Belgium's Economy in a Nutshell - Economic Outlook of February 2022

Although annual GDP growth collapsed in Belgium in 2020 (-5.7 %) as a result of the global coronavirus pandemic. The decline in GDP in Belgium was less pronounced than that of the European Union (27 countries; -5.9 %) and the euro zone (-6.4 %). The recovery of economic activity is observed from 2021. Recent economic developments show that in the third quarter of 2021, Belgium's GDP grew by 4.9 % year-on-year, a slower pace than in the previous quarter (+15.1 % year-on-year). Both domestic demand excluding inventories and net exports contributed to this recovery in GDP.

Services are usually the main growth driver for the Belgian economy. In 2020, they were the main contributors to the decline in economic activity.

The production index in the manufacturing industry fell sharply in 2020, only to rise again in 2021. With the exception of the construction sector, the industrial sector as a whole and the energy sectors have exceeded their pre-crisis level in 2021.

Business demographics continued to be strong in 2021, with more business creations than cessations and a net balance of 43,839 units, the largest net balance observed over the 2017-2021 period. While the entrepreneurial dynamism continued in the second quarter of 2021, with a positive net balance of creations and cessations (9,772 units), this balance has nevertheless strongly declined year-on-year (193 fewer units), despite a slight deterioration in cessations compared to the corresponding period of 2020.

Overall, 2020 proved to be an unfavourable year for the labour market, with the employment rate falling and unemployment rates rising, both for total unemployment and for young people under 25. The deterioration in unemployment rates continued in the second quarter of 2021 (year-on-year). The youth unemployment rate rose to 19.2% (from 18.0% a year earlier) and the total unemployment rate reached 6.4% (from 6.6% a year earlier). The employment rate increased in the second quarter of 2021 to 66.4% (from 65.1% a year earlier),

After the year 2020, which was marked by a clear slowdown in inflation and the collapse of oil prices on world markets, amongst other things, consumer prices measured by the HICP accelerated in the first three quarters of 2021. The most striking development here also concerns energy prices, which rose by more than 24.6% in 2021, being in line with the rise in oil and gas prices on the world markets. As a result, natural gas, electricity and fuels rose sharply over the period.

With regards to the short-term growth prospects for Belgium, the Federal Planning Bureau indicates that the economic recovery has already taken place in 2021, where growth amounts to 6.1%. Belgian growth would slow down somewhat in 2022 to 3.0 %. If the consumer price index rises in 2021, the significant growth in energy prices, that has already been observed at the end of 2021 should continue, leading to an estimated rise in inflation of 5.5% in 2022.