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Federal Planning Bureau predicts purchasing power will rise again from 2023
While households’ purchasing power continues to decrease this year, the Federal Planning Bureau (FPB) is optimistic about the future, predicting a rise again from 2023 onwards.
Belgians have already curbed their spending amid increasing inflation and a decline in purchasing power that’s seen the euro go less far, from the grocery store to the petrol station. But forecasts for the coming years are largely positive.
“In 2023, real per capita income is expected to rise again in the three regions, thanks in particular to an indexation of wages and social allowances higher than inflation that year,” the FPB said in its report.
“Subsequently, over the period 2024-2027, we expect to find a growth in purchasing power close to that which was observed before the health crisis.”
An increase in the real disposable income per inhabitant is expected in every region: in Flanders by 1.1% per year, in Wallonia by 1.2% and in Brussels by 1.4%.
In Brussels, increases in wages are expected to make a major contribution to the rise in purchasing power, while in Flanders and Wallonia, pensions play a relatively bigger role.
The FPB also expects an increase in net domestic job creation from 2024-2027, estimated for Flanders at an annual average of 0.9% per year, in Wallonia at 0.6% and in Brussels at 0.4%.
Despite having the lowest rate of job creation, the Brussels region is actually expected to see a larger increase in the working population (+1.4%) than the other two regions (+0.7% each), partly due to the increase in commuting traffic from Brussels to Flanders.
Inflation hampering economic recovery
The FPB’s report wasn’t entirely optimistic, however, noting that inflation will put the brakes on economic recovery in 2022, not long after the growth seen in 2021.
“High inflation is hampering further recovery in all regions,” the report reads. “In 2022, GDP growth estimates stand at 2.1% in Brussels, 2.8% in Flanders and 2.5% in Wallonia. Next year, they will slow to 1.1% in Wallonia and 1.3% in Flanders and Brussels.”
The FPB points to a slowdown in the growth of potential international export markets and a weakened catch-up process for private consumption as a contributing factor.
They also noted that the public finances of Belgium’s communities and regions remain under pressure due to deficits that are still higher than before the pandemic, with the exception of the Flemish community, which is on the way to balancing its budget by 2027.