Belgium's GDP growth accelerated in the third quarter of 2023, as the country's economic outlook continues to brighten following the recent news that inflation fell close to zero in October.
According to a report published on Tuesday by Eurostat, the EU's statistical office, the Belgian economy expanded at a quarterly rate of 0.5% from July to September this year – up from 0.3% in the previous quarter.
The country's quarterly growth rate was the second highest in the eurozone after Latvia (0.6%). Its year-on-year growth of 1.5% was the third highest in the bloc, after Portugal (1.9%) and Spain (1.8%).
Belgium's accelerated expansion comes in spite of the fact that the eurozone as a whole contracted by -0.1% at a quarterly rate in this year's third quarter, after expanding by 0.2% in the second.
Belgium's growth rate was also considerably higher than that of its neighbours. France experienced a 0.1% quarterly expansion, while Germany – Europe's largest economy – contracted by -0.1%. (Data for Luxembourg and the Netherlands have not yet been released.)
Inflated hopes?
Eurostat's study came on the same day that it reported that year-on-year eurozone inflation (as measured by the Harmonised Index of Consumer Prices (HICP)) fell to 2.9% in October, down from 4.3% in September. Eurostat further noted that Belgium's annual inflation rate fell from 0.7% to -1.7% over the same period.
Similarly, Belgium's official statistics office Statbel reported on Monday that Belgium's year-on-year inflation rate as measured by Consumer Price Index (CPI) fell to 0.36% in October, down from 2.39% in September. (The CPI is a slightly different index to the HICP; in particular, the latter better facilitates comparisons of inflation rates in different countries.)
Apart from a brief blip in April, the eurozone's annual inflation rate has steadily declined since peaking at 10.6% in October 2022. Belgium's annual inflation rate has also decreased fairly steadily since peaking at 12.27% in October last year, except for a similarly brief uptick in March.
Interestingly, both the Eurostat and Statbel data make clear that October's decline in annual inflation is largely a consequence of the fact that current prices are being compared to last year's peak.
Thus, Eurostat reported that month-on-month inflation (as measured by the HICP) in the eurozone actually increased in October by 0.1%, while Belgium's monthly inflation rate rose by 0.3%. (Statbel also reported that Belgium's monthly inflation rate grew by 0.3% in October.)
Dark clouds on the horizon?
Belgium's generally positive economic data comes just a month after the Federal Planning Bureau (FPB) revised the country's expected growth figures downwards for 2023 and 2024, citing a "deterioration in the international environment."
In particular, the FPB forecast that the Belgian economy would grow by just 1.0% in 2023 before expanding by 1.3% in 2024: 0.3 percentage points fewer each year than previously forecast.
The study also predicted that Belgium's annual inflation rate would climb to 4.1% in 2024: 0.8 percentage points higher than formerly anticipated.
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Similarly, last week the International Monetary Fund predicted that a "weaker external environment and slowing domestic demand" mean that the Belgian economy will expand by just 1.25% "in the medium-term". This is barely half the country's average annual growth rate over the past three decades.
The fund also forecast that inflation will rise to "above 4%" in 2024: double the European Central Bank's 2% target rate.
