ECONOMIC OUTLOOK « The only way is up? »

September 2013

TABLE OF CONTENTS

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BELGIAN ECONOMIC INDICATORS

LABOUR MARKET

GLOBAL ECONOMY WORLDWIDE

SUMMARY

THE BELGIAN ECONOMY GROWS SLIGHTLY IN 2ND QUARTER

Source: NBB

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GDP Growth

Q2|13 vs Q1|13 +0,2%

Q2|13 vs Q2|12 0,0%

Components GDP Growth Q2|13 vs Q1|13

Added Value Investments

Industry +0,4% Enterprises +0,7%

Construction -0,4% Housing -0,9%

Services +0,2% Public Authority -6,3%

Final Consumption

Private Consumption +0,2% Net Export +0,2%

Public Consumption +0,1% Stocks -0,1%

CONSUMERS TOO CONFIDENT?

Consumer expects employment to rise, economists expect the opposite…

Optimism due to stabilisation of financial household welfare

Source: NBB

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Consumentenvertrouwen | La confiance des consommateurs

BUSINESS CONFIDENCE INDICATOR INCREASING SLOWLY

Improvement in Manufacturing Industry, Business related services & Trade

more favourable assessment of orderbooks

The economic climate nearly stabilised in the building industry.

Source: NBB

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Ondernemersvertrouwen | La confiance des chefs d'entreprise

LOW INFLATION RATE (TEMPORARILY?)

Yoy growth rates in %, the values in the grey area are forecasts

Inflation: Year Averages

2011 3,53%

2012 2,84%

2013 1,20% (e)

2014 1,30% (e)

Low inflation due to low vegetable & energy prices

Inflation expected to rise :

following unrest in the Middle-East

Growing demand due to European & American recovery

Inflation in the Netherlands: +3,1%

European inflation: 1,6% (July)

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Source: www.plan.be

BELGIAN ECONOMY STILL VULNERABLE

Little action so far to improve Belgian’s weak points:

1. Large souvereign debt: 101,1% of GDP

2. Increasing public spending: 54,9% of GDP

3. Loss of international market share

4. Unprepared Social Security System confronted by inevitably ageing population

5. Overvalued housing market

GDP expected to grow in 2014

Source: NBB & Petercam

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NBB +1,1%

European Commission +1,2%

GLOBAL COMPETITIVENESS

Source: World Economic Forum

1 Country/Economy Rank 13-14 Score Rank 11-12 Change

Switzerland 1 5,67 1 0 Singapore 2 5,61 2 0 Finland 3 5,54 3 0 Germany 4 5,51 6 2 United States 5 5,48 7 2 Sweden 6 5,48 4 -2 Hong Kong SAR 7 5,47 9 2 Netherlands 8 5,42 5 -3 Japan 9 5,40 10 1 United Kingdom 10 5,37 8 -2 Norway 11 5,33 15 4 Qatar 13 5,24 11 -2 Canada 14 5,20 14 0 Denmark 15 5,18 12 -3 Austria 16 5,15 16 0 Belgium 17 5,13 17 0 Luxembourg 22 5,09 22 0 France 23 5,05 21 -2 Korea, Rep. 25 5,01 19 -6 China 29 4,84 29 0 Turkey 44 4,45 43 -1 Portugal 51 4,40 49 -2 South Africa 53 4,37 52 -1 Brazil 56 4,33 48 -8 India 60 4,28 59 -1 Russian Federation 64 4,25 67 3 Greece 91 3,93 96 5

Global Competitiveness Report

Belgium is ranked 17th

Same rank as two years ago

NO DETERIORATION, NOR IMPROVEMENT

The high tax rate discourages

working and investment.

Rigid labor market weighs on

our competitiveness.

BELGIAN UNEMPLOYMENT AT HIGHEST LEVEL IN 14 YEARS

Source: Eurostat

2009-2010 | 1st dip: Labourhourding

2012-2013 | 2nd dip: Redundancies

Working population grows faster than

number of jobs

Unemployment increases

8,9% in Belgium

12,1% in Europe

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Employment slightly decreases

Q1|13: 4,54 million jobs

13.600 less than Q1|12

THE SALARIED EMPLOYMENT RATE CONTINUES TO FALL…

Source: RSZ | ONSS

2 … both in number of jobs as in volume

Q1|13 vs Q4|12 Jobs -0,9% Increasing pressure on social security

Hours -1,2% Sustainability?

Employment volume in FTE

Number of jobs

Q1 ’13: THE SALARIED EMPLOYMENT RATE CONTINUES TO FALL

Source: RSZ | ONSS

Sector Jobs Volume (in hours)

Industry -2,3% -4,7%

Continuous downsizing of industrial employment

Commercial Services -1,0% -0,6%

Non-Commercial Services +0,3% +0,9%

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JOBVACANCIES & TAW

Source: Actiris, FOREM & VDAB

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Jobvacancies in Flanders -8,6%

(August‘13 vs August ‘12)

Regular jobs -12,2%

Student jobs +17,4%

Temporary jobs -12,7%

Jobvacancies in Brussels +15,4%

Jobvacancies in Wallonia -16,2%

(July ‘13 vs July ‘12) Regular jobs -18,8%

Temporary jobs -13,5%

STABILIZING FEDERGON TAW-INDEX?

