Belgium's Economy in a Nutshell - Economic Outlook of November 2021
Table of Contents
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 (- 5.7 %) 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 2.1 % in 2019. However, the decline in GDP was less pronounced in Belgium than in the European Union (27 countries; -5.9 %) and in the euro area (-6.4 %). In the second quarter of 2021, Belgium recorded a year-on-year increase in GDP of 15.1 %. This is also the first increase in GDP since the start of the health crisis. 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 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 three quarters of 2021. The construction sector, however, saw a decline in output in the third quarter of 2021.
Business demographics continued to be strong in 2020, with more business creations than terminations and a net balance of 40,137 units, the largest net balance observed over the 2016-2020 period. The entrepreneurial dynamism continued in the second quarter of 2021, with a positive net balance of "creations-terminations" (14,019 units), we observe, on the one hand, that this balance has increased strongly year-on-year (8,109 units less) and this, despite the deterioration of terminations 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 20.5% (from 16.4% a year earlier) and the total unemployment rate reached 6.5% (from 5.0% a year earlier). The employment rate increased in the second quarter of 2021 to 65.0% (from 64.2% 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 the third quarter of 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 European commission already expects an economic recovery in 2021, where economic growth is forecast to rise to 6.0 % as a result of the recovery of activities and the progress of the vaccination campaign. The Belgian growth is forecast to equal 2.6 % in 2022. However, the appearance of new variants and the surge in coronavirus contaminations at the end of 2021 could again weigh on economic activity in 2022.