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Belgian National Bank does not expect severe economic recession

12:28 28/03/2022

While the impact of the war in Ukraine has forced the Belgian National Bank (BNB) to adjust its economic and budgetary outlook, analysts don’t expect the conflict to result in a severe economic recession. 

“We now expect the economy to slow down significantly temporarily, mainly because lower purchasing power growth and uncertainty make consumers keep a tight hand on their purses,” BNB said in its report, titled ‘War in Ukraine: Update on the macroeconomic outlook for the Belgian economy’.

BNB projects growth of 2.4% in 2022, saying that the currently-very-high inflation is receding more slowly than expected due to further increased tensions in the international energy markets.

At the end of this year, that inflation is expected to be above 5% and for the year as a whole it’s forecasting an average of 7.4%. 

“Nevertheless, even the current forecasts do not point to a long-term wage-price spiral: inflationary pressure falls back in the next two years. The budget deficit is projected to reach 4.4% of GDP in 2022, but rises somewhat further by 2024.”

It predicts the Belgian economy will continue to show strong growth, despite how drastically the circumstances have changed since initial estimates for the year, made in December 2021.

Governor Pierre Wunsch said in a video message that despite the war in Ukraine, the ongoing energy crisis and rampant inflation, growth will remain on track. 

What will be affected is Belgium’s competitive position compared to neighbouring countries, many of which don’t have an indexation that triggers automatic rises in wages in response to inflation, meaning their labour costs will stay low as Belgium’s rise. 

Belgium will therefore lose ground on the export markets, BNB says. 

It couched its predictions by explaining that “developments not only in the military sphere, but also in the area of economic and financial sanctions, could significantly change the outlook. All of this means that the forecasts presented here are surrounded by greater than normal uncertainty”.

Photo: © Belga/Jonas Hamers


Written by Helen Lyons