Belgium to fall into recession this year, UCLouvain study finds

Belgium to fall into recession this year, UCLouvain study finds
Credit: Herwig Vergult / Belga.

The Belgian economy is expected to fall into recession this year as a result of high inflation and global economic uncertainty, according to new data released by the Institute of Economic and Social Research (IRES) at UCLouvain and reported on by l'Echo and Sud Info.

IRES estimates that, after declining 0.3% between September and December 2022, the Belgian economy will shrink a further 0.1% in the first quarter of this year – technically pushing the Belgian economy into recession, which is defined as two consecutive quarters of negative growth.

"At the end of 2022, many obstacles to growth persist: high inflation, tighter financing conditions, low confidence and high uncertainty and slowing global economic growth," IRES wrote. "As a result of these, Belgian economic activity should continue to contract at the beginning of 2023."

IRES further predicted that the Belgian economy will grow a paltry 0.2% over the whole of this year, while – more promisingly – it forecast that inflation, which is currently at 10.35%, will fall to around 3% by the end of 2023.

A pessimistic outlook

IRES's forecast is more pessimistic than that of the National of Bank of Belgium (BNB), which recently estimated that Belgium would narrowly avoid a recession by experiencing a tiny but positive growth in the first quarter of this year.

The BNB predicted that Belgium would experience three times the growth this year than that predicted by IRES (0.6%), and also estimated that its economy grew slightly more than IRES believes it did last year (3.1% instead of 3.0%).

Whatever the correct estimates might be, there is no doubt that the economic outlook is becoming increasingly dismal not just for Belgium, but for Europe and, indeed, most of the world.

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Earlier this week, the World Bank warned that the world is "perilously close to falling into recession" and forecast that global GDP will increase a mere 1.7% in 2023, down from the 3% it had predicted in June last year.

In particular, the Bank noted that soaring inflation, high interest rates, declining investment, and the continuing impact of Russia's war in Ukraine have left the world economy in a "fragile" condition such that "any new adverse development – such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the Covid-19 pandemic, or escalating geopolitical tensions – could push the global economy into recession."

The Bank's warnings about the dire state of the global economy were recently echoed by the IMF Managing Director Kristalina Georgieva, who predicted a "tough year, tougher than the year we leave behind" in 2023, and forecast that one-third of the world's economy will be in recession this year, including half of all EU Member States.

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