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To promote transparency and provide information, the Federal Planning Bureau regularly publishes the methods and results of its works. The publications are organised in different series, such as Outlooks, Working Papers and Planning Papers. Some reports can be consulted here, along with the Short Term Update newsletters that were published until 2015. You can search our publications by theme, publication type, author and year.
The new Economic outlook for Belgium for the period 2011-2016 is based on a context that is characterised by a stronger-than-expected recovery of the world economy, spurred on in particular by the Asian emerging economies and the US economy. Three main risks could undermine this international scenario: the budgetary position of several countries and the financial risks that this may entail; the volatility of commodity prices; and the overheating of several emerging economies.
Belgian GDP growth should amount to 2.2% in 2011 and in 2012, affirming its outperformance compared to the euro area since the start of the crisis. This growth rate should persist in the medium term. In 2011 and 2012, domestic demand growth should accelerate, backed by private consumption and business investment. Public investment should be highly dynamic in the run-up to the local elections of 2012. After an impressive increase in 2010, exports are expected to increase at a slower pace in 2011 and 2012 due to the deceleration in world trade growth. From 2013 onwards, growth in domestic demand and exports should remain close to historical average rates.
Belgian inflation should accelerate considerably in 2011 (3.5%), mainly due to a steep increase in raw material prices. Without new shocks on commodity prices, inflation should stabilise around 2% in the medium term.
Belgian employment coped remarkably well with the crisis. The rise in employment in the enterprise sector in 2010 (+27 000 persons) had already compensated for the decline in 2009. This performance seems to be related mainly to the so-called temporary unemployment system and the further increase in the number of people working in the government-subsidised voucher programme for domestic-type services. From 2011 onwards, employment in the enterprise sector should increase by roughly 46 000 persons per year. The number of unemployed should decline by 8 000 units in 2011 and by 3 000 units in 2012, followed by a strengthening in the annual decline in unemployment of up to 16 000 persons in 2016. The unemployment rate (broad administrative definition) should fall from 12.6% of the labour force in 2010 to 11% at the end of the projection period.
The general government deficit amounted to 4.1% of GDP in 2010 and should shrink to 3.8% of GDP in 2011, taking into account the budget information up to mid-April. Under a constant policy assumption, the public deficit should increase significantly in 2012 (4.4% of GDP) and decline gradually from 2013 onwards to reach 3.6% of GDP in 2016. The deficit reduction path, which aims to achieve a balanced budget in 2015, requires structural consolidation measures amounting to 17 billion euro.
STU 2-11 was finalised on 1 June 2011.
Closed series - Short Term Update 02-11 (en),
Closed series - Planning Paper 109 (fr), (nl),
Last year, the global economic recovery after the 2009 recession turned out to be stronger than initially expected. The phasing out of stimulus measures, a deceleration of world trade growth, and public deficit reduction measures are expected to weigh on economic growth in the euro area this year. However, the German economy should continue to grow noticeably faster than the euro area average and impact positively its neighbouring countries (including Belgium). The international economic context remains highly uncertain, among other factors with regard to the future evolution of oil and other raw material prices.
In the wake of the Germany’s strong growth performance, combined with a catch-up in construction activity after the cold winter, Belgian GDP increased sharply in 2010Q2 (1.1%). The growth deceleration in 2010Q3 (0.4%) was therefore hardly surprising, all the more so because export market growth was already expected to slow down in the second semester. In the course of 2011, Belgian export growth should pick up again and domestic demand growth should strengthen, owing to investment especially. As a result, GDP growth should gradually improve from 0.5% in 2011Q1 to 0.6% in 2011Q4. On an annual basis, Belgian GDP growth is estimated at 2% both for 2010 and for 2011.
Despite the rise in labour productivity and working time, the number of jobs has been increasing again since the beginning of 2010. During the first half of this year, employment growth should weaken slightly owing to an acceleration of productivity growth, but should regain momentum thereafter. The number of employed persons is expected to increase by 28 500 on average in 2010 and by 37 600 in 2011. Considering the evolution of the labour force, the number of unemployed should fall by 4 600 on average this year. Therefore, the harmonised unemployment rate (Eurostat definition) should stabilise at 8.4%.
