The Belgian economy is set to stagnate in the second half of this year, as weak demand and declining business confidence continue to act as a significant drag on the country's growth rate.
In an interview with l'Echo, Hans Bevers, the Chief Economist at Degroof Petercam, an investment bank, noted that the forecast stagnation follows Belgium's meagre expansion over the first half of this year, from 0.4% in the first quarter of 2023 to 0.2% in the second.
"The confidence indicators are not good, whether it is employer confidence in Belgium or the Purchasing Managers' Index [which measures business confidence in the manufacturing and service sectors] for the eurozone," Bevers said.
Bevers' assessment was corroborated by a recent report by
Maes highlighted "weak" consumption and "disappointing" investment as the principal causes of the country's economic woes. He also suggested that these factors will likely negatively reinforce one another.
"The barometer of entrepreneur morale does not bode well," Maes noted. "Many companies are facing a decline in demand, which should further slow down their investment projects."
Deutsche Schuld?
In addition, Bevers noted that the poor performance of Germany, Belgium's largest trading partner, will have a profoundly negative impact on Belgium's future growth rate. The German economy has now experienced three consecutive quarters of recession or stagnation.
Indeed, a recent report by the Ifo Institute, a Munich-based think tank, found that German business confidence fell this month to its lowest level in three years.
"Companies are increasingly pessimistic about the months ahead," Ifo noted. It highlighted "starkly pessimistic" business sentiments in the country's manufacturing sector, as well as a "notable cooling" in the services sector and a "continuing nosedive" in the construction industry.
Related News
- Belgian economy growing at just half OECD average rate
- 'Increasingly pessimistic': German business confidence falls to lowest level in three years
Bevers also stressed that Europe's economic fragility means that the European Central Bank (ECB) should refrain from further rate hikes at its next meeting in September.
At its last meeting in July, the ECB raised interest rates by 25 basis points (0.25 percentage points), bringing its benchmark deposit facility rate to a record high of 3.75%. The ECB has increased rates nine times in the past year as it attempts to dampen persistent European price pressures.
"I would advise taking a break," Bevers said. "The real monetary tightening has already taken place and inflation has started to fall again. Whether the rates are at 3.75% or 4%, what does it change? Of course, the central bankers have had a lot of criticism to digest, so they cannot afford to take things lightly. But the real economy is also important."
