National Bank of Belgium sees no signs of upcoming recession

The Belgian economy will in all likelihood be able to avoid a recession, in which the economy shrinks for two consecutive quarters. The National Bank of Belgium (NBB) said this on Monday during a presentation of its autumn estimates.

The economy has proved more robust than expected over the past year, the NBB said at its press conference, mainly thanks to household consumption. There was also growth in the third quarter. It is possible that the economy will contract slightly in the closing quarter of 2022, but even that is not certain. According to the NBB, that would be the bottom: economic growth is expected to pick up in the spring. Year-on-year growth would then amount to 0.6 per cent.

However, NBB governor Pierre Wunsch reiterated at the press conference that the state of public finances is unsustainable in the medium term. "There is a risk of slippage," he echoed. If policies remain unchanged, the National Bank expects budget deficits of around 5 per cent in the coming years. In that case, public debt would increase to almost 112 per cent of gross domestic product by 2025.

Wunsch also warned about the competitive position of Belgian companies in international markets. "The loss of market share is currently three times faster than under normal circumstances," he said. The deteriorating competitiveness has much to do with Belgium's system of automatic wage indexation. The NBB expects wage costs in Belgium to rise 5.6 per cent faster than in neighbouring countries over the 2022-2023 period. This difference would then decrease to 2.3 per cent over the period 2022-2025.

^{National Bank governor Pierre Wunsch. © BELGA PHOTO JAMES ARTHUR GEKIERE}