Country Report Belgium April 2009

Outlook for 2009-10

• The Economist Intelligence Unit expects the government, consisting of the Flemish and francophone Christian Democrats and Liberals and the francophone Socialists, to serve its full term until 2011.
• An early election cannot be ruled out, but is unlikely before the regional election in June 2009. The parties' campaigns have focused on the recession, and a shift to provoking early elections would be unpopular with voters.
• Devolution negotiations will be carried out by regional and community politicians, but constitutional reform discussions are currently stalled, at least until after the regional elections in June.
• The government will try to implement an economic recovery programme aimed at achieving wage moderation, encouraging lending, boosting purchasing power and supporting public investment.
• We expect the budget deficit to grow to 4.4% of GDP in 2009 before narrowing to 4.2% of GDP in 2010. The government expects a deficit of 3.4% of GDP in 2009.
• Domestic and foreign demand will fall in 2009, causing GDP to contract by 3%. In 2010 private consumption, investment and export growth should pick up moderately, but GDP will contract by 0.6%.

Monthly review

• According to opinion polls, the right-wing Lijst Dedecker, New Flemish Alliance and Vlaams Belang collectively have 35% support in Flanders. Their increasing popularity is likely to affect political discourse at the federal level.
• The parliamentary commission examining alleged government interference in the planned takeover of Fortis bank by BNP Paribas suggested that there was a violation of the separation of powers between government and judiciary.
• On March 24th the High Council of Finance published an advisory report on the government's stability programme, in which it forecasts that the budget deficit will rise to 4.5% of GDP in 2010.
• Owing to the rising deficit and the costs of capital purchases of major banks, the government has shortened the term structure of debt so that prices are higher and the corresponding yields are lower.
• The government and BNP Paribas reached a revised agreement on the sale of Fortis Bank. The revised deal involves the government taking a 25% stake in Fortis's insurance business, but it must still be approved by shareholders.
• The primary factor weighing on consumer confidence, which stabilised at -24 in March, was concern about unemployment. Unemployment (according to the harmonised index) reached 7.2% in January and February.

Source: Country Report

This report covers the following industry codes:
SIC Code: 1;15;60;70;39
NAICS Code: 11;23;52;72;31