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UPDATE 1-Belgian growth slows in Q3 but no contraction

Published 10/31/2008, 11:25 AM
Updated 10/31/2008, 11:28 AM
KBC
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(Adds economist comment, background)

By Philip Blenkinsop

BRUSSELS, Oct 31 (Reuters) - Belgium's economy grew slightly in the third quarter, bettering expectations it would contract, although the country is expected to join its neighbours in recession from the end of the year.

Gross domestic product (GDP) growth slowed to 0.1 percent quarter-on-quarter, the weakest rate since the first three months of 2005, and a five-year low of 1.2 percent year-on-year, the central bank reported on Friday.

Belgium, the first country in the euro zone to report a flash GDP estimate, had been expected to contract by 0.1 percent in the quarter, according to a Reuters survey of 7 economists.

German and Spanish GDP estimates are due on Nov. 13, with France, Italy and the euro zone following on Nov. 14.

The British economy shrank by more than expected and for the first time in 16 years in the third quarter, official data showed last week.

Belgian central bank chief Guy Quaden, a member of the European Central Bank's governing council, said in a newspaper interview published on Friday that he thought it likely Belgium would record negative growth this quarter and next.

He noted the worst of the global crisis had come after the end of the quarter.

"A recession ... is not ruled out," he told Belgian business daily De Tijd.

Economists said that the unexpected growth in the July-September period would do little to relieve pressure on the ECB to cut interest rates again.

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Bart Van Craeynest of KBC Securities said Belgium might also record negative figures in the second quarter next year.

"We are now looking for the end of recession by summer of 2009. I would not expect a very significant upturn," he said.

Philippe Ledent of ING said that Belgium had probably avoided contraction beca use of the resilience of its main trading partner, Germany, and reflecting the fact that Belgian growth figures had been revised down for preceding quarter.

Belgium's central bank also revised up the growth figure for the second quarter to 0.3 percent quarter-on-quarter. It maintained the 1.9 percent year-on-year number. (Additional reporting by Marcin Grajewski and Darren Ennis, Editing by Mike Peacock)

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