Confidence indicators in Belgium weakened in recent months in line with growing concerns about the eurozone’s growth outlook. Sentiment in manufacturing in particular worsened amid a weak external environment. Most striking, the assessment of export-order book levels took a new hit over the summer months, fully wiping out the previous upward trend which began in March (see figure BE1).

At the regional level, the gloom affecting industry seems to impact consumers’ morale more in Flanders (see figure BE2). Belgium’s industry is concentrated mainly in Flanders, with a number of well-known companies in the region declared bankrupt in the course of 2024 (e.g., bus manufacturer Van Hool and semiconductor maker BelGaN). For Belgium as a total, the number of employees involved in collective dismissals was strongly up in the first three quarters of 2024, reaching 8,900 people and rising above the 2010-2023 full-year average.

Growth engine stuttering

It's not all bad news, however, and hence the current weakness in manufacturing need not be a barometer of ill-health more broadly. The business climate in professional services is holding up well so far and in trade sentiment even edged up strongly in August and September. The depressed signals from the manufacturing surveys nevertheless led us to slightly revise downward the outlook for quarterly GDP growth in the third and next quarters. Specifically, and in line with changes to our euro area scenario, we downgraded qoq growth of the Belgian economy in Q3, from 0.20% to 0.15%, and in Q4, from 0.30% to 0.25%. Quarterly growth is expected to stay slightly below 0.30% in the first half of 2025, with a revival back to that rate from Q3 2025 on. Belgian growth for the whole year is now seen at 1.0% for both 2024 and 2025, down from 1.1% and 1.2% respectively.

Belgian harmonised inflation (HICP) stabilised at 4.3% in September, again witnessing that it is falling slower than expected. Following the drop between June and August, energy inflation fell only marginally this time, from 11.2% to 11.0%. Electricity and gas had a big upward month-on-month effect on the September inflation rate. The Belgian figures contrast to the euro area: while euro area inflation is cooling faster than expected, this is not the case in Belgium. As a result, we once again slightly revised the outlook for 2024 annual HICP inflation, from 4.0% to 4.1%. We still see monthly headline inflation figures falling further going into 2025. Our 2025 annual inflation forecast is now at 2.1%, slightly down from 2.2% previously.

Q2 house price data

In early October, Eurostat published harmonised house price figures for the second quarter of 2024. Most striking in the Q2 figures is the fall in the number of EU countries with a price decline compared to the previous quarter. At the peak in Q4 2022, there were sixteen. By Q1 2024, that number had dropped to eight and in Q2 2024 it fell further to just two (see Sky over European housing market clears further (kbc.com)). Belgium was one of these two, with the quarterly price decline limited to 0.2%. The correction concerned only new construction (-1.2%). Prices of existing dwellings continued to rise slightly by 0.1% (see figure BE3). The minuscule decline in prices for dwellings as a whole followed three previous quarters of decent price increases. Cumulatively, that previous increase between Q2 2023 and Q1 2024 was 3.6%. For existing homes, it was 2.5%, for new ones as much as 8.1%. 

Typically, quarterly changes in house prices are quite volatile, so we need not be too worried about the small price drop in Q2. On an annual basis, price dynamics continued to pick up in Belgium, from 3.2% yoy in Q1 to 3.4% yoy in Q2. For new dwellings, the yoy increase in Q2 was 6.8% (7.8% in Q1), for existing dwellings, 2.6% (2.1% in Q1). In fact, the second-quarter figure brought some tempering to the robust pace of new construction price increases in previous quarters. The Q2 data do not change our view on Belgian real estate substantially. For existing and new dwellings taken together, we still see annual house price growth running at some 3% in both 2024 and 2025.