« CONCERN ABOUT THE SUSTAINABILITY OF THE ECONOMIC RECOVERY »

| FEDERAL PLANNING BUREAU REVISES GDP GROWTH 2014 DOWNWARDS |

September 2014

ECONOMIC OUTLOOK « RENTREE »

BELGIAN ECONOMY BARELY GREW IN 2ND QUARTER* +0,1%

INTERIOUR DEMAND SUPPORTS GROWING ACTIVITY

INCREASING ADDED VALUE IN INDUSTRY & SERVICES

* Q1 ‘14/Q4 ‘13 = +0,4% | Source: NBB

2,2%

0,5%

-0,2%

0,0%

0,0%

0,2%

0,4%

-2,9%

0,4%

0,5%

0,5%

-0,5%

2,2%

-0,7%

-0,5%

-0,2%

-0,1%

0,1%

0,1%

0,1%

0,1%

0,3%

0,3%

0,3%

0,6%

2,6%

2,9%

3,2%

Added Value - Construction

Investment in Housing

Supply Change

Public Consumption

Employment

Added Value - Services

GDP

Public Investment in fixed-assets

Private Consumption

Added Value - Industry

Interior Demand

Export

Corporate Investment in fixed-assets

Import

Q2 Components GDP-growth (Q/Q-1)

Q1 Components GDP-growth (Q/Q-1)

+ - LOSS OF ADDED VALUE IN CONSTRUCTION

NEGATIVE TRADE BALANCE DESPITE GROWING EXPORT

Source: NBB

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

1 |

20

07

3 |

20

07

5 |

20

07

7 |

20

07

9 |

20

07

11

| 2

00

7

1 |

20

08

3 |

20

08

5 |

20

08

7 |

20

08

9 |

20

08

11

| 2

00

8

1 |

20

09

3 |

20

09

5 |

20

09

7 |

20

09

9 |

20

09

11

| 2

00

9

1 |

20

10

3 |

20

10

5 |

20

10

7 |

20

10

9 |

20

10

11

| 2

01

0

1 |

20

11

3 |

20

11

5 |

20

11

7 |

20

11

9 |

20

11

11

| 2

01

1

1 |

20

12

3 |

20

12

5 |

20

12

7 |

20

12

9 |

20

12

11

| 2

01

2

1 |

20

13

3 |

20

13

5 |

20

13

7 |

20

13

9 |

20

13

11

| 2

01

3

1 |

20

14

3 |

20

14

5 |

20

14

7 |

20

14

Consumentenvertrouwen | La confiance des consommateurs | Consumer Confidence

Ondernemersvertrouwen | La confiance des chefs d'entreprise | Business Confidence

ANXIETY OPPRESSES CONFIDENCE (UKRAINE CRISIS, IS, GAZA, …)

TAW = Temporary Agency Work

THE FEDERGON TAW-INDEX EVOLVES NEVERTHELESS IN A POSITIVE WAY

2,9% 1,8%

7,2% 9,6%

4,0%

12,6% 11,9% TAW Growth - yearly basis

150,0

170,0

190,0

210,0

230,0

250,0

270,0

290,0

01-0

7

03-0

7

05-0

7

07-0

7

09-0

7

11-0

7

01-0

8

03-0

8

05-0

8

07-0

8

09-0

8

11-0

8

01-0

9

03-0

9

05-0

9

07-0

9

09-0

9

11-0

9

01-1

0

03-1

0

05-1

0

07-1

0

09-1

0

11-1

0

01-1

1

03-1

1

05-1

1

07-1

1

09-1

1

11-1

1

01-1

2

03-1

2

05-1

2

07-1

2

09-1

2

11-1

2

01-1

3

03-1

3

05-1

3

07-1

3

09-1

3

11-1

3

01-1

4

03-1

4

05-1

4

07-1

4

93.698 96.522

93.387

84.830

97.276 94.202

90.151

75.364

83.092

76.567

71.193

65.847

86.481 89.142 88.622

84.011

104.666 108.692

100.562

88.247

98.545 95.223

84.964 82.767

86.834 85.429 83.414

86.843

93.965

83.302

0

20.000

40.000

60.000

80.000

100.000

120.000

BrusselsWalloniaFlanders

SLIGHT DECLINE IN THE AMOUNT OF JOB OFFERS (PLACED IN PES)

+5,2% +1,5% -3,7%

Q2|14 vs Q2|13: -2,5%

0,1%

-0,4%

-0,3%

-0,2%

-0,1%

0,0%

0,1%

0,2%

0,3%

0,4%

0,5%

0,6%

0,7%

BUT SLIGHT INCREASE OF EMPLOYMENT Q/Q-1

NBB

PERSISTING LOW INFLATION > DANGER FOR DEFLATION? FAR BELOW THE 2% ECB-TARGET

Low inflation (based on consumption-index)

2014(e): +0,6%

2015(e): +1,3%

Impact on wages?

When will the pivotal index be crossed?

