are concerns about high food prices leading to a potential food crisis. In May 2023, electricity and natural gas witnessed deflation of 26.3% and 62.1%, respectively. However, food prices saw a significant rise, with inflation reaching 15.5% in May 2023, compared to 6.3% the previous year. Notably, edible oils, fish, dairy products, bread and cereals, and meat all experienced high inflation rates ranging from 12.2% to 23.8% over the past year.”

In terms of sectors, financial intermediation, real estate, and business activities contributed 30.8% to the gross value added (GVA) in 2022, followed by mining, manufacturing and utilities (17.7%) and wholesale, retail, and hotels activities (12.7%), according to GlobalData estimates. In nominal terms, the three sectors are expected to grow by 3.8%, 2.4% and 4.1%, respectively, in 2023 as compared to 5.2%, 3.3%, and 5.7% in 2022.

The construction sector is being hindered by the high cost of construction materials, affecting its potential for growth. In March 2023, the sector’s production index decreased by 2.2% compared to February 2023, and the calendar-adjusted production index saw a larger decline of 4.3% compared to March 2022, according to StatBel. as According to GlobalData estimates, the sector will experience a slowdown, with an average growth rate of 3.5% expected from 2023 to 2025, following a growth rate of 5.4% in 2022.

Belgium is categorized as a very low-risk nation and ranked 23rd out of the 153 nations in GlobalData Country Risk Index (GCRI Q1 2023). The country’s overall risk score is lower than the West European and the world average in GCRI Q1 2023. Belgium performed well in political, demographic, and social structure, technological, and infrastructure parameters when compared with the Western European average.

Patel concludes: “The government deficit is expected to increase in 2023, as expenditure is set to rise due to the automatic indexation of public sector wages and benefits, higher interest payments, and a temporary reduction in employers’ social contributions during the first half of 2023. Reform of energy product taxation, including a permanent reduction in VAT and a reduction in excise duties, will further impact the deficit in 2023 and 2024.”

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