Measured by the yoy growth rate of the monthly consumer price index, Belgian inflation was on the rise in the course of 2010 as a result of a steady increase in commodity prices. Underlying inflation was also on an uptrend as from May 2010 and should increase further as the recent rise in commodity prices feeds into prices of other goods and services. According to our most recent inflation forecasts, finalised at the end of February, the inflation rate should increase from 2.2% in 2010 to 3.3% in 2011.
STU 01-11 was finalised on 2 March 2011.
Closed series - Short Term Update 01-11 (en),
In October, the FPB prepared an update of its medium-term economic outlook of May 2010. This new outlook covers a longer period (2010-2020) than usual because it was drawn up in the framework of the macroeconomic surveillance process under the Europe 2020 Strategy, with a view to the preparation of the draft Belgian National Reform Programme.
This new outlook for Belgium is based on an international context that is marked by a recovery that should emerge in 2010-2011 and even gain momentum in the medium term. Nevertheless, the uncertainty surrounding these forecasts continues to be higher than before the financial crisis. Large budget deficits and global imbalances continue to threaten the stability of worldwide economic growth.
Yearly Belgian economic growth should amount to approximately 1.8% in 2010 and 2011 (based on our September forecast described in STU 3-10) and fluctuate around 2% thereafter. After a sharp decline in 2009, domestic demand has been expected to rise again in 2010, despite the on-going fall in business investment. As of 2011, domestic demand should rise at an average yearly rate of 1.8% as its various components regain their trend-based growth. Belgian exports, which fell by 11% in 2009, have recovered significantly in 2010. Thereafter, exports should grow at a rate close to its historical average. The contribution of net exports to GDP growth should be positive for the whole projection period (0.3-0.4 %-points on average for 2012-2020). Employment seems to have already experienced a moderate recovery in 2010.
Employment should increase further in 2011 and 2012, but at a limited pace as employers try to push up labour productivity and average working time from the historically very low levels that they reached in 2009. From 2013 to 2015, employment growth should become more sustained before gradually dropping again towards the end of the forecast. Employment as a percentage of the population aged between 20 and 64 years should initially fall from 68% in 2008 to 66.9% in 2010, but should recover to 68.2% in 2015 and 69.8% in 2020, a rate still well below the 75% target set by the EU. Unemployment (broad administrative definition) is expected to peak in 2012 at a level that is 103 000 units higher than in 2008. From 2013 onwards, unemployment should slowly decline and reach 591 000 units in 2020.
The general government budget deficit should shrink from 6% of GDP in 2009 to 4.8% of GDP in 2010, 4.6% in 2011 and 4.5% in 2012. Thereafter, the deficit should remain almost constant up to 2020. A further and considerable fiscal adjustment is thus necessary to cut back the deficit to 3% of GDP in 2012 and achieve a balanced budget in 2015 in accordance with the Stability Programme of January 2010.
STU 04-10 was finalised on 22 December 2010.
Closed series - Short Term Update 04-10 (en),
Since mid-2009, the world economy has been recovering from one of the worst post-war economic crises. As of mid-2010, world economic growth should slow down as stimulus measures are gradually reduced or phased out and stock building becomes less of a support to economic growth. Moreover, western economies now face major challenges in restoring health to public finances. As a result, the international context remains surrounded by major uncertainties, with downside as well as upside risks.
During the second half of 2009, the Belgian economy posted positive quarterly growth rates driven by recovering exports and an acceleration of private consumption growth. In 2010Q1, the economic recovery was, however, interrupted due to a drop in construction activity owing to the cold weather. Strong GDP growth in 2010Q2 (0.9%) was in turn partly due to a catch-up by the construction sector, but exports boomed as well because of the strong growth of the German economy. In line with the international business cycle, qoq GDP growth should decelerate to 0.3% on average during the second half of 2010. In the course of 2011, export growth should pick up again, resulting in average quarterly GDP growth of 0.5% in the second half of the year. On an annual basis, GDP growth should amount to 1.8% in 2010 and 1.7% in 2011.
The past recession has had a smaller impact on domestic employment than initially expected. A temporary strong decrease in hourly labour productivity and in average hours worked per person softened the downward impact on the number of employed persons. Consequently, the net decrease in employment in 2009 was limited to 17 500 persons (-0.4%). Hourly labour productivity and average working time should catch up in the course of this year and next year. Combined with a modest economic recovery, the net increase in employment should therefore remain limited to 10 100 persons in 2010 and 4 700 in 2011. The harmonised Eurostat unemployment rate (which is based on labour force surveys) is expected to increase from 7% in 2008 to 9% in 2011.
