Belgian Planning Bureau revises inflation outlook further downwards

The Belgian Planning Bureau revises this year's inflation outlook further downwards. It now assumes average annual inflation of 4.8 per cent in 2023. The previous forecast a month ago called for yearly average inflation of 5.3 per cent. By comparison, inflation was at 9.59 per cent in 2022.

The pivot index will not be exceeded this year until June, the Planning Bureau expects. Earlier, it still assumed an overshoot in April. The last time the pivot index was exceeded was in November last year.

The outlook does not yet consider the measures around energy bill reform announced by the government on Monday, the Planning Bureau adds. The calculation still assumed a 21 per cent VAT on natural gas and electricity from April. That VAT increase will ultimately not materialise, and excise duties will be introduced instead. This could further reduce energy bills and thus inflation.

Average annual inflation

For 2024, the Planning Bureau assumes average annual inflation of 2.9 per cent. It also expects two overshoots of the pivot index in January and November. A month after the overshoot, social benefits will be increased by 2 per cent, and a month later, civil servants salaries. And in the private sector, too, wages will be adjusted - often with a delay - in line with rising life expectancy.

In its outlook, the Planning Bureau considers an oil price averaging $85 a barrel this year and $80 a barrel in 2024. As a result, the euro exchange rate would average $1.10 per euro in 2023 and $1.12 per euro in 2024.

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