Belgium's central bank has cut its growth forecasts for the euro zone's sixth largest economy in 2022 and 2023 due to the impact on consumer spending and trade from Russia's invasion of Ukraine.
"There is no talk of stagflation. There will be positive growth," bank governor Pierre Wunsch said in a video address.
The bank now estimates 2022 growth at 2.4%, down from a previous forecast of 2.6%. For 2023, its forecast has fallen to 1.5% from 2.4% and for 2024 risen to 1.9% from 1.6%.
The central bank would normally only have updated its forecasts in June, but said it was giving a provisional update to its December estimates to take into account the war and its impact on inflation, which is seen accelerating to 7.4% this year, up from a previous forecast of 4.9%.
That would hit consumer spending, notably in the second quarter, the bank said. Since wages are partly indexed to inflation, this would also harm Belgium's relative competitive position, reducing import demand from the country's main trading partners. Belgium's exports to Ukraine and Russia are low.
The bank said the fourth quarter of 2021 had proven stronger than expected, providing a higher point of departure for 2022, but the negative impact of the Ukraine war impact would outweigh this. (Reporting by Philip Blenkinsop Editing by Gareth Jones)