During recent years, Belgian headline inflation (as measured by yoy growth of the national index of consumer prices) has primarily been influenced by the evolution of raw materials prices. As from May 2010, underlying inflation has also been creeping up. In the course of the next year, underlying inflation should remain on an uptrend. Nevertheless, consumer price inflation is expected to decelerate somewhat because of the quasi-stabilisation of energy prices. On an annual basis, inflation should drop from 2.1% in 2010 to 2% in 2011.
STU 3-10 was finalised on 1 October 2010
Closed series - Short Term Update 03-10 (en),
The new medium-term outlook for Belgium is based on an international context that is marked by a stronger-than-expected recovery, particularly spurred on by the large Asian emerging economies and the American economy. Nevertheless, the uncertainty surrounding these forecasts continues to be higher than before the financial crisis. The important budget deficits and global trade and capital flow imbalances continue to threat the stability of worldwide economic growth.
The yearly growth of the Belgian economy should amount to 1.4% in 2010 and 1.7% in 2011 and exceed 2% in 2012-2015. After a sharp decline in 2009, domestic demand should start rising again in 2010, despite the ongoing fall in business investment. As of 2011, domestic demand should rise at an average yearly rate of just above 2% as its various components regain their trend-based growth. Belgian exports, which fell by 11% in 2009, are expected to recover from 2010 onwards. The contribution of net exports to GDP growth should be largely positive in 2010 (+0.7%-points) and weaken from 2011 onwards (+0.2%-points on average) due to the acceleration in domestic demand.
Belgian inflation should not exceed 2% on a yearly basis as the limited increase in nominal unit labour costs (average annual growth of 1% during the period 2010-2015) should keep underlying inflation in check. However, this limited increase masks a decline in 2010 followed by a gradual acceleration to 2% in 2015.
Employment should decline by 33 000 units in 2010 and increase by as little as 7 000 units in 2011. As economic growth accelerates in 2012-2015, employment should expand by nearly 50 000 persons per year on average. Employment as a percentage of the population aged between 20 and 64 years, should initially fall from 68% in 2008 to 66.3% in 2010 but should recover to 67.7% in 2015, a rate still far below the 75% target set by the EU. In 2012, unemployment (broad administrative definition) is expected to peak at a level that is 128 000 units higher than in 2008. From 2013 onwards, unemployment should slowly decline and reach 698 000 units in 2015.
The general government budget deficit should shrink from 5.9% of GDP in 2009 to 4.8% of GDP in 2010. However, under the assumption of constant policy, the deficit should again exceed 5% of GDP from 2011 onwards. A further and considerable fiscal adjustment is thus necessary to cut back the deficit to 3% of GDP in 2012 and achieve a balanced budget in 2015 in accordance with the Stability Programme of January 2010.
STU 2-10 was finalised on 1 June 2010.
Closed series - Short Term Update 02-10 (en),
According to our February forecast, quarterly GDP growth should remain limited to 0.3% on average in the course of 2010, which is about half of the quarterly growth in the second half of 2009. This slowdown is in line with the international business cycle, which should temporarily lose momentum to the extent that monetary and budgetary stimuli fade and restocking comes to an end. In the course of 2011, exports should pick up and domestic demand should gain momentum, resulting in average quarterly GDP growth of 0.6%. On a yearly basis, Belgian GDP should increase by 1.4% in 2010 and 1.7% in 2011, after a drop of 3% last year. This means that real GDP should remain below its pre-crisis level until late 2011.
Net job losses reached 23 200 persons on average in 2009 and should add up to 46 100 this year. This trend should reverse in 2011, with a net creation of 8 600 jobs. Given the evolution of the labour force, the number of unemployed (broad administrative definition) should increase by 52 900 persons this year (after going up by 45 000 persons in 2009) and by almost 29 000 persons in 2011. As a result, the harmonised Eurostat unemployment rate (which is based on labour force surveys) is expected to reach 8.8% in 2011, compared to 7% in 2008.
Headline inflation in Belgium, as measured by yoy growth of the national index of consumer prices, was negative from May to November 2009, which was mainly due to the negative impact of energy prices. As a result, overall inflation remained just below zero in 2009. At the end of last year, the base effect of the drop in energy prices had disappeared. Combined with a gradual increase in oil prices, headline inflation should rise to 1.7% in 2010 according to our inflation forecast of March.
