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Belgian Stability Programme
The economic context
Short-term outlook for the Belgian economy
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The Belgian economic outlook for 2008 according to
the January 2008 Economic Budget
In Belgium, the rate of growth slowed down during
the second half of 2007, with the increase in GDP at constant prices on
a quarterly basis falling from 0.7 and 0.6% in the first half of the
year to 0.5% in the second. The Federal Planning Bureau forecasts
relative stability in this growth rate in 2008. The annual average
growth of GDP in real terms is expected to fall from 2.7% in 2007 to
1.9% in 2008.
These predictions have been drawn up under the
assumption of an exchange rate of 1.44 dollars to the euro and an
average oil price of around 90$ for a barrel of Brent over the year
2008.
The results of the NBB's business surveys tend to
reinforce the prospect of a moderate slowdown in the rate of growth.
While the synthetic confidence indicator reached a turning point and
fell back in July, the sharp end-of-year drop, which could have been
influenced by the national political context, was more or less offset by
the results for the first quarter of 2008, helping to mitigate the
downward trend.
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TABLE 1
Growth and
associated factors |
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% Percentage change unless otherwise stated |
2006
billion |
2007
billion
|
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
|
1. Real GDP |
310,6 |
318,9 |
2,8 |
2,7 |
1,9 |
2,0 |
2,0 |
2,0 |
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2. Nominal GDP |
316,6 |
330,5 |
4,9 |
4,4 |
4,6 |
4,1 |
4,0 |
4,0 |
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Components of real GDP |
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3.Private consumption expenditure |
162,2 |
166,3 |
2,0 |
2,5 |
1,8 |
1,5 |
1,6 |
1,6 |
4.Government consumption expenditure
|
68,7 |
70,5 |
0,0 |
2,6 |
2,6 |
1,8 |
1,9 |
1,8 |
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5. Gross fixed capital formation |
63,9 |
67,2 |
4,2 |
5,1 |
2,4 |
2,7 |
2,5 |
2,7 |
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6. Change in inventories and net acquisition of valuables |
- |
- |
0,9 |
-0,2 |
0,0 |
0,0 |
0,0 |
0,0 |
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7. Exports of goods and services |
268,4 |
280,7 |
2,6 |
4,6 |
4,5 |
5,6 |
5,6 |
5,6 |
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8. Imports of goods and services |
257,2 |
269,8 |
2,7 |
4,9 |
4,8 |
5,6 |
5,6 |
5,6 |
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Contribution to real GDP growth |
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9. Final domestic demand
(3+4+5) |
- |
- |
2,9 |
2,8 |
2,0 |
1,8 |
1,8 |
1,8 |
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10. Change in inventories and
net acquisition of valuables |
- |
- |
0,9 |
-0,2 |
0,0 |
0,0 |
0,0 |
0,0 |
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11.
External balance of goods and services |
- |
- |
0,0 |
-0,1 |
-0,1 |
0,2 |
0,2 |
0,2 |
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According to the Economic Budget, growth of domestic demand should weaken
sharply in 2008, both on the household consumption and investment fronts. It
is forecast to rise by only 2.1%, against 2.9% in 2007.
Private consumption is expected to increase by 1.8%, after a rise of 2.5%
in 2007. The increase in disposable income will be influenced negatively by
the accelerating inflation rate, and especially by the effects of the rise
in fuel prices which are not taken into account in the health index which in
turn serves as the basis for wage index-linking.
The expansion in investment by enterprises cooled off from mid-2007
onwards in light of less favourable demand prospects. It may only reach 3.4%
this year, after rising by 7% in 2007(1) . Investment in housing is suffering
from the effects of the rise in mortgage interest rates and the slowdown in
real growth of disposable income. It is expected to rise by no more than 1%
in 2008 compared with 5.1% in 2007.
External markets for Belgian products are not likely to expand as much in
2008 than in 2007, considering the slowdown in the expansion of world trade.
