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

Annual GDP growth recovered strongly in Belgium in 2021 (+6.2%) as a result of the global recovery in economic activity. The rebound of GDP in Belgium was more pronounced than the one in the European Union (27 countries; +5.3%) and in the eurozone (+5.4%). In the first quarter of 2022, Belgium saw its GDP increase by 4.9% year-on-year, which is slower than in the previous quarter (+5.7% year-on-year). While domestic demand excluding stocks, especially private consumption, contributed to this favourable GDP growth, net exports weighed on the growth of economic activity in the first quarter.

Services are usually the main growth driver for the Belgian economy. In 2021, they were also the main supporters of the recovery of economic activity.

The production index in the manufacturing industry fell sharply in 2020 to rise again in 2021. The production index for industry excluding construction and for the energy sector both exceeded their pre-crisis level in 2021, whereas the construction index did not. Data from the first quarter of 2022 shows a clear recovery in construction.

Business demography was strong again in 2021, with more business creations than terminations and a net balance of 43,839 units, the largest net balance observed over the 2017-2021 period. Entrepreneurial dynamism is still observed in the first quarter of 2022, with a positive net “creations-terminations” balance (22,146 units). This balance increased year-on-year by 13,247 units and represents the largest net balance observed since the first quarter of 2017.

Overall, 2021 proved to be an uneven year in the labour market, with the employment rate rising, but both the total and under-25 unemployment rates increasing. In the first quarter of 2022, the job market improved, with both the unemployment rate and the employment rate experiencing a favourable trend, compared to the year before. Indeed, the youth unemployment rate stood at 14.2% (against 18.6% a year earlier). As for the total unemployment rate, it improved slightly in the first quarter of 2022 and reached 5.3% (against 6.6% a year earlier). The employment rate increased as well in the first quarter of 2022, reaching 66.4% (compared to 63.6% a year earlier).

After a year 2020 marked by a clear slowdown in inflation, partly as a result of the collapse of oil prices on world markets, inflation as measured by the Harmonized Index of Consumer Prices (HICP) rose in 2021 and during the first semester of 2022, where it reached 9.9% in the second quarter of 2022. All components of the HICP are rising, but it is the energy component that is driving prices upwards. With an inflation of 64.3% in the second quarter of 2022, the energy component accounts for more than two-thirds of total inflation. The estimated inflation increase in 2022 is 8.1%.

With regard to the short-term growth prospects for the Belgian economy, the Federal Planning Bureau indicates that the economic recovery has already started in 2021, with growth amounting to 6.2%. However, according to the Planning Bureau, Belgian growth will slow down to about 2.6% in 2022.