The medium-term outlook for Belgium (cut-off date: April 30) points towards an average GDP growth rate of 2.2% during the 2005-2010 period, which is slightly higher than potential (2.1%). This pace of growth is expected to take place after a slowdown in economic growth in 2005 (1.7%) and a rebound in 2006 (2.6%). In both years Belgian economic growth should be slightly higher than in the euro area. Recent information makes the 2005 growth figure highly uncertain, with a significant downward risk.

Despite moderate wage increases, the average yearly growth rate of private consumption should reach 1.9% during the 2005-2010 period, particularly thanks to the increase in households’ disposable income (stimulated particularly by reductions in personal income tax and the rise in employment). Investment growth should reach 3% on average during the 2005-2010 period, mainly reflecting the increase in business investment but also an acceleration of public investment in 2005 and 2006. Growth in exports should be 5.5% on average and the contribution of net exports to GDP growth is expected to be 0.2%. Limited wage cost increases, lower oil prices as compared to the average level in 2005 and a negative output gap should allow inflation to remain around 1.8% in the medium term.

The development of employment should reflect the favourable macroeconomic context, the limited increases in wage costs and various policy measures. After the net creation of approximately 29,000 and 21,000 jobs in 2004 and 2005 respectively, about 40,000 jobs should be created every year during the 2006-2010 period. Between 2004 and 2010 industrial employment should fall by 51,000 persons and the number of jobs created in market services should exceed 270,000. Nevertheless, in view of the growth in the labour force (mainly in the 50-64 age group) the fall in unemployment will be limited to 50,000. The unemployment rate (broad administrative statistics) is still increasing in 2005 (from 14.4% to 14.6%), but it will subsequently fall to 12.9% in 2010.

Under the assumption of unchanged policy, the public accounts are expected to show a clear deterioration, with a net public sector borrowing requirement appearing in 2005 (0. [...]