Belgian Q2 GDP up 0.6 pct vs Q1

Sep 12, 2007 - Belgium's economy expanded in the second quarter at the slowest pace in almost two years as the stronger euro hurt manufacturing and trade.

Gross domestic product adjusted for seasonal changes expanded 0.6 percent from the prior three months, when it grew 0.7 percent, the Belgian central bank in Brussels said today, confirming a preliminary estimate. A 0.7 percent increase in services offset a slowdown in production, which grew 0.1 percent, and construction, which rose 0.3 percent.

The rising euro and slowing economic growth in Europe have weighed on euro-area exports at a time when higher oil prices and interest rates are sapping consumer confidence. The European Commission yesterday cut its 2007 growth estimate for the euro region to 2.5 percent from an earlier prediction of 2.6 percent, following the collapse of the U.S. subprime market.

"The subprime crisis may have begun in the U.S., but the effects are being felt worldwide," said Marco Valli, an economist at UniCredit Markets & Investment Banking in Milan.

The second-quarter expansion in Belgium, the sixth-largest economy among the 13 nations that share the euro, is the slowest since the third quarter of 2005. Imports grew 1.9 percent, almost double the 1 percent increase in exports.

The euro's advance against the dollar makes Belgian goods less competitive abroad, while a 23 percent increase in oil prices this year has raised raw-material costs for companies. The euro hit a record against the dollar today, touching $1.3889, a sign the outlook for exports may worsen. Brent crude reached an all-time high of $78.30 a barrel in August 2006 and is now trading at about $76.55.

Key Rate

The European Central Bank on Sept. 6 left its key rate at 4 percent, shelving a planned increase after the U.S. housing slump roiled financial markets and threatened to curb global economic growth. Since then, policy makers have stressed they remain focused on fighting inflation. The ECB has raised interest rates eight times since late 2005.

The Belgian economy expanded 2.9 percent in the second quarter from the year-earlier period, the central bank said today, matching its preliminary estimate and the annual growth rate in the first quarter. The bank forecasts the economy will grow 2.5 percent this year and 2.2 percent in 2008, compared with a growth rate of 3.1 percent last year.