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Belgian economy is slowest growing in Europe
No European country will grow more slowly than Belgium this year, according to the latest economic outlook from the European Commission.
The average growth rate of the European economy (which includes both the eurozone and non-member countries) will reach 4% this year, it predicts.
But in Belgium, that growth will look more like 2.7% — making it the slowest growing country on the list. At the same time, inflation is expected to be 4.3%, higher than the average of 3.5% for the eurozone.
“Multiple headwinds have chilled Europe's economy this winter: the swift spread of Omicron, a further rise in inflation driven by soaring energy prices and persistent supply-chain disruptions,” said Paolo Gentiloni, the EU economy commissioner.
“With these headwinds expected to fade progressively, we project growth to pick up speed again already this spring. Price pressures are likely to remain strong until the summer, after which inflation is projected to decline as growth in energy prices moderates and supply bottlenecks ease. However, uncertainty and risks remain high.”
Covid-related restrictions slowed growth
The commission’s report found that real GDP bounced back strongly in Belgium in 2021 after a severe decline of 5.7% in 2020, which it says was caused by the Covid-19 outbreak.
“The gradual easing of restrictions throughout the year allowed real GDP to surpass its pre-crisis level already in the third quarter, with a strong increase of private consumption,” the report reads.
“However, activity is expected to have slowed down at the end of the year driven by the new wave of infections and renewed restrictions, as well as by supply side constraints and high input prices.”
Belgium’s annual growth rate for 2021 was 6.1%, but at the beginning of 2022, restrictions on activity and supply side constraints “are still affecting the economy,” the report explains.
These restrictions are expected to gradually ease, with real GDP recovering from the second quarter onwards.
The report also makes reference to Belgium’s energy woes, and the fact that the government is employing various measures meant to combat skyrocketing prices for electricity and gas.
“After exceptionally high electricity and gas prices in the fourth quarter of 2021 and the first quarter of 2022, energy prices are expected to gradually decline over the forecast horizon, though remaining at a high level,” the report says.
Optimism for European economy
The commission’s overall outlook was optimistic, despite acknowledging some of the pandemic-related issues still facing European countries.
“The EU economy has now regained all the ground it lost during the height of the crisis, thanks to successful vaccination campaigns and coordinated economic policy support. Unemployment has reached a record low. These are major achievements,” Valdis Dombrovskis, says executive vice-president for an economy that works for people says.
“As the pandemic is still ongoing, our immediate challenge is to keep the recovery well on track. The significant rise in inflation and energy prices, along with supply chain and labour market bottlenecks, are holding back growth. Looking ahead, however, we expect to switch back into high gear later this year as some of these bottlenecks ease.”
Dombrovskis expects that the EU's fundamentals will be boosted further as countries start to put their Recovery and Resilience Plans into full effect.
Photo: Berlaymont (c) Visitbrussels / Sophie Voituron