Global Future > Country Report > Q4 2009 > Extract

Belgium Economic Outlook : Export-led revival

Belgium has joined the recovery, which has been led by external trade. However, headwinds remain – low investment continues to plague the economy and consumers are still hesitant to resume spending. A fairly unspectacular recovery path is likely, with long-term growth hampered by unfavourable demographics.

Business outlook : Upgraded forecasts, but domestic economy still sluggish

• 2009q3 estimates reveal Belgium’s recession is over. A breakdown of GDP is not yet available, but exports are likely to be the driving force, as the recovery in Belgium’s key trading partners, Germany and France, was sustained and most of Europe is now in recovery. While headwinds remain, such as cautious consumers and falling investment activity, there are other bright sparks in the economy aside from external trade, including a surge in business confidence and unemployment increasing only gently.
• We expect a positive end to 2009, albeit modest, with a continued gradual revival throughout 2010. We have upgraded our near term projections in the face of faster improving global conditions and growing confidence. That said, growth in 2010 will still be fairly lacklustre at 1.5%, and until consumers and investment jump on the recovery bandwagon in 2011 growth will remain sluggish and reliant on government and net exports.
• Employment has been contracting and although the rise in unemployment rates has slowed recently it still remains on an upward trend. We expect this trend to continue to play out through 2010, which is the underlying cause of the weak revival in consumer spending. Past 2010, employment will be hampered by the shrinking working age population and limited labour supply. Unemployment meanwhile is likely to peak at 8.7% in 2010 but edge down to 6% over the longer term.
• Future growth potential for Belgium is estimated at 1.9% per annum in real terms, below past trend of 2.2% p.a. recorded over the 1998-2007 period. External trade will become less supportive of GDP growth as import penetration

Key risks

• With recovery underway, risks now seem to lie more on the upside. There is potential for global demand to step up, and if this materialises, then the open Belgium economy would benefit.
• If recovery were to gather momentum, some of the job cuts projected for 2010 may be scrapped and this, combined with rising confidence, could boost spending growth.

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