Revisions of past GDP

According to the preliminary estimate of the National Accounts Institute (NAI), third quarter Belgian real GDP grew by 0.20% qoq. The figure was broadly in line with what we had expected (0.15%) and followed an upwardly revised 0.32% and 0.28% expansion in the first and second quarter (from 0.27% and 0.21% published previously). A longer series of GDP data, from 2009 onwards, was revised by the NAI as part of the process to improve the quality of statistics in line with Eurostat’s recommendations. Such a benchmark revision of national accounts data takes place every five years. The general trend of Belgian economic activity since 2009 did not change, but for the individual years the revision caused a more significant adjustment of the annual growth figures. For the more recent years, annual real GDP growth in 2019 (2.4%), 2020 (-4.8%), 2022 (4.2%) appears to have been better compared to the previously released data (2.2%, -5.3% and 3.0%, respectively), while in 2021 (6.2%) and 2023 (1.3%) it was worse (6.9% and 1.4% previously reported).

The Belgian Q3 2024 growth figure (0.2%) came out below that of the euro area (0.4%, excluding Ireland 0.3%) and was in line with that of Germany (0.2%). The initial Q3 estimate shows that value added in the services sector rose by 0.2%, a slowdown compared to qoq growth in previous quarters. Value added in construction remained stable, while in industry it continued to contract (-0.1%). Component data for Q3 growth are not yet available. Frequently available data point to ongoing weakness on the side of businesses in the manufacturing industry, indicating that Belgian exports likely have been weighing on Q3 growth. Most notably, capacity utilisation in the sector currently is at levels previously seen only in periods of severe crisis. In the textile and chemical sectors, the rate is even more than 10 percentage points below its long-term average (see figure BE1). A more thorough analysis of Belgian industry can be found in a recently published KBC Research Report "Een macro-economische blik op de Belgische industrie" (currently only available in Dutch).

Trump and Belgium

Trump's second presidency and the related protectionist turn of the US may profoundly harm Belgium’s economy, as it is a very open export-oriented economy and trade with the US is important. In 2023, Belgium exported EUR 31 bn in goods to the US, making up 6.4% of total goods exports or nearly one-fifth of its extra-EU exports. This makes the US Belgium’s largest trading partner outside the EU and its fourth trading partner overall. Several EU countries have a higher share of the US in their exports than Belgium. The direct impact on Belgian GDP of a potential 10% tariff on goods exported to the US is relatively large, however, given Belgium’s high ratio of total exports to GDP. As a percentage of GDP, exports to the US amount to some 5% in Belgium, which is the highest figure in the EU27 after Ireland (see figure BE2). Indirect effects may be big as well, given the high US exposure of Belgium’s main EU trading partners and Belgium’s sensitivity to mounting negative sentiment on global trade.

The looming trade shock made us revise the growth outlook for the Belgian economy, similar to what we did for our euro area scenario. We now see more sluggish quarterly growth ahead, with annual real GDP growth in 2025 forecast at 0.6%, down from 1.0% previously. Given Belgium’s large exposure (see above), the downward revision of Belgian growth (-0.4 percentage points) is somewhat bigger than the one for euro area growth (-0.3 percentage points). The estimate for annual growth this year (2024) is slightly down as well, from 1.0% to 0.9%, mainly due to the technical national accounts’ revisions discussed earlier (among which, a smaller statistical growth overhang at the end of 2023, at 0.3% after the revisions instead of 0.5% in previously released data). In our updated scenario, Belgian industry continues to experience difficult times, likely leading to further net job losses in the sector. Hence, we also upwardly revised the outlook for Belgian unemployment, which we now see at a rate of 6.0% by end 2025, up from 5.6% previously.   

Belgian harmonised inflation (HICP) slightly increased to 4.5% in October, up from 4.3% in August and September. The sub-indices with the largest upward effect on the October inflation rate were natural gas, electricity and tobacco. Core inflation (excluding energy and unprocessed food) stood at 3.7% in October, slightly up from 3.6% in September. Average annual HICP inflation in Belgium looks set to reach 4.2% in 2024, well above the forecast euro area figure (2.4%). Taking into account the new situation of Trump’s re-election in the US, inflation in the next years will likely come out somewhat higher and more persistent than we had been expecting so far. Retaliatory tariff hikes by the EU as well as a stronger USD may indeed reignite some inflationary pressures. In our updated scenario, we now think that annual Belgian inflation in 2025 will be at 2.3%, up from 2.1% in our previous forecast.