In 2022, Wallonia’s growth should be sustained by the momentum of the post-coronavirus recovery – Economic policy

Wallonia’s GDP growth should be +2.5% in 2022. And this is in the face of uncertainty exacerbated by a strong inflationary surge, caused, among other things, by the Russian-Ukrainian conflict, which will slow down the process of economic recovery, the Walloon Institute for Evaluation, Forecasting and Statistics (Iweps) said this Thursday.

The Walloon Institute for Evaluation, Forecasting and Statistics (Iweps) has compiled a table of Wallonia’s growth for 2022. Wallonia’s GDP growth should reach +2.5% in 2022. However, this is less than the 4% estimated in the Institute’s latest forecasts last November.

New restrictions on international supply chains and the recent Russian-Ukrainian conflict will significantly slow down the process of economic recoverywhich was still going on after the health crisis.

However, with strong fundamentals in the face of this new shock such as high household savings rate and very strong labor marketWalloon GDP growth is still set to reach +2.5% in 2022. However, the uncertainty associated with these forecasts is unusually high, according to Iweps.

Another dive into uncertainty

The extent of the conflict’s impact on the Walloon economy is unclear. Many factors elude economic analysis. Its effects will spread through three main channels:skyrocketing energy and commodity prices leading to general price inflationfurther disruption to supply chains, due in part to sanctions imposed on Russia, and uncertainty affecting business investment and private consumption.

Authoritative Recovery Scenario

At the beginning of 2022, the prospect of an improvement in the overall economic situation was confirmed, and obstacles related to health conditions and ongoing supply difficulties were removed. The recovery momentum that prevailed at the beginning of the year, before the conflict, should continue to support Walloon GDP growth. which will be +2.5% in 2022, i.e. higher than normally observed before the health crisis. However, the one-year difference in GDP growth is expected to slow significantly during the year.

Employment growth should also ease in the second half of the year, influenced by a slowdown in activity, ahead of Iweps in its forecasts for a recovery in working hours and harmonization issues in certain sectors.

However, on average per year, it should reach +1.3% in 2022, i.e. 17,100 units. This trend partly reflects the good results achieved in late 2021 in terms of job creation, as well as the continued favorable dynamics in labor demand (hiring intentions and temporary workers) and the unemployment rate at the beginning of the year.

Household consumption affected

Inflation and weakening confidence will weigh on the expected further recovery in Walloon household consumption (+4.0%), likely more than the eurozone and Belgian averages givenhigher energy component of their expenditures.

However, consumers should be able to cushion an inflationary shock by using the high savings they have accumulated and by exploiting the marked improvement in employment. In addition, investment needs are still significant and even increased in terms of production and energy savings for both households and businesses. They are added to the necessary reconstruction after the floods last July, as well as the implementation of the Wallonia Recovery Plan, which, along with public investment, intends to stimulate private investment.

Future companies

If, according to economic reviews, the demand outlook remains unchanged for now, a high level of uncertainty should favor a wait-and-see attitude on the part of investors, and higher costs should affect the profitability of companies. Penalized in the short term, corporate investment should recover in the second half of the year, but annual growth should be capped at 1.2%.

Finally, due to the recent deterioration in overall economic conditions in our major trading partners, exports should also slow in the short term. In the second half of the year however, exports should recover, taking advantage of the ongoing economic recovery in Asia, the US and parts of Europe, despite the more unfavorable outlook for some of our partners, in particular for Germany.

In addition, Walloon industrial companies producing intermediates and semi-finished products that are largely integrated into European value chains should take advantage of various recovery plans at the European level, the implementation of which is not in doubt during this year due to the outbreak of conflict. . The average annual growth of Walloon exports should be around +3.5%.

The Walloon Institute for Evaluation, Forecasting and Statistics (Iweps) has compiled a table of Wallonia’s growth for 2022. Wallonia’s GDP growth should reach +2.5% in 2022. in the institute’s latest forecast last November, following the health crisis. However, thanks to strong fundamentals in the face of this new shock, such as a high household savings rate and a very resilient labor market, Wallonia’s GDP growth should still reach +2.5% in 2022. However, the uncertainty associated with these projections is unusually high. reports Iweps. The extent of the conflict’s impact on the Walloon economy is unclear. Many factors elude economic analysis. Its effects will spread through three main channels: soaring energy and commodity prices leading to general price inflation, further disruption of value chains due in part to sanctions imposed on Russia, and uncertainty affecting business and private investment. consumption. At the beginning of 2022, the prospect of an improvement in the overall economic situation was confirmed, while obstacles related to health conditions and ongoing supply difficulties were removed. The recovery momentum that prevailed at the beginning of the year, before the conflict, should continue to support Walloon GDP growth, which should be +2.5% in 2022, i.e. higher rates than usually observed before the health crisis. However, the one-year difference in GDP growth is expected to slow significantly during the year. Employment growth should also ease in the second half of the year, influenced by a slowdown in activity, ahead of Iweps in its forecasts for a recovery in working hours and harmonization issues in certain sectors. However, on average per year, it should reach +1.3% in 2022, i.e. 17,100 units. This trend partly reflects the good results achieved in late 2021 in terms of job creation, as well as the continued favorable dynamics of labor demand (intentional and temporary workers) and unemployment at the beginning of the year. will surely affect the expected further recovery in household consumption in Wallonia (+4.0%), probably more than the average in the euro area and Belgium, given the higher energy component of their spending. However, consumers should be able to offset part of the inflationary shock by drawing on the large savings they have accumulated and benefiting from the marked improvement in past employment. In addition, investment needs are still significant and even increased in terms of production and energy savings for both households and businesses. They add to the necessary reconstruction after the floods last July, and also favor the implementation of the Wallonia Recovery Plan, which, along with public investment, intends to stimulate private investment. If, according to economic reviews, the demand outlook remains unchanged for now, a high level of uncertainty should favor a wait-and-see attitude on the part of investors, and higher costs should affect the profitability of companies. Penalized in the short term, corporate investment should recover in the second half of the year, but annual growth should be capped at 1.2%. Finally, due to the recent deterioration in overall economic conditions in our major trading partners, exports should also slow in the short term. However, exports should recover in the second half of the year thanks to the ongoing economic recovery in Asia, the United States and parts of Europe, despite the more unfavorable outlook for some of our partners, Germany in particular. In addition, Walloon industrial companies producing intermediates and semi-finished products that are largely integrated into European value chains should take advantage of various recovery plans at the European level, the implementation of which is not in doubt during this year due to the outbreak of conflict. . The average annual growth of Walloon exports should be around +3.5%.

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