BELGIUM: WILL GROWTH REMAIN ABOVE POTENTIAL IN 2018?

As Belgian economic growth has benefited from the global recovery, it reached 1.7% on average in 2017 before coming to a standstill in the first half of this year , like in the rest of the euro area . After slowing down in Q1 (0.3% QoQ after 0.5% in end-2017), growth picked up slightly in Q2 to 0.4% QoQ. The less buoyant economic activity in Belgium in the first half was at least partially due to destocking, which reduced GDP growth by 0.1 pp in Q1 and then by 0.2 pp in Q2. In contrast, foreign trade continued to contribute to growth during the first two quarters in spite of a less positive international context , reflecting Belgium's strategic geographical position in the euro area . At the aggregate level, investment rebounded in Q2 after the slowdown in Q1, thereby returning to the end-2017 growth rate. This was mainly due to the acceleration in corporate investment, while residential investment slowed down. The contribution of foreign trade to Belgian growth has been relatively constant at 0.2 pp of GDP since end-2017, and slightly higher in Q2 2018. Finally, consumption, faced with relatively high inflation, has been relatively resilient so far, driven by job creation . Looking ahead, given the slowdown in the first half associated with the rise in oil prices and the downside risks weighing on international trade, we have revised our growth forecasts slightly downwards, although growth is likely to remain slightly higher than potential growth in 2018 and come in at 1.5% on average.