- 16-12-2024

Belgian growth: a temporary acceleration, followed by a slowdown

2 min

In recent years, Belgium's economic growth has been sustained despite challenging external circumstances. We have managed to recover from the decline in GDP caused by the coronavirus more quickly than other European countries, and even the energy shock has had a limited impact on our economic growth. While German growth came to a halt, Belgian GDP continued to grow. But will this trend continue?

Q4 nowcast: 0.5%

The National Bank of Belgium (BNB) has published its final figures for Q3, showing a growth of 0.3%. This is slightly higher than the expected 0.2%. The increase is mainly due to a strong recovery in private consumption, which grew by 1.4% between July and September, our strongest acceleration since the pandemic.

Our business clients' transaction data is also evolving positively. These figures, aggregated and anonymised, are a unique ingredient in our nowcast, developed in collaboration with Ugent. Even traditional high-frequency indicators (HFIs) are showing a mostly positive trend. Retailers' confidence is approaching its highest point since 2022, despite a small decline in November. Sentiment has also improved in the construction and services sectors, although industry remains pessimistic.

Our nowcast (quantitative) estimate is 0.5%. At first glance, this figure seems high, especially compared to the trend growth of around 0.3%. However, it is reassuring that the BNB has reached a similar conclusion in its business cycle model (BCM) at the beginning of the week. The series of new and less new models used in this exercise give estimates ranging from -0.8 to 2.8, with a median of 0.5%. From a historical perspective, this 0.5% is not unusual. Between 2009 and 2024*, quarterly growth has reached a level at least as high as this one quarter out of three.

Several temporary factors could also lead to a temporary surge in growth. For example, the fear of increased tariffs is encouraging exporters to the United States to sell their products quickly, resulting in a temporary increase in exports**.

The impact of Trump II

Our colleagues in London have analysed the potential impact of the trade measures announced by the President of the United States. They assume that the import tax on Chinese products will increase by 25 percentage points, reaching an effective average rate of 40%. For other countries, it would be an increase of 3 percentage points, effective from the end of 2025.

The United States is an important destination for our exports, but not as significant as our neighbours. Germany, France, and the Netherlands receive nearly half of our exports, compared to just over 5% for the United States. However, we will still be vulnerable, if only indirectly, when the new measures slow down growth in France and Germany.

Today, we assume that the tariffs and the uncertainty surrounding them will lead to a cumulative increase of just one percentage point in quarterly GDP by the end of 2026. In other words, the quarterly growth rate will slow down from 0.3% to 0.2% over the next two years. The total impact will thus remain relatively limited: for 2025 and 2026, we are lowering our growth forecasts from 1.3% to 0.9%.

These forecasts are subject to a higher degree of uncertainty than usual. What counter-measures will the countries affected by the tariff increase take? Will we soon see a federal government accelerate fiscal consolidation, with a reduction in public spending? One thing is for sure: the economy will be a hot topic of conversation at holiday gatherings.

* For this calculation, we have excluded the Covid years (2020-2022).

** On the other hand, stocks would decrease at the same time, but this consequence could only manifest itself (in part) in later quarters. In any case, if exports were to increase now, it would not last.