Source: NBB

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Bottoming out of TAW*-activity on -15% of volume on a Y/Y-2 base

* TAW = Temporary Agency Work

(July ‘13 vs

July ‘12)

Total -4,6%

Blue Collar -5,9%

White Collar -2,9%

Students -6,6%

ECONOMY WORLDWIDE

Source: OECD

“A moderate recovery is underway in the major advanced economies, according to the OECD’s latest Interim Economic Assessment. Growth is proceeding at encouraging rates in North America, Japan and the UK. The euro area as a whole is out of recession, although output remains weak in a number of countries.”

“Gradual pick-up in momentum in the advanced economies is encouraging but a sustainable recovery is not yet firmly established. Major risks remain. The euro area is still vulnerable to renewed financial markets, banking and sovereign debt tensions. High levels of debt in some emerging markets have increased their vulnerability to financial shocks.”

-1,8%

0,3%

0,7%

1,5%

1,6%

1,7%

2,0%

7,4%

Italy

France

Germany

UK

Japan

USA

Canada

China

Expected Growth in2013

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UNITED STATES: MAKINGS OF A STRONG RECOVERY 3

GDP Growth Q2|13 vs Q2|12 +1,7%

Q3|13 vs Q3|12 +2,5% (forecast)

Lowering welfare demand, but 7,5% unemployment rate still far above pre-crisis level

Rising consumerspending due to higher wages & more jobs

Healthy retail sales

Rising production orders

Housing recovery is built on solid foundations

Consumer debt has plunged

Banks are keen to lend

Shale gas boosts the supply-side

→ Only in America the growth

acceleration is likely to last

USA: ENGINE OF GLOBAL GROWTH

EUROPE: FAR FROM THERE

Source: The Economist

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-0,2%

-0,2%

-0,1%

0,1%

0,3%

0,5%

0,6%

0,7%

0,7%

1,1%

-0,5% 0,0% 0,5% 1,0% 1,5%

Italy

Netherlands

Spain

Belgium

Euro Area

France

UK

Finland

Germany

Portugal

GDP-growth Q2|13 vs Q1|13

GDP Growth Q2|13 vs Q2|12 +1,1%

After a year and half of recession, the euro area’s economy has begun to grow again.

Extreme austerity has been abandoned

CAUTION! Microeconomic conditions do not point to a recovery that is both rapid & lasting

Output in Europe is 3% lower compared to the output before the crisis (In the USA it is 4% higher) GDP for the whole of 2013 would be 0,6% lower in the Eurozone Expected GDP growth 2014: +0,9% The lack of a banking union creates uncertainty, creating a dysfunctional credit market: Europe’s recovery will not accelerate until this is fixed

CHINA: IN TRANSITION, NOT THE ENGINE FOR GLOBAL GROWTH 3

GDP Growth 2013 vs 2012 +7,5%

Government settles for stabilizing economy

The main monthly indicators, from trade to industrial output, improved in july

CAUTION! China will avoid a hard landing but will not be a spur for global growth.

Real estate prizes keep going up: housing bubble danger persists The investment rate remains unsustainble high: 48% of GDP The debt ratio (debt that China’s firms, households and government owe) has risen to 200% of GDP Growth not expected to grow faster. China’s economy is on the verge of economic transition:

From an investment-led economy to a consumption driven:

A FRAGILE RECOVERY THAT RELIES HEAVILY ON AMERICA.

STOCK MARKETS

The prospect of growth makes European stocks & bonds attractive again. The European stock markets

are finding momentum.

Source: Euronext

95,0

100,0

105,0

110,0

115,0

120,0

125,0 Index Bel20

Index CAC40

Index Dow Jones

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SUMMARY 4 Several economic indicators point out that the bottom of the economic downturn may have been reached. The Belgian GDP has risen on a quarterly basis and both consumer as business confidence have gone up. The recovery however is fragile. GDP just stabilised on a yearly basis, with some Belgian GDP-components further deteriorating. The labour market, for example, still surfers from a loss of employment, in volume as well as in jobs. The situation in the Eurozone is comparable. Several Euro-members signal positive GDP-growth, although the economy stays vulnerable. For further growth Europe relies on the expansion of other economies. Therefore all eyes are set on the United States. The revival of the American economy is believed to be lasting. In doing so, it gives the Chinese economy the necessary fuel to handle it’s transition to a mature economy.

Federgon members can expect a slight improvement in market conditions in the coming months due to the somewhat more favorable economic outlook. Even with a growth forecast of 1% to 1.2% in 2014 recovery will only be partial.

CONTACT

RESEARCH & ECONOMIC AFFAIRS DEPARTMENT

PAUL VERSCHUEREN

THIBAUT PRINCEN

HAVENLAAN 86C BTE 302 - 1000 BRUSSEL AVENUE DU PORT 86C BTE 302 - 1000 BRUXELLES TEL: 02/203 38 03 FAX: 02/203 42 68 STAT@FEDERGON.BE