Country Report Belgium February 2013

Country Report Belgium February 2013

Outlook for 2013-17

• The Economist Intelligence Unit's central forecast is that Belgium will remain unified throughout the forecast period. Agreeing a split between the Flemish and francophones would be as hard as agreeing to stay together.
• The coalition government is expected to remain in power until the end of its term in 2014, but tension between the two linguistic communities will persist and have an impact on political stability during and after the election.
• Policy will focus on reducing the fiscal deficit and improving competitiveness. The distribution of austerity between the regions and the federal government will remain a bone of contention between the linguistic communities.
• The euro zone crisis will continue to weigh on investor and business sentiment, hampering efforts to improve competitiveness and productivity. The Economist Intelligence Unit believes that the risk of a euro zone break-up persists.
• The general government deficit was 3.9% of GDP in 2011, owing to economic downturn in the second half of the year. We estimate that it declined to 3% of GDP in 2012 and forecast moderate reductions to 2.1% of GDP by 2017.
• Real GDP growth slowed to 1.8% in 2011, and we estimate a contraction of 0.2% in 2012. The economy is forecast to continue to contract mildly in 2013, but GDP growth should recover and average about 1.7% per year in 2014-17.
• Inflation, as measured by the EU harmonised index, was 2.6% in 2012 and is expected to average 2.1% per year during 2013-17, which is still above the euro area average.

Review

• According to surveys from the National Bank of Belgium (the central bank), business sentiment fell to a low level in January, mainly as a result of subdued confidence in the building and manufacturing sectors.
• Consumer confidence was also low in January, with the indicator rising to -23, only 2 points above its worst reading since early 2009.
• Expectations regarding employment deteriorated sharply, although the unemployment rate remained stable in December and is not expected to jump too sharply in the coming months.
• The trade deficit grew to EUR300m in October, compared with EUR100m a year earlier, as imports rose faster than exports (by 6.3% and 5.2% year on year respectively).
• Several cases involving French people fleeing to Belgium in order to avoid taxes have emerged in recent months, leading to some resentment by the French public of what they perceive as the complacent Belgian fiscal system.

Do to the nature of this product there is no table of contents.