Short Term Update (STU) is the quarterly newsletter of the Belgian Federal Planning Bureau. It contains the main conclusions from the publications of the FPB, as well as information on new publications, together with an analysis of the most recent economic indicators.
Headlines Belgian Economy
The economic recovery in the euro area is proving to be challenging. Because of a disappointing first semester, economic growth should amount to only 0.8% in 2014. Driven by a strengthening of world trade, a loose monetary policy and a gradual pick-up in domestic demand, GDP growth in the euro area ought to rise by 1.3% in 2015. The international context remains surrounded by major uncertainties. Inflation in the euro area is currently very low and a new negative demand shock could tilt the euro area into deflation. Furthermore, a resurfacing of the euro crisis or an escalation of the conflict in Ukraine are likely to weigh down on consumer and producer confidence.
The recovery of the Belgian economy faltered in 2014Q2 (0.1%), which was partially due to a temporary slide in activity in the building sector, which performed exceptionally well in 2014Q1 because of the mild winter. Belgian GDP growth should strengthen from the second half of this year onwards owing to the (moderate) recovery of the European economy and a further expansion in domestic demand. On an annual basis, GDP growth should amount to 1.1% in 2014 and 1.5% in 2015. The improvement in the business cycle in the course of 2014 and 2015 should lead to a net increase in the number of jobs. This increase should, however, remain limited to 9 400 units (0.2%) and 27 400 (0.6%) respectively, due to the catching-up of both labour productivity and average working time. The number of unemployed persons (broad administrative definition) should increase by 2 400 units this year, but go down by 8 300 units next year. The harmonised Eurostat unemployment rate for Belgium should decline from 8.5% in 2014 to 8.3% in 2015.
Belgian inflation, as measured by the yoy growth rate of the national index of consumer prices (NICP), should cool down to 0.6% in 2014 due to lower energy prices. In 2015, underlying inflation ought to stabilise on an annual basis, while prices of petroleum products in euro should increase slightly due to the depreciation of the euro. Therefore, the NICP should rise by 1.3% next year. It should be noted that measures announced by the new regional governments in Belgium were not taken into account in our September forecast as they have not yet been formally adopted.
STU 3-14 was finalised on 6 October 2014.