Belgium first in eurozone to enter recession

2012-02-01 18:01

Brussels - Belgium became the first eurozone member formally to fall into recession in the second half of last year, data showed on Wednesday, paving the way for what is expected to be a tough contraction for the bloc as a whole in 2012.

Gross domestic product (GDP) in the bloc’s sixth largest economy shrank by 0.2 percent in the fourth quarter, following a quarterly contraction of 0.1 percent in the July-Sept period.

Two consecutive quarters of contraction is generally accepted by economists as the minimum for an economy to be considered in a recession.

Belgium is often cited as a harbinger of things to come in Europe and many countries in the region are already sliding towards recession, hit by the eurozone debt crisis and a wave of austerity required to cure it.

Final quarter figures for the euro zone, which grew by 0.2 percent in the third quarter, will be published on Feb. 15.

Germany, France, Italy and the Netherlands are also due to release their GDP estimates on that day. Spain said on Monday its economy had shrunk in the fourth quarter.

A Reuters poll earlier predicted that the euro zone as a whole will contract 0.3 percent in the coming year.
Economists said on Wednesday it had come as no surprise to see Belgium’s recession confirmed. Indeed the 0.2 percent contraction was slightly better than some had expected.

Few also expect any improvement in the first three months of 2012, notably after the new Belgian government imposed austerity measures in December designed to save €11.3 bn.

Private households in particular are downbeat, the consumer sentiment index falling to a two-and-a-half year low in January.

“In order to sell the measures our politicians have had to talk a different language.... They have to say the situation is serious. Saying this makes people feel less comfortable,” said Etienne De Callatay, economist at Bank Degroof.

Economists broadly expected growth in the second quarter, the rate dependent on the health of trade partners - Belgium is among the most open economies in the world.

“There could be some upward potential coming from outside,” said Steven Vanneste of BNP Paribas Fortis. “Financial tensions are easing so I think the worst of the economic crisis should be behind us. We see stabilisation right now but its still in a very fragile state.”

Year-on-year on Belgium grew 0.9 percent in the fourth quarter for a 1.9 percent total growth in 2011.