Closed series - Short Term Update 01-10 (en),
Closed series - Planning Paper 108 (fr), (nl),
In view of the new round of stability and convergence programmes (SCP) by the EMU member states, the FPB transmitted a medium-term outlook for the Belgian economy to the federal government. In this outlook, the short-term international assumptions are based on the November forecasts of the EC. These assumptions result in a gradual recovery of Belgian GDP in 2010 (0.8%) and 2011 (1.6%), after a decline of 3.1% in 2009. More information on this simulation can be found on pages 5-6.
As world trade appears to recover at a faster pace than expected in the EC outlook, the FPB produced a technical update of the SCP-simulation. This second simulation results in relatively stronger Belgian economic growth in 2010 and 2011 (1.1% and 1.7% respectively). From 2012 to 2014 economic growth is expected to be 2.1% on average, which might not be sufficient to close the output gap by 2014. Comments in the next paragraphs are based on this exercise.
Private demand was heavily affected by the financial and economic crisis. Private consumption suffered from a lack of confidence which brought an important increase along in the savings rate in 2009. In the medium term, consumption growth should gradually recover but remain below 2%. Gross fixed capital formation plummeted in 2009 and is unlikely to recover soon as idle production capacity is still abundant. From 2011 to 2014, average investment growth should amount to 2.1%. Exports declined by more than 10% in 2009, but should recover from 2010 onwards and reach an average growth rate of 4.4% from 2011 to 2014.
As employment typically reacts with a lag to the business cycle, the decrease in employment should even be stronger in 2010 than in 2009, before increasing gradually from 2011 onwards. The (broad administrative) unemployment rate should increase by 2.5 percentage points in 3 years and reach 14.3% in 2011. From 2012 onwards the unemployment rate should diminish somewhat, but total administrative unemployment should still amount to more than 730 000 persons in 2014 (130 000 persons more than in 2008).
Due to the recession the public deficit increased to 5.8% of GDP in 2009. Under an unchanged policy assumption the net public financing requirement should decline by 0.6% of GDP in 2010 and roughly stabilise somewhat below 5.5% in the medium term.
STU 04-09 was finalised on 21 December 2009.
Closed series - Short Term Update 04-09 (en),
After the escalation of the financial crisis in September 2008, the industrialised countries were pulled into a deep recession. The main uncertainty that currently surrounds economic forecasts concerns the robustness of the international economic recovery. In fact, monetary and fiscal policies have been able to stabilise the world economy more rapidly than expected, but it remains difficult to predict whether the economic recovery is able to withstand the fading out of the impact of the economic stimulus measures.
According to our September forecast, Belgian GDP growth should become slightly positive in the second half of 2009. In the course of 2010, economic growth should also be supported by domestic demand. Quarterly GDP growth should pick up further in the course of 2011 and reach 0.6%. This will result in annual GDP growth rates amounting to 0.4% in 2010 and 1.9% in 2011, after a drop of 3.1% this year.
Whereas total net job creation still amounted to 71 200 persons on average last year, 34 600 jobs should be lost this year. In 2010, job losses should add up to 58 900 on average. In 2011, a net job creation of 17 600 persons on average is expected. Given the evolution of the labour force, the number of unemployed (broad administrative definition) should increase by 53 900 persons this year, by 98 400 next year and a further 23 300 persons in 2011. As a result, the harmonized Eurostat unemployment rate (which is based on labour force surveys) is expected to reach 9.6 % in 2011, compared to 7% in 2008.
According to our inflation update of October, headline inflation (as measured by yoy growth of the national index of consumer prices) has become negative since May and should remain so until November 2009. The yoy decrease of the index results from the price evolution of a limited number of products and is temporary. Underlying inflation should cool down further as a reaction to weak economic activity and the gradual pass through of lower energy prices into the prices of other goods and services, but should remain clearly positive. This year, inflation should be zero on average, mainly due to the negative impact of energy prices. As oil prices should increase gradually, their negative impact on inflation should disappear, resulting in a rise in inflation to 1.3% in 2010, despite the decrease in underlying inflation (from 2% in 2009 to slightly above 1% in the second half of 2010).
