Belgian real GDP grew by 0.5% in the first quarter of 2023, clearly up from the virtual stagnation seen in the fourth quarter of 2022 and even marginally above the 0.4% estimate in the March 2023 Business Cycle Monitor and the NAI’s April flash estimate.

First-quarter GDP growth continued to benefit from strong household consumption growth and activity in the services industries. Household consumption should continue to grow at a broadly stable pace in the second quarter of 2023, with purchasing power rebounding strongly this year.

Business investment in volume terms surprised on the upside in the first quarter. We expect business investment growth to decline markedly but to remain in positive territory in the second quarter. This slowdown partly reflects the elimination of exceptional purchases that pushed up investment in the previous quarter. Residential investment should decline in the second quarter.

Growth in government consumption is expected to turn positive again in the second quarter, while government investment growth should continue to be boosted by the roll-out of investment plans and the usual electoral cycle. The contribution of net exports to growth will most likely be slightly negative in the second quarter.

The NBB’s “BREL” nowcasting model currently estimates growth in the second quarter at around 0.45%, while the “R2D2” model is clearly much more optimistic, predicting a growth rate of 0.85%. It should be noted that these nowcasts are subject to substantial uncertainty as the massive shocks since the start of the COVID-19 crisis constitute a challenge for the estimation of standard time-series models.

All in all, we currently expect economic activity to expand by 0.4% in the second quarter of 2023. This is somewhat above the median predictions of the one-indicator models and in line with the most downbeat of the two nowcasts. The balance of risks appears broadly neutral.