The Federal Planning Bureau has revised Belgium's GDP growth forecast for 2014 downwards to 1.1% due to concerns about the sustainability of the economic recovery. While domestic demand continues to support growth, the Belgian economy only grew 0.1% in the second quarter. Construction added value declined and despite growing exports, Belgium saw a negative trade balance. Looking ahead, uncertainty surrounding the recovery will likely cause companies to be prudent about permanent hiring in the coming months.

1. « CONCERN ABOUT THE SUSTAINABILITY OF THE ECONOMIC RECOVERY » | FEDERAL PLANNING BUREAU REVISES GDP GROWTH 2014 DOWNWARDS |
September 2014
ECONOMIC OUTLOOK « RENTREE »

2. BELGIAN ECONOMY BARELY GREW IN 2ND QUARTER* +0,1%
INTERIOUR DEMAND SUPPORTS GROWING ACTIVITY
INCREASING ADDED VALUE IN INDUSTRY & SERVICES
* Q1 ‘14/Q4 ‘13 = +0,4% | Source: NBB
2,2%
0,5%
-0,2%
0,0%
0,0%
0,2%
0,4%
-2,9%
0,4%
0,5%
0,5%
-0,5%
2,2%
-0,7%
-0,5%
-0,2%
-0,1%
0,1%
0,1%
0,1%
0,1%
0,3%
0,3%
0,3%
0,6%
2,6%
2,9%
3,2%
Added Value - Construction
Investment in Housing
Supply Change
Public Consumption
Employment
Added Value - Services
GDP
Public Investment in fixed-assets
Private Consumption
Added Value - Industry
Interior Demand
Export
Corporate Investment in fixed-assets
Import
Q2 Components GDP-growth (Q/Q-1)
Q1 Components GDP-growth (Q/Q-1)
+
-
LOSS OF ADDED VALUE IN CONSTRUCTION
NEGATIVE TRADE BALANCE DESPITE GROWING EXPORT

3. Source: NBB
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
1 | 2007
3 | 2007
5 | 2007
7 | 2007
9 | 2007
11 | 2007
1 | 2008
3 | 2008
5 | 2008
7 | 2008
9 | 2008
11 | 2008
1 | 2009
3 | 2009
5 | 2009
7 | 2009
9 | 2009
11 | 2009
1 | 2010
3 | 2010
5 | 2010
7 | 2010
9 | 2010
11 | 2010
1 | 2011
3 | 2011
5 | 2011
7 | 2011
9 | 2011
11 | 2011
1 | 2012
3 | 2012
5 | 2012
7 | 2012
9 | 2012
11 | 2012
1 | 2013
3 | 2013
5 | 2013
7 | 2013
9 | 2013
11 | 2013
1 | 2014
3 | 2014
5 | 2014
7 | 2014
Consumentenvertrouwen | La confiance des consommateurs | Consumer Confidence
Ondernemersvertrouwen | La confiance des chefs d'entreprise | Business Confidence
ANXIETY OPPRESSES CONFIDENCE (UKRAINE CRISIS, IS, GAZA, …)

4. TAW = Temporary Agency Work
THE FEDERGON TAW-INDEX EVOLVES NEVERTHELESS IN A POSITIVE WAY
2,9%
1,8%
7,2%
9,6%
4,0%
12,6%
11,9%
TAW Growth - yearly basis
150,0
170,0
190,0
210,0
230,0
250,0
270,0
290,0
01-07
03-07
05-07
07-07
09-07
11-07
01-08
03-08
05-08
07-08
09-08
11-08
01-09
03-09
05-09
07-09
09-09
11-09
01-10
03-10
05-10
07-10
09-10
11-10
01-11
03-11
05-11
07-11
09-11
11-11
01-12
03-12
05-12
07-12
09-12
11-12
01-13
03-13
05-13
07-13
09-13
11-13
01-14
03-14
05-14
07-14

5. 93.698
96.522
93.387
84.830
97.276
94.202
90.151
75.364
83.092
76.567
71.193
65.847
86.481
89.142
88.622
84.011
104.666
108.692
100.562
88.247
98.545
95.223
84.964
82.767
86.834
85.429
83.414
86.843
93.965
83.302
0
20.000
40.000
60.000
80.000
100.000
120.000
Brussels
Wallonia
Flanders
SLIGHT DECLINE IN THE AMOUNT OF JOB OFFERS
(PLACED IN PES)
+5,2% +1,5% -3,7%
Q2|14 vs Q2|13: -2,5%

6. 0,1%
-0,4%
-0,3%
-0,2%
-0,1%
0,0%
0,1%
0,2%
0,3%
0,4%
0,5%
0,6%
0,7%
BUT SLIGHT INCREASE OF EMPLOYMENT Q/Q-1
NBB

7. PERSISTING LOW INFLATION > DANGER FOR DEFLATION?
FAR BELOW THE 2% ECB-TARGET Low inflation (based on consumption-index) 2014(e): +0,6% 2015(e): +1,3% Impact on wages? When will the pivotal index be crossed? March ‘15: social benefits +2% April ‘15: public wages +2% (as wages in PC 322.01 Household Services) Indexation of wages in PC 218 on 01/2015 = 0,47% (e) (e) = estimate
0,00%
0,20%
0,40%
0,60%
0,80%
1,00%
1,20%
1,40%
1,60%
1,80%
jan/14
feb/14
mrt/14
apr/14
mei/14
jun/14
jul/14
aug/14
sep/14
okt/14
nov/14
dec/14
jan/15
feb/15
mrt/15
apr/15
mei/15
jun/15
jul/15
aug/15
sep/15
okt/15
nov/15
dec/15
Consumption Index
Health-index