STU 3-09 was finalised on 6 October 2009
Closed series - Short Term Update 03-09 (en),
The new medium-term economic outlook for Belgium has been drawn up in an international context that is heavily influenced by the financial crisis and the deep economic recession this has brought about. Belgian GDP should fall by nearly 4% in 2009, followed by zero growth in 2010 as the crisis subsides. In the wake of a worldwide recovery, Belgian GDP growth should start accelerating from 2011 onwards, resulting in average growth for the period 2011-2014 (2.3%) that is similar to the average of the past twenty years. Note that the global economic situation is beset with many uncertainties and, therefore, the outlook is surrounded with considerable risks, especially for the short term.
Households are expected to raise their precautionary savings dramatically in 2009, thus lowering their consumption compared to last year (-0.6%). Strongly unfavourable demand prospects, combined with a sharp drop in profitability and deteriorated external financing conditions will lead to a sharp contraction in business investment (-7.5%). Domestic demand should recover slightly in 2010 and more markedly from 2011 onwards. The volume of Belgian exports is expected to go down for two years in a row (-8.9% in 2009 and -0.6% in 2010) and the contribution of net exports to GDP growth should be largely negative. From 2011, Belgian export growth should be close to its historical growth rate (4.8%). After a peak in 2008 (4.5%), the inflation rate should fall to 0.3% on average in 2009. In the medium term, inflation is expected to pick up again, but to remain below 2%.
The effects on employment of the sudden fall in activity should materialise progressively: domestic employment should drop on average by 37 000 jobs this year and by 53 000 jobs next year. The recovery in 2011 should not be labour-intensive and employment is only expected to increase significantly from 2012 onwards (by a little more than 43 000 jobs a year on average). This evolution of employment, combined with an increase in the labour supply, should lead to a rise in unemployment of 194 000 units from 2009 to 2011. In the next three years, the unemployment rate (broad administrative definition) should go up from 11.8% to 15.2%. As from 2012, the unemployment rate should gradually decrease to reach 14.5% in 2014.
Under the assumption of constant policy, public sector accounts are expected to deteriorate markedly, with a net public financing requirement of 4.3% of GDP in 2009, widening to 5.6% of GDP in 2010. The end of the recession will not lead to a reduction in the deficit, which should peak at 6.1% of GDP in 2012 before slightly improving afterwards. As a result, Belgian public debt should again experience a snowball effect, going up from 89.3% of GDP in 2008 to 106% of GDP in 2014.
STU 2-09 was finalised on 27 May 2009
Closed series - Short Term Update 02-09 (en),
In 2008Q4, the financial crisis and the recession faced by the main trading partners took their toll and caused Belgian GDP to fall by 1.3% qoq. According to our February forecast, Belgian economic activity should continue to contract in the course of 2009 and only stabilise in the fourth quarter. As a consequence, Belgian GDP is projected to fall by 1.9% in 2009, after an increase of 1.1% in 2008. Despite the considerable downward revision of Belgian GDP growth for 2009 (last September a positive economic growth of 1.2% was forecast), the uncertainty surrounding this forecast remains exceptionally large and downside risks are likely to be greater than upside risks.
Belgian exports should fall by 4.6% this year, after an increase of 2.2% in 2008. Imports should decrease less than exports. Despite the drop in oil prices and the appreciation of the euro, the current account balance should remain negative and reach -1.8% of GDP in 2009.
In 2008, private consumption increased by 0.9%. The negative growth of private consumption in 2009 (-0.4%) is mainly due to historically low consumer confidence and negative wealth effects caused by the drop in asset prices. This should lead to a strong rise in the households' savings rate (up to 15.8%). Worsened demand prospects, the decline in business profitability, falling capacity utilisation rates and tightened lending conditions should exert a drag on business investment in 2009, which should fall by 4.6%. Household investment growth should also turn negative in 2009 (-1.6%), although this contraction will be mitigated somewhat by a temporary VAT reduction. Only public consumption and public investment growth rates are expected to remain positive.
This year, an average (net) loss of 24 700 jobs should be registered. Job losses in the course of 2009 will be far worse than appears from the annual averages: in 2009Q4, employment should be 59 100 persons lower than in 2008Q4. The harmonised Eurostat unemployment rate (which is based on labour force surveys) is expected to reach 8.2% in 2009, compared to 7.1% in 2008.
Despite high underlying inflation during the first half of 2009, total inflation, as measured by the yoy increase in the national index of consumer prices, should continue to decrease and even become slightly negative during summer. Only in the second half of this year should the expected oil price increase be reflected in inflation evolution. According to our inflation update of March, average inflation should decline from 4.5% in 2008 to 0.5% in 2009.
