Since our July forecasts, a number of new developments inside and outside Belgium have occurred. Taking those elements into account, a rapid and tentative updating of our forecasts for 1999-2000 has been made.
The first element concerns the good news stemming from the quarterly national accounts of a higher than expected GDP growth in the second quarter of 1999. As a result, over the first half of 1999, Belgian GDP growth reached 1.7% (yoy). The FPB GDP-leading indicator points to a further cyclical upturn in the second half of the year. It is also worth stressing that according to the information available today (in terms of value added, trade and unemployment), the impact of the dioxin crisis is still in line with the assumptions made in our July forecasts.
All in all, GDP growth in 1999 has been revised upward from 1.7% to 1.9%.
As prospects for the world economy are looking brighter now than four months ago and the 2000 Federal Budget is on an expansionary track, GDP growth in 2000 has been revised upward from 2.5% to 3.0%. Both developments are complementary - in the sense that the former primarily triggers exports, whereas the latter in the short-term mainly boosts private consumption- although the impact of the more favourable international environment on GDP growth is more important than the revision coming from the Budget 2000.
The acceleration of Belgian export markets in 2000 should indeed be stronger than previously expected due to higher import growth experienced by our European trading partners as well as in the rest of the world, resulting in stronger export growth than estimated earlier.
Compared to our July forecasts, the budgetary impulse for 2000 taken into account in these new forecasts is more than BEF 30 billion. At this stage, the simulation results in this field must be interpreted with caution. The most important effect of the measures should be seen in the area of private consumption, resulting from an increase in employment (reductions in social contributions) and accordingly in households’ real disposable income (reinforced by tax cuts and higher pensions). [...]