Belgium: Momentum slows

After healthy growth in 2006, economic momentum is expected to slow somewhat during the next two years. Domestic demand is being sustained by higher real incomes and employment increases, but continued export market losses show that the economy is not fully benefiting from the international recovery. Despite the slowdown, economic growth will remain higher than the potential rate of just below 2%, closing the output gap by end-2008. There are already signs that slack is disappearing in some parts of the economy. Nevertheless, core inflation is projected to remain subdued while headline inflation falls forwards towards the core rate on the back of lower oil prices.
The fiscal objectives are to generate increasing budget surpluses over the projection period as part of the strategy to pre-fund future ageing related cost. Reaching the 2007 objective, however, relies on the use of one-off fiscal measures and higher indirect taxes. A sustainable path for public finances could be secured by fiscal consolidation through a combination of expenditure restraint and labour market measures to stimulate job creation and increase employment rates, particularly for younger and older workers who both have relatively low labour market participation rates.
Population (000s), 200510 438
Area (000 sq km)31
CurrencyEuro
GDP (Billion USD), 2005340.9
Life expectancy at birth (Women, Men), 200381.7, 75.9
Total labour force (000s), 20054 669
Government typeConstitutional Monarchy
Indicators% change unless otherwise indicated
200620072008
GDP growth2.92.32.1
Household savings ratio11.511.511.3
Consumer price index2.41.71.8
Unemployment rate (%)8.68.38.0
General government financial balance (% GDP)0.0-0.2-0.2
Current account balance
(% GDP)
2.01.91.6
Source: OECD©OECD Observer No. 258/259, December 2006


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