Moreover, the appreciation of the euro exchange rate is affecting the price
competitiveness of Belgian exporters, who are expected to lose even more
market share, albeit fairly marginally in 2008. Various technical factors
nevertheless point to a similar export growth forecast for goods and
services in 2008 to that in 2007 (4.5% compared with 4.6%). Despite the
slower growth of final demand, the high growth already built up suggests, on
an annual basis, an increase in imports of the same magnitude in 2008 than
in 2007 also (4.8% compared with 4.9%). Net exports should therefore make a
slightly negative contribution to growth.
(1) These growth rates
come to 3.3 and 5.3% respectively after accounting for the sale of
public buildings.
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TABLE 2
Price movements |
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% Change |
2006
(2005=100)
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2007
(2005=100) |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
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GDP deflator |
102,0 |
103,6 |
2,0 |
1,6 |
2,6 |
2,1 |
1,9 |
1,9 |
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Private consumption deflator |
102,5 |
104,5 |
2,5 |
2,0 |
2,9 |
1,7 |
1,8 |
1,8 |
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HICP |
102,3 |
104,2 |
2,3 |
1,8 |
3,0 |
1,7 |
1,8 |
1,8 |
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Public consumption deflator |
103,0 |
105,5 |
3,0 |
2,5 |
3,1 |
2,6 |
2,3 |
2,3 |
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Investment deflator |
102,7 |
104,7 |
2,7 |
1,9 |
2,5 |
2,0 |
2,0 |
2,0 |
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Export price deflator (goods and services) |
103,4 |
106,3 |
3,4 |
2,7 |
1,9 |
0,9 |
1,2 |
1,4 |
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Import price deflator (goods and services) |
104,0 |
106,4 |
4,0 |
2,3 |
2,0 |
0,8 |
1,2 |
1,4 |
The rise in prices measured by national consumer price index was 1.8% in
2007. In the Economic Budget, the annual average increase was estimated at
3% for 2008, with the above-mentioned exchange rate and oil price
assumptions. On the basis of trends during the first two months of the year
2008, the Federal Planning Bureau estimated in March that this increase
could be as much as 3.5%. This faster rise in prices seems to be largely due
to the rise in oil prices, but also to higher gas and electricity tariffs
and the increase in prices for some food products. The health index, which
does not take fuel price movements into account, is expected to rise
slightly less quickly, by 2.8% according to the Economic Budget and 3.3%
according to the latest revised figures. After the first one in February, a
second round of index-linking for civil service pay and social benefits is
due in May/June.
Growth in employment, which lags behind the pace of economic activity
somewhat, should slow down in 2008, but the employment rate is still
expected to rise slightly to 63.7%, and the unemployment rate should fall
back to 7.3%, according to harmonised Eurostat data, compared with 7.6% in
2007.
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TABLE 3
Labour market movements |
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% change |
2006
Level |
2007
Level |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
| 1.
Domestic employment |
4.278,0 |
4.346,1 (a) |
1,2 |
1,6 |
1,1 |
0,9 |
0,9 |
0,8 |
| 2.
Numbers of hours worked |
6.328,6 |
6.427,0 (b) |
1,4 |
1,6 |
1,0 |
0,8 |
0,8 |
0,7 |
3.
Unemployment rate
(definitie Eurostat definition) |
8,2 |
7,6 |
8,2 |
7,6
|
7,3 |
7,1
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7,0
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6,7 |
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4. Labour productivity, persons |
72,6 |
73,4 (c) |
1,6 |
1,1 |
0,8 |
1,1 |
1,2 |
1,3 |
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5.
Labour productivity, hours worked |
49,1 |
49,6 (d) |
1,4 |
1,1 |
0,8 |
1,2 |
1,3 |
1,4 |
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6.
Compensation of employees |
158,2 |
165,5 (e) |
4,5 |
4,7 |
4,2 |
4,3 |
4,4 |
4,4 |
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7. Compensation per employee |
44,1 |
45,5 (f) |
3,2 |
3,1 |
3,2 |
3,3 |
3,4 |
3,4 |
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(a) thousands - (b) millions of hours - (c)
euro - (d) thousands of euro - (e) billions of euros - (f) thousands of
euros |
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