STU 1-09 was finalised on 2 March 2009.
Closed series - Short Term Update 01-09 (en),
Closed series - Planning Paper 107 (fr), (nl),
The FPB has revised its medium-term outlook for 2008-2013 for the Belgian economy. For the 2008-2010 period, the outlook adopts the international economic scenario provided by the OECD outlook of November 2008. The uncertainty surrounding the results is exceptionally large and downside risks could prove to be greater than upside risks. The greatest downside risks include a longer than expected period of distress on financial markets, and that emerging markets could be hit harder than anticipated.
The outlook for Belgium shows average GDP growth reaching only 1.5% during the period 2008-2013 (1.9% for the period 2001-2007). This relatively weak performance is largely explained by weak GDP growth in 2008 (1.4%), a fall in economic growth next year (-0.3%) and a limited recovery in 2010. Over the period 2011-2013, GDP growth is expected to stabilise at a rate slightly above 2%, which might not allow the output gap to be completely closed by the end of the projection.
After dynamic growth in 2007, private consumption expansion should be much more limited in 2008 and 2009. From 2010 onwards, household demand growth should increase gradually and then stabilise at a rate close to 2%. After dynamic growth in 2008, gross fixed capital formation should slightly decrease in 2009, before recovering in 2010 and increasing by 2.4% on average during the 2011-2013 period. Given the unfavourable international environment next year, exports are expected to decrease in 2009. Over the period 2010-2013, exports should increase by 4.4% on average and the contribution of net exports to GDP growth is expected to be slightly positive.
The worsening of the economic situation should lead to a decrease in employment in 2009. In the medium term, employment should increase again, at a yearly rate reaching 0.8% at the end of the projection. With employment growth heavily affected by the adverse economic situation in the short run and in view of the increase in the labour force, the unemployment rate (broad definition) will soar to 12.9% by 2010 (against 11.9% in 2008), before levelling off at around 13.2% from 2011 onwards. Total administrative unemployment should stand at almost 700,000 persons in 2013 (65,000 persons more than in 2007).
Under the assumption of unchanged policy, the public accounts are expected to deteriorate markedly, with a net public financing requirement of 1.6% of GDP in 2009, 2.4% in 2010 and up to 2.6% in 2011-2013.
STU 04-08 was finalised on 11 December 2008.
Closed series - Short Term Update 04-08 (en),
Since mid-September, the financial crisis has entered an exceptionally turbulent new phase. The US and European authorities have had to take extraordinary measures in order to deal with solvency and liquidity problems in the banking sector. As financial conditions are likely to remain difficult, it is obvious that the crisis will have large negative effects on the world economy, although the size of these effects is currently very difficult to grasp due to huge uncertainties concerning the magnitude and the duration of the crisis.
This uncertainty explains the volatility of most indicators, which makes it currently very difficult to establish credible economic forecasts. The latest short-term forecasts of the FPB were finalised in the first half of September, i.e. before the aggravation of the financial turbulence. According to these forecasts, Belgian GDP growth should amount to 1.6% in 2008 and slow down to 1.2% in 2009. The 2009 government budget is based on this outlook.
In the light of recent financial sector developments, the latest FPB forecasts should be revised downwards, in line with revisions of economic growth by national and international institutions. In fact, the weakening of economic growth in the course of 2008 will probably be stronger than expected, while the subsequent recovery could take longer to materialise and could lack strength. The channels through which the financial crisis is affecting the real economy are discussed in the Special Topic of this Short Term Update.
Belgian business and consumer confidence have dropped to their lowest level in more than five years due to weakening economic growth and the financial crisis, which are tending to reinforce one another. Moreover, consumer confidence has suffered from the high number of lay-offs in large Belgian companies. On the other hand, the decline in oil prices and the depreciation of the euro have limited the worsening of sentiment somewhat through their positive effect on households’ purchasing power and export competitiveness.
Inflation forecasts for 2009 have been revised downwards since September, which is the result of two counteracting factors. In fact, the downward effect of falling oil prices on inflation is partly compensated by the stronger than expected increase in underlying inflation. According to our end-of-October inflation update, the increase in the national index of consumer prices should slow down from 4.6% in 2008 to 1.9% in 2009.
STU 3-08 was finalised on 31 October 2008.