March ‘15: social benefits +2%

April ‘15: public wages +2% (as wages in

PC 322.01 Household Services)

Indexation of wages in PC 218

on 01/2015 = 0,47% (e)

(e) = estimate

0,00%

0,20%

0,40%

0,60%

0,80%

1,00%

1,20%

1,40%

1,60%

1,80%

jan/1

4

feb/1

4

mrt

/14

apr/

14

mei/

14

jun/1

4

jul/

14

aug/1

4

sep/1

4

okt/

14

nov/1

4

dec/1

4

jan/1

5

feb/1

5

mrt

/15

apr/

15

mei/

15

jun/1

5

jul/

15

aug/1

5

sep/1

5

okt/

15

nov/1

5

dec/1

5

Consumption Index

Health-index

Source: www.plan.be

DOWNWARD REVISED OUTLOOK FOR BELGIUM

Y2Y 2014 2015 2016

GDP +1,1% +1,5% +1,7%

Inflation 0,6% 1,3% 1,7%

Employment +9.400 (+0,2%) +27.400 (+0,6%) +31.000

Unemployment +2.400 -8.300

Unemployment rate 8,5% 8,3%

Low inflation should drive private consumption Internationale trade should drive demand, and by doing so higher the occupation of the production capacity Employment growth only in the private sector, due to cuts in public employment Calm financial markets: interest rates on 10 year bonds historically low: 1,224% on the 1st of September

Source: The Economist

GLOBAL BUSINESS CONFIDENCE BOUNCES BACK

THE GLOBAL BUSINESS BAROMETER IS DOWN FROM THE BEGINNING OF 2014. CAUSE FOR CONCERN: - Fear for higher oil prices due to the turmoil in Iraq

- Fear for higher interest rates in the US by the

Federal Reserve

THE GOBAL BUSINESS BAROMETER DECLINED ESPECIALLY IN THE INDUSTRIES - Construction - Consumer goods

ALTHOUGH… THE 2 LARGEST ECONOMIES IN THE WORLD DEVELOP SUBSTANTIALLY …

USA: +1,0% GDP growth (Q/Q-1) | number of employed on a record high | low unemployment rate

(6,2%)

CHINA: +2,0% GDP growth (Q/Q-1) | +9% industrial production | low unemployment rate (4,1%)

ACCOMPANIED BY THE UK, WHO MANAGED TO PUSH THE ECONOMY:

UK: +0,8% GDP growth (Q/Q-1) | unemployment (6,4%)

HOWEVER… IN THE EUROZONE THE 3 BIGGEST ECONOMIES SUFFER

THE GERMAN ENGINE SPUTTERS: -0,2% GDP growth (Q/Q-1) | unemployment (6,7%)

FRANCE & ITALY KEEP HOBBLING BEHIND: France 0,0% & Italy -0,2% GDP growth (Q/Q-1)

JAPAN: ABENOMICS FACES SUBSTANTIAL CHALLENGES: 0,0% GDP growth (Q/Q-1)

& THE BRIC’S (MINUS CHINA) LOSE PACE

GLOBAL GDP-GROWTH FIGURES

0,0%

-0,4%

1,3%

0,1%

0,7%

1,0%

0,9%

3,2%

2,4%

7,5%

-1,7%

-0,2%

-0,2%

0,0%

0,1%

0,1%

0,8%

1,0%

2,0%

Japan

Italy

Germany

France

Euro Area

Belgium

Netherlands

Britain

United States

China

GDP Growth Q/Q-1

GDP Growth Q/Q-4

Positive yearly & positive quarterly

growth

Positive yearly growth Negative quarterly growth

Negative yearly & negative quarterly

growth

EUROPE IS NOT FACING SUSTAINED GROWTH

Q3 LOOKS RATHER UNHEALTHY

The economy is suffering from Russian sanctions resulting from the Ukraine crisis A minor risk of deflation High youth unemployment

EUROPE’S 3 MAJOR ECONOMIES GERMANY, FRANCE & ITALY STOPPED GROWING IN Q2

FRANCE: unstable politics can new PM implement promised structural, business-

friendly reforms?

GERMANY: Uncertainty about the Ukraine crisis and the effect on the German economy delays investment & keeps confidence low The minimum wage (€ 8,5) will take effect in 2015 and should push wages up. This could be a contribution to recovery in the Eurozone.

ITALY: GDP-level is almost the same as 15 years ago

CAN EUROPE ADAPT? EUROPE HAS 3 INTERRELATED PROBLEMS

Have political leaders the courage and conviction to push through structural reforms to improve competitiveness Public opinion is not convinced of the urgent need for deep and radical changes The monetary and fiscal framework is too tight which makes structural reforms harder

|NEW| THE ECB LOWERS INTEREST RATE TO HISTORICAL LOW LEVEL

Interest rate: 0,15% 0,05% Publication 4/09/2014 - Effective from 10/09/2014

HOPING ONCE AGAIN THAT: Banks will not hold redundant liquidities Credit will be pushed into the economy Sovereign-debt will be cheaper to refinance Saving money becomes uninteresting Exchange-rate Euro declines

CAN BELGIUM ADAPT?

1) STANDSTILL GERMAN GROWTH-ENGINE = IMPORTANT NEW ELEMENT

2) CAN THE BELGIAN COMPETITIVENESS BE RESTORED? Belgium lost 1 place on the WEF Global Competitiveness Index (from 17th to 18th place) Budget cuts up to € 17 billion needed

↔ Substantial cuts on wage costs ↔ Preservation of purchasing power ↔ Paying the bill caused by an ageing population

3) 1,1% GDP-GROWTH WILL ONLY HAVE A MINOR EFFECT ON NET-JOBCREATION

vs.

CONCLUSION UNCERTAINTY ABOUT THE SUSTAINABILITY OF THE ECONOMIC RECOVERY THE NEXT MONTHS WILL DRIVE COMPANIES TO PRUDENCE CONCERNING (PERMANENT) RECRUITMENT

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

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