'A brightening horizon': Belgian economy to improve in 2023, study finds

'A brightening horizon': Belgian economy to improve in 2023, study finds
Credit: Laurie Dieffembacq / Belga

Aspects of the Belgian economy are set to improve considerably this year compared to 2022, a recent report by Belgium's Federal Planning Office (FPO; Bureau fédéral du Plan) has found.

In an economic forecast published on Thursday, the FPO predicted that real disposable incomes in Belgium should increase by 4.2% in 2023 — a significant improvement on last year's 1.6% decline. It also noted that inflation should fall to 4.5% this year, down from 9.6% in 2022.

"The Belgian economy has shown remarkable resilience so far despite the magnitude of the price shock," said Igor Lebrun, an Advisor at the Federal Planning Office. "A recession should be avoided. The economic horizon should gradually brighten during the year."

The FPO claimed that the improved economic outlook was due to a confluence in factors, including lower-than-expected gas prices and government-mandated wage indexations.

"Several factors have made it possible to avoid a recession and could allow economic growth to gradually strengthen during 2023," the report stated. "Thus, energy prices have fallen considerably, alternatives to Russian gas have been found, and the post-Covid recovery continues. In addition, household spending is supported by the favourable development of employment and by the measures taken by the public authorities to reduce the energy bill."

Darkening clouds?

However, the study also predicted that several aspects of the Belgian economy will not improve — or, indeed, may even worsen — over the coming year.

In particular, the FPO predicted that Belgium's GDP will grow by just 1% in 2023: an increase on the FPO's previous forecast of 0.5%, but still a significant decline compared to last year's 3.1% growth rate. It also predicted that the number of people in employment would rise by just 38,000 this year — 62,000 fewer than in 2022.

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Furthermore, despite predicting a decrease in inflation, the FPO noted that core inflation — which strips out the impact of energy and unprocessed food prices — continues to increase. It also pointed out that its forecast relies upon several assumptions that may not be borne out by coming events.

"These forecasts are surrounded by uncertainties relating to the evolution of the war in Ukraine, the extent of the economic recovery in China, and inflation," the report noted. "A faster-than-expected slowdown in inflation can give an additional impetus to the economic recovery.

On the other hand, the persistence of high inflation could encourage central banks to raise their key interest rates even more, which could lead to a stronger than expected rise in long-term rates and put heavily indebted states in difficulty."

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