Closed series - Short Term Update 03-08 (en),
Closed series - Planning Paper 106 (fr), (nl),
The medium-term outlook for Belgium points towards an average GDP growth rate of 2% for the period 2008-2013. A slowdown is expected for the Belgian economy in 2008 and 2009 (GDP growth of only 1.7%), mainly as a consequence of less dynamic exports and a moderate increase in domestic demand. Belgian GDP growth should accelerate in 2010, thanks to the more favourable international environment and a more dynamic development of domestic demand. From 2011 onwards, Belgian GDP growth should stabilise slightly above its potential (equal to 2% on average). Note that the global economic situation is beset with many uncertainties and, therefore, the outlook is surrounded with considerable risks, especially for the short term.
The average yearly growth rate for private consumption should reach 1.7% for the period 2008-2013, which is slightly lower than the increase in households’ real disposable income. Purchasing power will be handicapped in 2008 by the high inflation rate (3.8%), but should be underpinned afterwards by employment growth and by higher increases in wage rates and social benefits. Investment growth should reach 2.8% for the period 2008-2013, reflecting the path of business investment growth (supported by business profitability and stable demand prospects after 2009). Growth in exports should reach 5% on average and the contribution of net exports to GDP growth is expected to be 0.1%-points. After an acceleration in 2008, the inflation rate should stabilise slightly below 2% for the period 2009-2013. This rather low inflation rate is mainly due to a moderate increase in imported costs and the persistence of a negative output gap until 2013.
The expected evolution of employment reflects a relatively favourable macroeconomic environment and persistently modest labour productivity growth (1.2% per year). After a particularly high number of new jobs created in 2007 (70,000), employment growth should remain sustained: about 42,000 units should be created every year during the period 2008-2013. Between 2007 and 2013, manufacturing industrial employment should fall by 35,000 but the number of jobs created in market services should exceed 270,000. Nevertheless, in view of the increase in the labour force (notably explained by incoming migration), the fall in unemployment should be limited to 22,000 persons. The unemployment rate (broad administrative statistics) should fall from 12.6% in 2007 to 11.6% in 2013.
Under the assumption of constant policy, public accounts are expected to deteriorate markedly, with a net public financing requirement of 0.3% of GDP in 2008, widening to 0.8% of GDP in 2009 and 0.9% of GDP in 2010, before gradually falling to 0.4% by the end of the projection period. Nevertheless, the total public debt to GDP ratio will continue to decline, from 84.8% in 2007 to 70.8% in 2013. [STU 2-08 was finalised on 26 May 2008]
Closed series - Short Term Update 02-08 (en),
Closed series - Planning Paper 105 (fr), (nl),
Closed series - Planning Paper 104 (fr), (nl),
Closed series - Planning Paper 103 (fr), (nl),
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]
Closed series - Short Term Update 01-08 (en),
On the basis of its short term economic forecast of September and revised figures for the medium-term international economic environment, the FPB has updated its medium-term outlook 2007-2012. GDP growth should reach 2.1% on average and should be driven by both domestic demand and exports, although the structural loss of export market shares should remain significant: while growth in our potential export markets will reach 6.8% a year on average, exports are expected to record an average annual increase of 5.4%.
The growth of private consumption (1.8% on average) should be in line with the growth of real disposable income (1.9% on average). Gross fixed capital formation should continue to register sustained growth, attaining an average of 3.1%, mainly reflecting an increase in business investment, but also an acceleration of public investment in view of the local elections of 2012. Inflation (as measured by private consumption deflator growth) should be below 2% on average during the projection period, despite an acceleration in 2008: inflation could even climb to 2.5% next year, according to the latest update of the monthly inflation forecasts of FPB. Limited wage increases (lower than productivity gains), the increase in interest rates, a negative output gap and a moderate increase in imported costs are the main factors accounting for the low inflation rate in the medium term.
Total employment will increase by more than 40,000 jobs a year on average during the projection period, due to sustained economic growth combined with persistently modest labour productivity (1.4% per year). Due to ongoing structural shifts in the sectoral composition of employment, the manufacturing industry will incur a further loss of 6,000 jobs a year on average, whereas market services should gain 46,000 jobs a year. The employment rate is expected to increase from 62.6% in 2006 to 65.4% in 2012; the fall in the unemployment rate (from 13.8% in 2006 to 11.0% in 2012 -broad definition) should accelerate at the end of the projection period, when baby-boomers will leave the labour force on a massive scale.
