By Philip Blenkinsop
BRUSSELS (Reuters) – The Belgian economy could contract by 8% this year due to measures to contain the coronavirus before a sharp rebound in 2021, the country’s central bank and national planning agency said on Wednesday.
That rebound could be as much as 8.6%, although the bank and agency said their figures should be seen as a broad macroeconomic “scenario” rather than a firm granular forecast and that they were based on a number of conditions, with risks.
The bank and agency estimated an increase in Belgium’s budget deficit to 7.5% of gross domestic product and its debt to 115% of GDP in 2020. The central bank previously forecast deficit and debt figures of respectively 2% and 99.2%.
One condition is that current restrictions last seven weeks. A partial lockdown, which began on March 14, is due to last five weeks until April 19, although the government has said it could be extended a further two weeks until May 3.
The bank and agency see a period of nine months of gradual recovery as measures to stem the flow of the coronavirus are steadily eased.
They also assume that the crisis will not leave permanent economic damage such as wide-scale solvency problems leading to company bankruptcies.
The bank and planning agency’s report estimates a 4% decline of gross domestic product in the first quarter and a 15% drop in the second before a steady improvement in the second half of the year. By the end of 2021, GDP would be on a growth trajectory 2 percentage points lower than that envisaged before the crisis.
The country of 11.5 million people which is the euro zone’s sixth-largest economy had 23,403 confirmed COVID-19 cases and 2,240 fatalities up to Tuesday. Health officials said on Wednesday the situation was nearing a peak or plateau.
The economic report said that measures taken to protect consumers’ disposable income, such as a temporary unemployment scheme and a mortgage payment pause, were the basis for a rapid recovery of consumption from the third quarter of this year.
The report said that in a matter of weeks, 1.2 million people had registered as temporary unemployed, allowing them to claim benefits, and more than 300,000 self-employed people had stopped work.
(Reporting by Philip Blenkinsop. Editing by Jane Merriman)