Belgium's Economy in a Nutshell - Economic Outlook of November 2022
Table of Contents
Annual GDP growth recovered strongly in Belgium in 2021 (+6.1%) 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; +5.4%) and in the eurozone (+5.3%). In the second quarter of 2022, Belgium saw its GDP increase by 4.1% year-on-year, which is slower than in the previous quarter (+5.3% year-on-year). While domestic demand excluding inventories, especially private consumption, contributed to this favourable GDP growth, the same goes for net exports and changes in inventories during the second quarter of 2022.
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 manufacturing fell sharply in 2020, only to rise again in 2021. The production index for industry excluding construction and for the energy sector both exceeded their pre-crisis levels in 2021, unlike that for construction. In the second quarter of 2022, output in industry excluding construction and in energy stalled. Construction output is once again asynchronous, rising by one year.
Business demographics were strong again in 2021, with more business creations than terminations and a net balance of 43,839 units, the largest net balance was observed over the 2017-2021 period. However, entrepreneurial dynamism weakened in the second quarter of 2022. In fact, despite a net balance of "creations and terminations" that is still positive (9,822 units), it decreased year-on-year by 4,137 units.
Overall, 2021 proved to be a mixed 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. In the second quarter of 2022, the labour market improved, with both the unemployment and employment rates moving favourably year-on-year. The youth unemployment rate was 17.4% in the second quarter of 2022 (down from 19.4% a year earlier) and the total unemployment rate was 5.8% (down from 6.3% a year earlier). The employment rate was 66.0% in the second quarter of 2022 (up from 65.0% a year earlier).
2020 was 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) increased during 2021 and the three first quarters of 2022.
All components of the HICP are up, but it is the energy component that is driving up prices. With inflation at 59.3% in the third quarter of 2022, this component explains more than half of total inflation. The latest estimates predict an inflation increase of 9.3% in 2022.
With regard to the short-term growth prospects for the Belgian economy, the economic recovery has already started in 2021, with growth amounting to 6.1%. However, according to the Federal Planning Bureau, Belgian growth will slow down to about 2.6% in 2022 and 0.5% in 2023.