Belgium's Economy in a Nutshell - Economic Outlook of July 2021
The Economic Outlook is published quarterly. It consists of various parts: an executive summary, a chapter presenting Belgium as a whole, a chapter on recent economic developments, a chapter on foreign trade, a chapter comparing Belgium's performance with the one of the European Union for a number of indicators and a chapter on GDP growth forecasts. The following lessons can be drawn from this edition of the Economic Outlook:
Recent cyclical developments indicate that annual GDP growth collapsed in Belgium in 2020 (- 6.3 %) as a result of the global coronavirus pandemic that also broke out in our country in March. Previously, Belgian economic growth was rather strong and amounted to 1.8 % in 2019. While the decline in GDP was more pronounced in Belgium than in the European Union (27 countries; -6.1 %), it was less pronounced than in the euro area (-6.6 %). In the first quarter of 2021, Belgium recorded a year-on-year decline in GDP of 0.5 %, a smaller decrease than the one recorded in the fourth quarter of 2020 (-4.9 %). Public consumption and investment spending drove economic activity in the first quarter of 2021, as did net exports. In contrast, private consumption and changes in inventories dampened economic growth in this first quarter of 2021.
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 taken as a whole fell sharply year-on-year in the first three quarters of 2020 . It is mainly the downturn observed during the second quarter that pulls the results down under the effect, in particular, of the partial or total cessation of activity in certain industries following the containment measures taken by the government to combat the expansion of the COVID-19 pandemic. However, a recovery in production in the manufacturing industry was already observed during the last quarter of 2020 and was confirmed in the first quarter of 2021.
Business demographics continued to be strong in 2020, with more businesses starting than closing down and a net balance of 40,137 units was observed, the largest net balance noted since 2016. While this entrepreneurial dynamism continued in the first quarter of 2021 with a positive net balance of creations and terminations (of 8,899 units), it should be noted that this balance deteriorated year-on-year (1,040 fewer units) and that terminations increased compared with the corresponding period in 2020.
Overall, 2020 proved to be an unfavourable year for the labour market, with employment rates falling and unemployment rates rising, both overall and for those under 25. The deterioration continued in the first quarter of 2021 year-on-year as the employment rate fell to 63.6 % from 65.1 % compared to a year earlier, the youth unemployment rate rose to 20 % from 12.9 % in comparison with a year earlier and the total unemployment rate reached 6.8 % from 5.1 % compared to 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 two quarters of 2021. The most striking development here also concerns energy prices, which rose by more than 18 % in the second quarter of 2021, being in line with the rise in world oil prices. With regards to the short-term growth prospects for Belgium, the Federal Planning Bureau has indicated a decline in economic activity of 6.3 % in 2020 as a result of the global coronavirus crisis. However, an economic recovery is already expected in 2021, where economic growth is forecast to rise to 5.5 % as a result of the recovery of activities and the progress of the vaccination campaign. The Belgian growth is forecast to equal 2.9 % in 2022.