Economic update - September 2020

The preliminary estimate of Belgium’s Q2 real GDP growth by the Insitute for National Accounts was confirmed at -12.1% qoq. The correction in real GDP was roughly in line with the one in the euro area (-11.8%), as was the case in the first quarter of the year. Compared with neighbouring countries, Belgium again performed worse than Germany (-9.7%) and the Netherlands (-8.5%), but better than France (-13.8%). The breakdown by GDP components shows a clear impact of covid-19 on domestic demand (excluding inventories), which dipped heavily (-13.0%). Household consumption expenditure (-12.7%) and housing investment (-15.7%) both slumped. Business investment even fell by 19.9%. The government sector curbed its consumption and investment by 8.3% and 11.7% respectively. Conversely, as in Q1, the contribution to GDP from changes in inventories and from net exports were slightly positive in Q2, at 0.2 and 0.4 percentage points respectively.

The latest survey conducted by the Economic Risk Management Group (ERMG) shows that the impact of the coronacrisis on Belgian companies’ turnover is fading only slowly. Mid-August, their turnover was still 13% below normal levels. Also, additional indicators like electricity consumption illustrate that the recovery is rather sluggish. From the side of consumers, the fear of unemployment reached an historically high level in August. As a result, precautionary savings will likely continue to weigh on consumption growth going forward (see figure BE1). In Belgium, the effective job losses have remained relatively limited so far, thanks to strong government measures to support the economy. In the second quarter, total domestic employment was down by only 0.3% from a year earlier, compared to -3.0% in the euro area as a whole. We expect the labour market situation to worsen more substantially in the coming quarters, though. More precisely, we predict a net job destruction of about 130,000 jobs in 2020-2021.

Manufacturing is lagging

From the side of businesses, there is indication that the Belgian industrial recovery is lagging behind the German one. This follows, for instance, from data on orders and the capacity utilisation rate in the manufacturing sector, which are recovering more slowly in Belgium than in Germany (see figure BE2). 

A similar story goes for exports. The assessment of export orders in August was still far below its precrisis level, as is the case for the number of Belgian trucks on German roads (see Truck Toll Mileage Index in figure BE3). In a context of continuing covid-19 related uncertainty, businesses will likely continue to scale back their investment plans. This is confirmed by the latest ERMG survey, which indicates that business investment in August was still down by one third due to the covid-19 crisis.


The rather sluggish recovery makes us believe that Belgian GDP growth will only rebound to 3.0% qoq in the third quarter, after having plummeted by 3.5% in Q1 and 12.1% in Q2. This is less than the now-cast prediction (+8.0%) recently published by the National Bank of Belgium (NBB). Without a new strong covid-19 upsurge, we see the quarterly growth rate in the fourth quarter stronger at an expected 7.0%. Of course, the uncertainty surrounding these quarterly forecasts is much higher than usual due to the uncertainty regarding the further development of the number of covid-19 infections. The indicated path of quarterly GDP growth implies that we stick to our forecast of the Belgian economy shrinking by 9.0% for the full year 2020, before growing by 5.1% in 2021.

Belgian inflation based on the European harmonised index of consumer prices (HICP) moved sharply higher in July (1.7% yoy compared to 0.2% yoy in June), followed by an even bigger drop in August (-0.9% yoy). The strong volatility in the HICP inflation figures was due to the postponement of the summer sales from 1st of July to the 1st of August. The fashion sector wanted the sales to be postponed, as there was concern that spring and summer stock would immediately have to be offered at discounted prices, not allowing them to make up any of the loss from the lockdown period. The sales are processed in the national CPI according to another methodology. This is why the CPI inflation was more stable in July-August, running at 0.7% and 0.8% respectively. We believe that the underlying upward trend in inflation seen in previous months will continue, bringing the average inflation for 2020 and 2021 to 0.7% and 1.7% yoy, respectively. 

Economic forecasts

National accounts (real yearly change, in %)

              2019 2020 2021
Private consumption 1.1 -7.5 7.3
Public consumption 1.8 -7.4 -2.8
Investment in fixed capital 3.2 -17.9 -1.7
Corporate investment 3.2 -18.8 1.0
Public investment -0.4 -13.6 0.2
Residential building investment 4.9 -17.1 -0.8
Final domestic demand (excl. changes in inventories) 1.8 -10.0 2.9
Change in inventories (contribution to growth) -0.4 -0.5 0.0
Exports of goods and services 1.1 -9.4 3.5
Imports of goods and services 1.0 -11.2 1.4
Gross domestic product (GDP) 1.4 -9.0 5.1
Household disposable income 2.5 -2.5 1.2
Household savings rate (% of disposable income) 13.1 17.6 14.5

Equilibrium indicators 

              2019 2020 2021
Inflation (average yearly change, in %)      
Consumer prices (harmonised CPI) 1.2 0.7 1.7
Health index (national CPI) 1.5 1.0 1.5
Labour market      
Domestic employment (yearly change, in '000, year end) 79.3 -110.0 -20.0
Unemployment rate (in % of labour force, end of year, Eurostat definition) 5.2 7.2 7.6
Public finances (in % of GDP, on unchanged policy)      
Overall balance -1.9 -12.1 -7.3
Public debt 98.7 119.8 118.7
Current account balance (in % of GDP) -1.2 -2.5 -2.0
House prices (average yearly change in %, existing and new dwellings, Eurostat definition) 4.0 -0.5 -3.0

Other forecasts and economic updates



Central and Eastern Europe

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