Still a long way to complete recovery in Belgium

According to the National Bank of Belgium [NBB], in Q3 of 2010 GDP grew 2.1% year-on-year and 0.5% on the previous quarter: a poorer performance than in Q2. Belgian exports are benefiting from strong demand from Germany, which can be expected to continue for the coming months. For the second month in row, the foreign trade balance was positive in July.

According to the NBB, business confidence increased in October for the fourth consecutive month, due largely to an improved business climate in the manufacturing and building sectors. In the same month, consumer confidence also improved, as consumers expectations of a recovery in the Belgian economy remain optimistic while their fears of a massive rise in unemployment subside [the jobless rate has increased only slightly this year: from 8.3% in January 2010 to 8.7% in October].

The IMF forecasts 1.6% GDP growth this year and 1.7% in 2011. The political situation in Belgium still poses some questions for future economic development, as, while awaiting the appointment of a new administration, the current interim government has yet to pass any of the austerity measures necessary to reduce the budget deficit in the coming years. The introduction of such austerity measures would have a negative effect on both consumer confidence and growth.

Payment morale has improved

According to Crédito y Caución, payment duration of both domestic and foreign customers has reduced compared to winter 2009. Not only have Belgian companies succeeded, during this difficult time, in getting their domestic customers to pay earlier, at an average of 33 days compared to 38 days last winter, but they have also managed to reduce the average waiting time for payment from foreign customers: from 45 days last winter to the current 39 days. While this suggests that many companies have sharpened their credit management processes, e.g. with more emphasis on credit reports and proactive reminders, around 34% of the Belgian companies are still paid `late´.

Statistics Belgium reported that corporate insolvencies increased 3.1% year-on-year in September 2010 and 7.5% between June and August, with construction [+14,7%], retail [+14,5%], hotels, bars & restaurants [+12,4%] and transport [+11,4 %] most affected, closely followed by manufacturing [+ 9.5%]. After two-digit increases in 2008 and 2009, Crédito y Caución still expects corporate insolvencies to rise 5%, to around 9,900, this year and to decrease 5% next year. The Expected Default Frequency for Belgium has shown some ups and downs since the beginning of the year, and in September we saw a five basis points decrease from the previous month.