In line with the international business cycle, qoq GDP growth in Belgium slightly decelerated from 0.7% in the first quarter to 0.5% in the third and the fourth quarter. This year, quarterly growth should be between 0.4% and 0.5%. On a yearly basis, economic growth should slow down from 2.7% in 2007 to 1.9% in 2008. In 2007, the Belgian economy was driven by domestic demand. This year, domestic demand growth should decline markedly. Private consumption growth is expected to weaken as the slowdown in job creation, the more modest increase in wages before indexation, and the acceleration in inflation should all limit the growth of real disposable income. This will also affect housing investment, together with the increased mortgage rates. Business investment growth should also slow down in view of less favourable demand perspectives.

Export growth should be almost as strong in 2008 as in 2007 despite a slowdown in the growth of the relevant export markets. As a consequence, Belgian exports will keep on losing export market shares, but to a lesser extent. The combination of real import growth exceeding export growth and deteriorating terms of trade should reduce the Belgian current account surplus to 2.5% of GDP in 2008 as compared to 2.9% last year.

After a net gain of about 68,000 persons in 2007, employment is expected to record an average increase of 46,600 persons this year. As employment will increase faster than the labour force, the broad administrative unemployment rate is expected to decline from 12.7% in 2007 to 12.2% in 2008. The harmonised Eurostat unemployment rate (based on labour force surveys) should fall from 7.6% last year to 7.3% in 2008.

According to our inflation update of March, the increase in the national index of consumer prices should accelerate to 3.5%, after 1.8% in 2007. This acceleration is mainly due to substantial price increases in energy products and in processed food items (especially cereal and milk products). [STU 1-08 was finalised on 7 March 2008]