Country Report Belgium January 2010

Outlook for 2010-11

• 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.
• Tensions between Flanders and Wallonia could be stoked by attempts to reduce the budget deficit and by the issue of the Brussels-Halle-Vilvoorde (BHV) constituency boundaries.
• If Jean-Luc Dehaene does not successfully negotiate an agreement on BHV, the Flemish parties are likely to force a solution through parliament, prompting the francophone parties to take a less conciliatory stance on devolution.
• The economic recovery measures implemented by the previous government will be continued, but we expect the fiscal stimulus measures to go partly into reverse in 2010.
• After rising sharply to an estimated 6% of GDP in 2009, we expect the budget deficit to widen further to 6.6% of GDP in 2010, before narrowing to 5.5% of GDP in 2011.
• After contracting sharply in 2009, we forecast that domestic and foreign demand will both resume moderate growth in 2010-11, underpinning GDP growth of 0.9% in 2010 and 1.4% in 2011.

Monthly review

• The prime minister, Herman Van Rompuy, was unanimously chosen by EU leaders on November 19th to fill the role of president of the European Council. His nomination reflects a preference for a consensual chairman.
• Yves Leterme was chosen to replace Mr Van Rompuy as prime minister and was sworn in on November 25th. In his speech in parliament, Mr Leterme focused entirely on socio-economic issues.
• The five coalition parties have appointed Mr Dehaene, a former Christian Democratic prime minister, to negotiate a solution to the BHV issue by March 2010.
• Mr Leterme highlighted labour market policy as central to boosting domestic demand in Belgium. He said that he will continue the crisis measures of the Van Rompuy government.
• The minister-president of Flanders, Kris Peeters, announced that the Flemish regional government will borrow €800m to finance a series of projects, of which €22.5m will be allocated to a sustainable employment plan.
• Hourly labour costs are expected to grow by 3.5% in 2009-10 in Belgium, compared with an average of 3.8% in the Netherlands, France and Germany.

• Highlights
• Outlook for 2010-11: Domestic politics
• Outlook for 2010-11: International relations
• Outlook for 2010-11: Policy trends
• Outlook for 2010-11: Fiscal policy
• Outlook for 2010-11: Monetary policy
• Outlook for 2010-11: International assumptions
• Outlook for 2010-11: Economic growth
• Outlook for 2010-11: Inflation
• Outlook for 2010-11: Exchange rates
• Outlook for 2010-11: External sector
• Outlook for 2010-11: Forecast summary
• The political scene: Herman Van Rompuy is made European Council president
• The political scene: Yves Leterme is chosen as new prime minister
• The political scene: Jean-Luc Dehaene becomes special negotiator for BHV
• Economic policy: New government is to focus on socio-economic policy
• Economic policy: Mr Leterme highlights labour market policy
• Economic policy: Flemish government also seeks to boost employment
• Economic performance: Confidence indicators continue on upward trend
• Economic performance: Unemployment rises slightly further
• Economic performance: Relatively low labour cost growth is suggested
• Economic performance: Quality of life: Belgium
• Data and charts: Annual data and forecast
• Data and charts: Quarterly data
• Data and charts: Monthly data
• Data and charts: Annual trends charts
• Data and charts: Monthly trends charts
• Data and charts: Comparative economic indicators
• Basic data
• Political structure