Government measures to stem the spread of coronavirus are having a negative impact on the economy. The Nationale Bank says the government now has the task of finding ways of supporting businesses and sharing the costs among enterprises, households and the government in order to protect our economy.
Belgium’s central bank and the planning office are working on a prognosis mapping out the economic impact of the crisis. Both the economy and public finances are set to receive a hard blow.
In 2020 Belgium’s GDP could shrink 8%. In normal times Belgian growth stands at +1.5%. Losses could total 45 billion euros this year. The Nationale Bank and planning office both expect a powerful recovery in the second half of the year, but not sufficient to make good the losses of the first half. The recovery could continue in 2021.
Lower tax revenue and funding economic support measures during the corona crisis will impact on public finances. The two bodies forecast this year’s budget deficit could rise by 5% reaching 7.5% of GDP. This is 3% above the EU Stability and Growth Pact norms.
National debt is set to total 115% of GDP by the end of the year – up around 15%.
Consumption is predicted to fall 5.7% as a result of corona measures. Households’ disposable income won’t fall all that much though allowing a rebound in demand starting in the third quarter.
Businesses and households will suffer as a result of the crisis but the impact will be temporary. Support measures should allow a “relatively quick” recovery. The measures taken will lessen the risk to companies that were financially sound before the crisis and prevent them from going bust.
The economists note our economic infrastructure hasn’t been damaged, but support measures will be needed in the post-pandemic phase too. This is required to prevent structural unemployment and keep public finances healthy.
The forecasts are based on a number of hypotheses e.g. the duration of corona measures. As a result this exercise in prediction contains significant room for error.
Maintaining restrictions for longer than seven weeks would lead to countless bankruptcies and loss of jobs. Prices shooting up due to increased demand or the opposite scenario could inflict even more damage. A speedy return to a normal situation would reduce the damage the crisis is inflicting.