Nowcast Q2: Belgian economy faring better than expected
3 min
For the Belgian economy, we project annual GDP growth of 0.8% this year and 1.1% next year. This is according to our latest nowcast, developed in collaboration with Ghent University.
Last month, the National Bank of Belgium (NBB) released its own Business Cycle Monitor. While some models showed slightly positive average estimates, NBB economists set their growth forecast for the current quarter at 0%.
A question of confidence
The latest monthly business survey underscores this pessimism. While retailers and manufacturers remain downbeat, the services sector is the least optimistic of all. On the brighter side, construction firms are gradually turning more upbeat.
Household confidence is also on the rise. Unemployment has levelled off, and self-employment continues its upward trend. Government policy still shapes unemployment benefit claims, as shown in the chart below.
The main risk?
Once again, the biggest risk in this nowcast lies with the White House. The announced US-Iran deal could have been a major driver behind the positive growth we saw among our corporate clients in June.
What about inflation?
This is also reflected in freshly revised inflation expectations. The chart below shows the impact across retail, construction and manufacturing. The share of businesses anticipating price rises clearly fell last month.
Among households, the proportion of ‘inflation pessimists’ (those expecting mainly price rises) has slightly decreased. However, this assumption is now being challenged by recent developments in the Middle East.
Uncertainty around inflation naturally affects our nowcasting exercise. We aim to measure real economic growth using nominal transactional data, which requires assumptions about monthly price changes - assumptions now subject to above-average uncertainty.
For now, we project annual GDP growth of 0.8% this year and 1.1% next year.