8. Source: www.plan.be
DOWNWARD REVISED OUTLOOK FOR BELGIUM
Y2Y
2014
2015
2016
GDP
+1,1%
+1,5%
+1,7%
Inflation
0,6%
1,3%
1,7%
Employment
+9.400 (+0,2%)
+27.400 (+0,6%)
+31.000
Unemployment
+2.400
-8.300
Unemployment rate
8,5%
8,3% Low inflation should drive private consumption Internationale trade should drive demand, and by doing so higher the occupation of the production capacity Employment growth only in the private sector, due to cuts in public employment Calm financial markets: interest rates on 10 year bonds historically low: 1,224% on the 1st of September

9. Source: The Economist
GLOBAL BUSINESS CONFIDENCE BOUNCES BACK
THE GLOBAL BUSINESS BAROMETER IS DOWN FROM THE BEGINNING OF 2014. CAUSE FOR CONCERN:
-Fear for higher oil prices due to the turmoil in Iraq
-Fear for higher interest rates in the US by the Federal Reserve
THE GOBAL BUSINESS BAROMETER DECLINED ESPECIALLY IN THE INDUSTRIES
-Construction
-Consumer goods

10. ALTHOUGH…
THE 2 LARGEST ECONOMIES IN THE WORLD DEVELOP SUBSTANTIALLY … USA: +1,0% GDP growth (Q/Q-1) | number of employed on a record high | low unemployment rate (6,2%) CHINA: +2,0% GDP growth (Q/Q-1) | +9% industrial production | low unemployment rate (4,1%) ACCOMPANIED BY THE UK, WHO MANAGED TO PUSH THE ECONOMY: UK: +0,8% GDP growth (Q/Q-1) | unemployment (6,4%)
HOWEVER…
IN THE EUROZONE THE 3 BIGGEST ECONOMIES SUFFER THE GERMAN ENGINE SPUTTERS: -0,2% GDP growth (Q/Q-1) | unemployment (6,7%) FRANCE & ITALY KEEP HOBBLING BEHIND: France 0,0% & Italy -0,2% GDP growth (Q/Q-1) JAPAN: ABENOMICS FACES SUBSTANTIAL CHALLENGES: 0,0% GDP growth (Q/Q-1)
& THE BRIC’S (MINUS CHINA) LOSE PACE

11. GLOBAL GDP-GROWTH FIGURES
0,0%
-0,4%
1,3%
0,1%
0,7%
1,0%
0,9%
3,2%
2,4%
7,5%
-1,7%
-0,2%
-0,2%
0,0%
0,1%
0,1%
0,8%
1,0%
2,0%
Japan
Italy
Germany
France
Euro Area
Belgium
Netherlands
Britain
United States
China
GDP Growth Q/Q-1
GDP Growth Q/Q-4
Positive yearly & positive quarterly growth
Positive yearly growth Negative quarterly growth
Negative yearly & negative quarterly growth

12. EUROPE IS NOT FACING SUSTAINED GROWTH
Q3 LOOKS RATHER UNHEALTHY The economy is suffering from Russian sanctions resulting from the Ukraine crisis A minor risk of deflation High youth unemployment EUROPE’S 3 MAJOR ECONOMIES GERMANY, FRANCE & ITALY STOPPED GROWING IN Q2 FRANCE: unstable politics  can new PM implement promised structural, business- friendly reforms? GERMANY: Uncertainty about the Ukraine crisis and the effect on the German economy delays investment & keeps confidence low The minimum wage (€ 8,5) will take effect in 2015 and should push wages up. This could be a contribution to recovery in the Eurozone. ITALY: GDP-level is almost the same as 15 years ago

13. CAN EUROPE ADAPT?
EUROPE HAS 3 INTERRELATED PROBLEMS Have political leaders the courage and conviction to push through structural reforms to improve competitiveness Public opinion is not convinced of the urgent need for deep and radical changes The monetary and fiscal framework is too tight which makes structural reforms harder |NEW| THE ECB LOWERS INTEREST RATE TO HISTORICAL LOW LEVEL Interest rate: 0,15%  0,05% Publication 4/09/2014 - Effective from 10/09/2014 HOPING ONCE AGAIN THAT: Banks will not hold redundant liquidities Credit will be pushed into the economy Sovereign-debt will be cheaper to refinance Saving money becomes uninteresting Exchange-rate Euro declines

14. CAN BELGIUM ADAPT?
1) STANDSTILL GERMAN GROWTH-ENGINE = IMPORTANT NEW ELEMENT 2) CAN THE BELGIAN COMPETITIVENESS BE RESTORED? Belgium lost 1 place on the WEF Global Competitiveness Index (from 17th to 18th place) Budget cuts up to € 17 billion needed
↔Substantial cuts on wage costs
↔Preservation of purchasing power
↔Paying the bill caused by an ageing population 3) 1,1% GDP-GROWTH WILL ONLY HAVE A MINOR EFFECT ON NET-JOBCREATION
vs.
CONCLUSION
UNCERTAINTY ABOUT THE SUSTAINABILITY OF THE ECONOMIC RECOVERY THE NEXT MONTHS WILL DRIVE COMPANIES TO PRUDENCE CONCERNING (PERMANENT) RECRUITMENT

15. RESEARCH & ECONOMIC AFFAIRS DEPARTMENT PAUL VERSCHUEREN / THIBAUT PRINCEN Havenlaan 86c bte 302 - 1000 Brussel Avenue du Port 86c bte 302 - 1000 Bruxelles Tel: 02/203 38 03 Fax: 02/203 42 68 stat@federgon.be
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