Belgium’s economic growth will ‘lose momentum’ in 2022

Belgium’s economic growth will ‘lose momentum’ in 2022

Businesses can expect growth to slow in the first half of the new year, according to companies surveyed in early November by the Federation of Enterprises (FEB) in Belgium.

The growth seen last year will lose momentum in the first half of 2022, Belga News Agency reports, with the drop in optimism inseparable from the explosion in costs that many companies have experienced and will continue to experience.

“Competitiveness is at risk in this country,” said FEB’s CEO Pieter Timmermans, adding that Belgian companies are likely to be hit hard by this in relation to companies in neighbouring countries.

“This will not be without consequences for our export market share. We must avoid Belgium becoming the sick man of Europe. We are now in a phase where we have to take action.”

Fewer sectors expect growth

When it comes to the economic outlook in six months’ time, there are fewer sectors anticipating an increase in activity: whereas there were five in May, there are now only three (temporary work, ICT and construction), among which there are no longer any industrial sectors.

More than 40% of the FEB sectors even expect a deterioration in the economic climate (compared to 25% in May).

The pre-crisis level seems to have also been regained in the third quarter of 2021, putting growth at 5.4% in 2021. But that would weaken quite sharply, to 2.2% in 2022.

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Investments still continue

Despite these somewhat lacklustre forecasts, many companies are determined to continue investing.

“This remains an absolute necessity in today’s Belgium,” said Edward Roosens, economic director of the FEB.

More than 50% of their respondents said they intend to increase their investments in the next six months, compared to 15% in May. Resources will be devoted in particular to technology, digitalisation and the greening of production, according to Roosens.

As far as employment is concerned, the companies do not expect any major changes in the medium term.

Explosion in costs

The gloomier forecasts are tied to an explosion in costs, Roosens says, including the soaring energy prices affecting the rest of Belgium and Europe.

Companies will also face a sharp increase in wage costs in the coming months. The acceleration of inflation will lead to an immediate increase in labour costs via the automatic wage indexation mechanism.

A relaxation of the 1996 law on the wage standard would be “a strategic mistake,” according to FEB’s CEO.

The uncertainty surrounding the health situation is also weighing on the enthusiasm of the employers.

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