March 21, 2023

Belgian GDP decelerated further in the final quarter of 2022, but activity did not contract. The latest NAI statistics place Belgian real GDP growth at 0.1 %, somewhat better than our estimate in the December 2022 Business Cycle Monitor. We currently expect GDP growth to accelerate further: a quarterly growth of 0.4 % is likely in the first quarter of 2023.

Belgian real GDP grew by 0.1 % in the fourth quarter of 2022. While this constitutes a clear slowdown compared to the third quarter, it is in line with the NAI’s January flash estimate and somewhat above our estimate in the previous Business Cycle Monitor.

GDP growth benefited in particular from the remarkable expansion of household consumption. All indications are that such consumption will pick up further in the first quarter of 2023. Confidence indicators, for example, improved markedly. Moreover, inflationary pressures have eased somewhat on the back of falling energy prices, while nominal incomes of many households have just increased sharply due to the lag inherent to the indexation mechanisms.

According to current statistics, business investment posted unexpected growth in the fourth quarter of 2022, despite rising (wage) costs and the uncertain economic outlook. Business sentiment and demand expectations have improved in recent months but remain at relatively low levels. All in all, we expect business investment growth to come in close to zero in the current quarter. Housing investment is expected to continue to decline.

Government consumption should grow very moderately in the first quarter of 2023, while the roll-out of investment plans should now lead to positive growth in government investment. The contribution of net exports to growth should be broadly constant in the first quarter, while a more gradual drawdown of stocks than in the previous quarter should detract less from GDP growth.

The NBB’s “BREL” nowcasting model currently estimates growth in the first quarter at around 0.4 %, while the “R2D2” model is clearly much more optimistic, predicting a growth rate of 1.3 %. It should be noted that these nowcasts are subject to substantial uncertainty as the massive shocks since the start of the COVID-19 crisis constitute a challenge for the estimation of standard time-series models.

All in all, we currently expect economic activity to expand by 0.4 % in the first quarter of 2023. This is slightly below the median predictions of the one-indicator models and in line with the most downbeat of the two nowcasts. It should again be stressed that the uncertainty of this nowcast is high. The balance of risks appears to be broadly neutral.

Source: National Bank of Belgium
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