Belgium by the numbers, October 2014 – GDP 2nd quarter (compared with last year) : +1,0 % – Inflation rate in the Eurozone in 0.3% (compared with last year) : 0.6 % – Industrial production in July : -1.2 % – Unemployment rate in August : 8,5 % – Current Account Balance in June: -4.2% of GDP – Budget Balance (expected) : -2,5 % of GDP – 10 year government bonds (25.10.2014) : 1.28%
2014 will continue to be a year that will be driven more through currency fluctuation and commodity prices. We have seen the beginning of the shifts this summer through a large movement in the dollar to the Euro, which most analysts believe, will continue due to the faster recovery in the United States compared to Europe which might as a whole go back into recession.
This shouldn’t impact Belgium as much as other European countries since its main export partners are mostly European. The US only makes up for 5.3% of Belgian exports and the UK (the other big currency mover) makes up 7.3%.
The big surprise has been the performance of Belgian bonds as they continue to decrease in yield (which in pricing terms means that they have gone up in value) to a dismal yield of 1.28%. So with the formation of the Michel government, they will not be forced to make radical changes to their $478 billion debt, which makes up for 99.6% of GDP.
This has most likely come from a pair of activities which include Moody’s move to raise its outlook for Belgium (rated AA3) from negative to stable and a flight to quality during the market hiccup in October.
While the unemployment rate remains extremely high, it is slowly improving, especially amongst the younger demographic. The new government has talked about some reforms but it is still far from fixing the fact that the hourly costs per worker amounts to 38 € in Belgium, the third most expensive in all Europe (Eurozone average = 23,7€).