Both next year and the following two years, the Belgian economy will grow at an ever slower pace. Growth, estimated at 1.5 percent this year, is well below the average of 1.9 percent in the eurozone. It is expected to only reach 1.2 percent in 2021. Only last year, the National Bank assumed that the Belgian economy would grow by 1.6 percent in 2018.
The bank also estimates that another 95,000 new jobs will be created in the next three years. Employment growth will also be somewhat slower than in the past. From just under 60,000 new jobs this year, the pace will drop to 24,000 in 2021.
The predictions, of course, are not inevitable. For example, it is unclear whether the budget and the jobs deal will be approved. In particular, failure to conclude the jobs deal could affect growth. The IMF warned against this last week. The international context also contains many uncertainties, such as Brexit.
The National Bank identifies a number of reasons for the slowdown in growth. The shortage in the labour market – many jobs are not being filled – plays an important role. In addition, domestic spending is declining relatively: companies are starting to invest less than in recent years.
On the positive side, the bank predicts the purchasing power of Belgians will increase by a total of 3.6 percent per capita in the next three years. This is partly due to the tax shift, which will have an effect on net wages next year. The bank also expects real wages to rise in the coming years.
There are less good prospects for the budget. The deficit will increase in each of the next three years, reaching 2.0% in 2021. This year, the deficit will be 0.8%, but that figure benefits from advance corporate tax payments. These have temporarily boosted the government’s revenue.
This effect will disappear in the coming years. Next year, the deficit will double to 1.6 percent. These forecasts are based on an unchanged policy. “If additional measures are taken, they will obviously have an effect,” says Pierre Wunsch, Deputy Governor of the National Bank of Belgium. According to the European stability programme, Belgium should balance its budget by 2020. The National Bank has its doubts about this happening.
Arthur Rubinstein
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