The negative effects of the novel Coronavirus (Covid-19) on the economy are probably limited for now, but things could get worse in the second quarter of the year, Belgium’s national bank, BNB, notes in its latest Business Cycle Monitor, published on Monday.
Assessing the economic impact of Covid-19 proves to be a complex task since most available short-term indicators do not yet reflect its recent appearance in Europe, the BNB explained in a press release. In the first quarter, the negative incidence on growth is still being assessed as limited, but it could worsen in the second quarter if severe containment measures were to be taken or if supply-chain problems were to lead to production stoppages in manufacturing, the BNB stressed.
The Bank expects Belgium’s economy to grow by 0.2% in the first quarter of 2020, after experiencing 0.4% growth in the final quarter of last year, against the background of a slowdown in corporate investments and investments in residential real estate, while private and public consumption should remain robust.
However, the BNB warns that its Business Cycle Monitor was finalised on 6 March, before this weekend’s decision by the Italian Government to quarantine millions of people in the north of the country, an unprecedented decision affecting a large part of the Italian economy.
Since Italy is Belgium’s sixth-largest trading partner, accounting for close to 5% of its total exports, the move stands to have a greater impact on export demand and increases the possibility that the first quarter’s growth forecast may need to be reviewed downward, the bank cautioned.
“More importantly,” it added, “prospects for the second quarter are currently much worse.”