Economic projections for Belgium – Autumn 2015

The article presents the new macroeconomic projections for Belgium for the period from 2015 to 2017, produced by the Bank as part of the Eurosystem’s projection exercises. Following the decline in foreign demand in the first part of the year, the recovery in the euro area has lost some momentum recently but the slowdown has remained contained as growth is still bolstered by the steep fall in oil prices, the depreciation of the euro and low interest rates, in a context of fiscal policies becoming less restrictive. According to the Eurosystem projections, real GDP in the euro area is set to expand by 1.7 % in 2016 and by 1.9 % in 2017. As for Belgium, the economic recovery continued at a modest pace in the first half of 2015 before running out of steam somewhat from the summer, against a backdrop of deteriorating business and household confidence. According to our projections, after reaching 1.4 % in 2015, GDP growth in Belgium is likely to fall to 1.3 % in 2016 before reviving to 1.6 % in 2017. Growth in economic activity and the reduction in labour costs are expected to support net job creation which are set to reach a cumulative figure of 114 000 units over the period from 2015 to 2017, with the unemployment rate dropping to 8.1 % in 2017. Inflation has been heavily influenced by the fall in energy prices in 2015 and should amount to only 0.6 % this year. Inflation is expected to rise next year (to 1.9 %), owing to the rise in commodity prices, but primarily on account of the increase in indirect taxes. Under the impact of measures taken to boost competitiveness via wage moderation, unit labour costs growth in the private sector should remain very weak at least until 2016. Only taking account of the fiscal measures subject to the guidelines for the Eurosystem projections exercises, the public deficit is expected to fall only modestly over the projection horizon, from 3.1 % of GDP in 2014 to 2.5 % in 2017. Government debt is projected to stabilise at around 107 % of GDP.