Belgian economy stronger than expected
According to the Belgian Institute for National Accounts INR, the Belgian economy grew by 0.3% in the first quarter of this year compared to the fourth quarter of last year. Despite predictions by economists of a 0.2% contraction, revised figures show furthermore that the country was not locked in a recession during the second half of 2011, as there was not a 0.1% contraction but a zero growth rate during the third quarter. According to bank economists, there are various reasons for the unexpectedly positive first quarter. “Until the end of March there was less talk of the crisis in the eurozone and stock markets were more upbeat,” says KBC’s chief economist Edwin De Boeck. “At the same time business and consumer confidence increased.” ING Belgium’s chief economist Peter Vanden Houte believes the scrapping of some fiscal measures had a more positive effect than expected. “When the government announced its intention to scrap the eco discount, it was expected that demand would drop after it peaked late last year, but this did not happen. Similarly the milder winter cushioned the building sector.” Most economists are nevertheless cautiously optimistic about the second quarter. “Renewed rumblings in the eurozone have meanwhile pushed confidence downwards,” says De Boeck. “The fact that even the German economy is now struggling is not a good sign for Belgium.” KBC and BNP Paribas maintain their growth prospects of 0.2% for the year, whereas ING has increased its expectations from 0% to 0.4%. BNP Paribas economist Steven Vanneste remains upbeat about the Belgian economy as unemployment levels are much lower than the European average, the budget has been kept under control and Belgians save a lot. This is all very good news for the Di Rupo government, as its budget calculations were based on the extremely cautious 0.1% growth prospect by the Federal Planning Bureau. A higher than expected growth rate will boost fiscal income, which will in turn will improve the budgetary balance. If the major banks are correct with their annual forecast, the budget will receive a boost of almost 400 million euros. The country’s growth will be above the average of other countries in the eurozone for the fifth year running. The relatively positive performance of the country is mostly due to the low business and household debt levels and the dependence on the German economy, which means the government will not have to cut as much as many other member states of the eurozone.