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Belgium's central bank retains growth forecast

Staff writer ▼ | June 8, 2016
Belgium's central bank retained the growth forecast for this year, as increased public spending on boosting national security offset the dampening effect of the terrorist attacks.
Belgium's central bank
Belgium   Gross domestic product is set to grow 1.3 percent
Gross domestic product is set to grow 1.3 percent this year after 1.4 percent expansion in 2015, the National Bank of Belgium said in its projections released twice a year.

The projection for next year was reduced to 1.5 percent from 1.6 percent. GDP is forecast to grow 1.6 percent in 2018.

Terrorist attacks are likely to have only a limited, short-lived impact on growth, the bank said. Domestic demand is expected to drive growth over the projection horizon.

"While private consumption growth will be down slightly in 2016, owing to wage moderation measures and the rise in indirect taxes, which depress purchasing power, it will recover from 2017, but more slowly than disposable income, implying a small rise in the savings ratio," the bank said.

"Public expenditure, which was temporarily bolstered by exceptional factors in 2016 relating in particular to the terrorist attacks, will increase more moderately in 2017 and 2018."

Inflation forecast for this year was trimmed to 1.6 percent from 1.9 percent. The projection for next year was raised to 1.8 percent from 1.7 percent. Price growth was seen at 1.9 percent in 2018.

"The increase in indirect taxes - since the autumn of 2015 - is a major factor fueling inflation in Belgium in 2016, while in 2017 and 2018 inflation will be driven more by higher energy (and food) prices, but also by growing domestic cost pressures originating from wages," the bank said.

The bank expects the unemployment rate to fall to 7.8 percent by 2018.