The earlier flash estimate of Belgium’s Q4 2024 real GDP growth was confirmed at 0.2% qoq. This is a slight deceleration from the steady pace of 0.3% quarterly growth recorded in the previous four quarters. Growth in the final quarter of 2024 was driven by domestic demand, with private consumption (+0.9% qoq) contributing the most, similar to the situation in Q3 2024 (see figure BE1). Investment in dwellings continued its downward trend (-2.3%). Business investment rose by 0.6%. Public consumption decreased by 0.4%, while public investment increased by 0.8%. Lastly, exports and imports declined by 0.4% and 0.2%, respectively, resulting in the growth contribution of net exports becoming negative again (-0.2 percentage points). 

Turning to the production approach to GDP, value added growth in Q4 in the services and construction sector was confirmed at 0.2% and 0.7%, respectively. Industry continued to record negative growth in Q4, with the correction (-0.2%) even slightly bigger than reported earlier in the flash estimate (-0.1%). Despite this, there was also more positive news on the sector in the Q4 report published by the National Accounts Institute (NAI): net job losses in industry totalled 400 units in Q4, which was much less than in the previous five quarters. For the economy as a whole, domestic employment saw a somewhat stronger quarterly increase again in Q4 (see figure BE2). Also, business confidence in the manufacturing industry improved for the second consecutive month in February. Conversely, the business climate weakened in business-related services and the building sector. In both sectors, respondents foresee a contraction in market demand.

Uncertain times

The biggest surprise among all indicators last month came from consumer confidence, which rebounded sharply. The surprisingly big improvement was almost entirely accounted for by a significant decline in unemployment expectations, which had been on a worsening trend over the past half year (see figure BE3). Likely, many responses in the survey have been positively affected by the announced reforms of the new federal government, including the plan to limit the unemployment benefit duration. We think the renewed confidence should not be seen as a positive signal regarding the business cycle. People’s sentiment is typically more volatile than their consumption. Consumers sometimes think extremely positively or negatively about the general economic and political situation. But as long as that doesn’t have an impact on their own financial situation, their readiness to buy will not be impacted accordingly. Note that consumers actually became somewhat more pessimistic regarding their own financial situation in February, while slightly revising upward savings intentions.

Given still high uncertainty regarding tariffs and trade, we decided to not make changes to the growth forecast at present. Our overall cautious scenario, which assumes US tariffs on the EU are coming on April 2, at least on particular products, currently sees weak Belgian GDP growth at 0.7% and 0.9% in 2025 and 2026, respectively. These figures continue to be at the lower end of the range of forecasts made by other institutions, which are often still above 1%. The risks surrounding the scenario are unusually large. A full-fledged US-EU trade conflict could result in a substantial loss in activity, driving Belgian growth even lower than we currently expect. Manufacturing of chemical and pharmaceutical products, machinery, and transport equipment, which taken together accounts for 82% of Belgian exports to the US, could be hurt in particular. On the other hand, the large German fiscal impulse could have some wider positive impact on euro area and Belgian growth. One should not become too optimistic on this, however, as it remains uncertain how quickly the stimulus will take effect and how big the economic impact could be.

Upside inflation surprise

Belgian HICP inflation for February was unchanged at 4.4%. So, a further decline, which had been widely expected, did not materialise. After the unusually big decline in January (-7.1% mom), core goods prices increased more than usual in February (+8.1% mom). The sharp rebound in prices after the January winter sales was a key driver behind the big month-on-month increase in total HICP in February (+2.4%). Belgian yoy inflation in February still ran substantially (i.e. 2 percentage points) higher than euro area inflation. Among euro area countries, the rate in February was higher only in Estonia and Croatia. High inflation for both energy and food in particular continues to drive relatively high general inflation in Belgium. On top of that, Belgian services inflation picked up again in recent months, reaching 4.2% in February, while in the euro area it eased a bit. The persistence of inflation implies an upside risk for annual average inflation in 2025. We decided to increase our 2025 inflation forecast to 3.2%, from 2.8% previously, with the 2026 forecast now seen at 1.7%.