Belgium projection note OECD Economic Outlook November 2022

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Belgium GDP growth is projected to slow considerably from 2.9% in 2022 to 0.5% in 2023 in the face of high inflation and heightened uncertainty, before picking up to 1.1% in 2024. Private consumption will remain weak until mid-2023 despite the automatic indexation of wages, which supports household purchasing power. Subdued net exports will contribute negatively to GDP over the projection period, as international competitiveness deteriorates and the economy is highly exposed to a slowdown in its main trading partners. Headline consumer price inflation is projected to average almost 10% in 2022 and remain high in 2023. The fiscal stance is expected to be neutral in 2023 and moderately restrictive in 2024. Better targeting of energy support measures while maintaining price signals is crucial for both fiscal sustainability and energy saving, and to limit further inflationary pressures. Clarifying the policy stance on nuclear power is necessary to ensure energy security. Introducing carbon taxation on all emissions is essential to promote green investments and enable the energy transition. The economy has slowed amid a deteriorating global outlook High energy prices, declining confidence and weakening international trade have slowed GDP growth, with output declining by 0.1% in the third quarter of 2022. Annual headline inflation surged to 13.1% in October, with persistently high energy inflation at 69.2% and steadily increasing food price inflation approaching 12%. The large 16-point drop in consumer confidence in September was close to that recorded at the onset of the COVID-19 pandemic, despite the automatic indexation that increased most nominal wages and welfare benefits by about 8% since January and prevented a larger decline in real incomes. Business sentiment has declined for several months, including a significant deterioration in construction demand expectations in October. The trade deficit increased by EUR 23 billion (about 4% of GDP) over the first eight months of 2022 compared to the same period in 2021.

Belgium

1. Provisional HICP data for October 2022. 2. For employees whose wages are automatically indexed based on the national consumer price index excluding alcohol, tobacco and motor fuel (about 60% of all employees). Source: OECD Economic Outlook 112 database; Federal Planning Bureau; National Bank of Belgium; and Statistics Belgium. StatLink 2 https://stat.link/xuifsd OECD ECONOMIC OUTLOOK, VOLUME 2022 ISSUE 2: PRELIMINARY VERSION © OECD 2022


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