Belgium’s Economy Grows More Than Initially Estimated

By Jurjen van de Pol

Dec. 3 (Bloomberg) -- Belgium’s economy expanded more than initially estimated in the third quarter, helped by a rebound in the construction industry and a jump in inventories.

Growth in gross domestic product slowed to 1.3 percent from the year-earlier quarter, compared with 1.9 percent annual growth in the prior three months, the National Bank of Belgium in Brussels said today. While the third-quarter figure is higher than the 1.2 percent estimated earlier, it still is the lowest rate of growth in almost five years and quarter-on-quarter expansion was just 0.1 percent.

“The GDP should have contracted if it was not for inventories,” which increased 0.6 percent from the prior quarter, said Dominique Barbet, an economist at BNP Paribas in Paris. “When manufacturers and retailers get rid of this inventory accumulation, we will get a much weaker output and GDP.”

European economies are under pressure as the financial turmoil that has prompted interest-rate cuts and bank bailouts spreads to industries beyond banking. The economy of the 15- nation euro zone contracted in the third quarter for the first time since the introduction of the single currency.

“It is clear that the first GDP drop of the Belgian cycle will be reported in the fourth quarter, and it should be a large one,” Barbet said.

Building Industry

The quarter-on-quarter growth rate was lower than in the previous three months, when the economy grew 0.3 percent. The building industry expanded 0.4 percent from the previous quarter, while industrial activity fell 0.5 percent and services expansion slowed to 0.2 percent from 0.4 percent in the second quarter.

Belgian new-car registrations tumbled 16 percent in November, while consumer and business confidence dropped to the lowest level in 15 years on increased pessimism about the labor market as economic growth stagnates. The Belgian federal government’s planning bureau yesterday cut its inflation forecast for this year to 4.5 percent from 4.6 percent and said it expects price growth to slow to 1.5 percent next year.

The European Central Bank tomorrow may lower borrowing costs for the third time since early October. European services shrank at a record pace last month and retail sales fell more than forecast in October, data today showed, increasing pressure on the ECB to cut rates further this week.

To contact the reporter on this story: Jurjen van de Pol in Amsterdam jvandepol@bloomberg.net