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Belgium Real GDP growth is projected to slow to 0.9% in 2023, before picking up to 1.4% in 2024. Inflation, tighter financing conditions, and high uncertainty will drag on domestic growth, while weak global trade prospects will weigh on net exports. By contrast, public investment, solid labour demand and automatic wage indexation will sustain activity. Headline inflation is projected to fall to 4% in 2023, due to falling energy prices, and 3.7% in 2024. The main risks to the outlook include more persistent inflation due to wage indexation and a consequent loss of export competitiveness. The fiscal deficit will increase in 2023 and remain large in 2024. In the longer term, measures to ensure the sustainability of public finances will be necessary given high public debt. The level of debt poses macro-financial risks and limits the scope for public investment. Policies reducing the gender gap in labour market participation could sustain stronger and more inclusive growth. Economic growth is slowing Economic growth has slowed significantly in the wake of high energy prices, rising borrowing costs, and weakening international trade. Weak confidence has weighed on economic activity, but consumer and business confidence indicators are now improving. GDP rose by 0.5% in the first quarter of 2023 (at an annualised rate), after 0.2% in the previous quarter. Sharply-higher interest rates have dampened housing market activity. Mortgages granted in January fell to their lowest level in 17 years, and credit demand is lower than during the 2008-09 financial crisis. Annual headline inflation is falling fast due to declining energy prices, reaching 3.3% in April. Labour market tensions are easing as the number of jobseekers rises, but wages are increasing faster than in major trading partner economies. Second-round effects from automatic wage indexation are being felt more broadly, with core inflation at 6.3% in April.
Belgium
1. Harmonised index of consumer prices excluding food, energy, alcohol and tobacco. 2. Maastricht definition. Source: OECD Economic Outlook 113 database; and Eurostat. StatLink 2 https://stat.link/3mvtld
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 1: PRELIMINARY VERSION © OECD 2023