The pace of employment growth should have nearly doubled during the period 2001-2012 compared with the previous decade, despite very similar average economic growth rates for both periods.
STU 04-07 was finalised on 10 December 2007.
Closed series - Short Term Update 04-07 (en),
Closed series - Planning Paper 102 (fr), (fr), (nl), (nl),
This year, the Belgian economy should register an increase in GDP of 2.7%. In 2008, economic growth is expected to slow down to 2.1%.
In 2006, Belgian exports grew significantly slower than the relevant export markets. Belgian exporters thus suffered from important losses of market share. Despite a steady deceleration of growth in the relevant export markets this year and next year, export growth should accelerate somewhat. Consequently, losses of export market shares should be more in line with their historical trend. The current account balance has worsened since 2003 due to the continued rise in oil prices. In 2007 and 2008, the slower increase in oil prices and the appreciation of the euro should limit the decline of the current account balance to 0.1% of GDP per year.
Domestic demand growth, which is mainly determined by the evolution of private consumption and business investment, should amount to 3.2% this year and 2% next year. In 2007, private consumption will benefit from a strong rise in employment and in property income, while business investment will be stimulated by the high capacity utilisation rate and the ongoing rise in profitability. Next year, private consumption growth should decelerate due to a smaller rise in real disposable income and less favourable demand prospects should weigh on business investment. Domestic employment should increase by, on average, 61,300 persons in 2007 and 44,200 persons in 2008. As the number of jobs is growing faster than the labour force, broad administrative unemployment is expected to decrease by 57,800 persons this year and 20,400 persons next year. The harmonised Eurostat unemployment rate (which is calculated by means of labour force surveys) is expected to fall from 8.2% in 2006 to 7.2% in 2008.
The evolution of inflation, as measured by the national index of consumer prices, is strongly influenced by the evolution of natural gas prices, which should decline in 2007 and rise substantially in 2008. Consequently, inflation should amount to 1.7% this year and 2.2% next year.
STU 3-07 was finalised on 5 October 2007.
Closed series - Short Term Update 03-07 (en),
The medium-term outlook for Belgium points towards an average GDP growth rate of 2.1% during the period 2007-2012, which is slightly higher than the potential rate (2.0%) and similar to the average growth rate of the euro area. This pace of growth follows a strong rebound in 2006 (3.0%), mainly driven by domestic demand, in a context of an improvement in international economic activity.
The average yearly growth rate for private consumption should reach 1.8% during the period 2007-2012, which is slightly lower than the increase in households’ disposable income. Purchasing power will especially be underpinned by employment growth in 2007 and 2008 and by higher increases in wages and social benefits at the end of the projection period. Investment growth should reach 2.7% during the period 2007-2012, reflecting the path of business investment growth (supported by high business profitability and stable demand prospects), but also an acceleration in public investment at the end of the projection period. Growth in exports should reach 5.7% on average and the contribution of net exports to GDP growth should amount to 0.2%-points. The external surplus, which was strongly reduced between 2002 and 2005, should (slowly) increase from 2007 onwards and attain 3.1% of GDP in 2012. The combination of moderate increases in domestic costs and limited rises in imported costs should allow the inflation rate to remain below 2% in the medium term.
The expected evolution of employment reflects a favourable macroeconomic context, limited wage increases (mainly at the start of the period) and various measures taken to promote employment. After a particularly high number of new jobs created in 2006 (44,000), employment growth should remain sustained: about 38,000 units should be created every year during the period 2007-2012. Between 2006 and 2012, manufacturing industrial employment should fall by 41,000 units but the number of jobs created in market services should exceed 256,000. As the number of newly created jobs is growing faster than the labour force, the unemployment rate (broad administrative statistics) should fall from 13.9% in 2006 to 12.0% in 2012.
Under the assumption of constant policy, public accounts are expected to present a net public financing surplus in 2007 (+0.1% of GDP) and to deteriorate in 2008 (-0.5% of GDP). During the following years, the net public financing requirement should gradually decline and the equilibrium should be restored at the end of the projection period, mainly thanks to a decrease in interest charges on the public debt. Consequently, the total public debt to GDP ratio is expected to decline from 87.5% in 2006 to 69.5% in 2012.
STU 2-07 was finalised on 18 May 2007.
Closed series - Short Term Update 02-07 (en),
Federal Planning Bureau
