Economist Philippe Ledent is mixed on the growth prospects for the Belgian economy which, according to him, should enter into recession by the end of the year.
Despite a relatively good first half for corporate earnings, ING Belgium has just lowered its growth forecast for the Belgian economy. Why?
Despite a relatively good first half for corporate earnings, ING Belgium has just lowered its growth forecast for the Belgian economy. Why? The global economy is clearly facing a slowdown. China seems to be struggling to restart after the closures linked to its “zero covid” strategy. A slowdown, induced by the rise in interest rates, can also be observed in the United States. In the euro zone, it is the surge in energy prices that is worrying. It weighs on the morale of households and takes on an increasingly concrete dimension for companies. The latter have much more difficulty than in the first half to pass on the rise in the cost of energy, and gas in particular, to the selling price. As a result, they will gradually adopt a cautious attitude in terms of investment and hiring. And, the most rational scenario is that all of this doesn’t end any time soon. Unlike other local banks, you even see Belgium going into recession at the beginning of next year. What are your numbers? For Belgium, we see economic activity decreasing in the last quarter of this year, but also in the first quarter of 2023 and probably also after. We expect negative growth of between -0.3% and -0.5% per quarter and no real rebound in the second quarter of 2023. For the record, we speak of a recession when the economy contracts for two consecutive quarters. If we refer to this technical definition, this therefore means that Belgium is on its way to recession, at the end of this year, beginning of next year. In this context, Jerome Powell’s speech at the central bank symposium in Jackson Hole is frightening… Between inflation and growth, the American Federal Reserve has chosen. It is ready to curb growth to curb inflation. In Europe, the situation is more complex, but the question is to what extent the European Central Bank (ECB) is prepared to slow down the economy to break inflation. However, the recent declarations of Isabel Schnabel (member of the Executive Board of the ECB, Editor’s note) in Jackson Hole suggest that the ECB is ready to make a greater sacrifice to tame the rise in prices, that is to say to accept a more pronounced slowdown in the economy.