Country Report Belgium June 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.
• The expected success of three right-wing parties in Flanders in the regional elections in June 2009 will cause the mainstream Flemish parties to adopt a more hardline stance on devolution.
• Devolution negotiations will be carried out by regional and community politicians, but these discussions are currently stalled, and even after the regional elections in June, prospects for progress are poor.
• 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 4.8% of GDP in 2009, narrowing to 4.5% of GDP in 2010. The government expects a deficit of 3.4% in 2009.
• Domestic and foreign demand will both contract over the forecast period, causing GDP to fall by 4.5% in 2009 and by 0.8% in 2010. Imports will contract by 10.2% in 2009 before picking up to moderate growth of 1.1% in 2010.

Monthly review

• Recent opinion polls do not give a clear indication of what the results of the regional elections in June 2009 will be in terms of regional government formation afterwards.
• Although three right-wing parties have collectively received 34% support in recent opinion polls in Flanders, it is unlikely that any of them will be incorporated into the regional government.
• The European Commission released its forecasts for Belgium's fiscal accounts and, for the first time in over 20 years, estimates that Belgium's primary accounts (fiscal balance net of debt service) will register a deficit.
• One of Belgium's three leading banks, KBC, secured a government bail-out in mid-May after announcing first-quarter losses amounting to 3.6bn, owing to a 4.1bn write-down on its investment portfolio.
• Months after the inter-sectoral accords were agreed in December 2008, employers and workers in construction reached a collective bargaining agreement on May 14th.
• Consumer confidence improved slightly in March 2009, but the outlook for unemployment remains highly pessimistic. The number of unemployed people has increased by 68,000 since its low point in May 2008.

Source: Country Report

This report covers the following industry codes:
SIC Code: 15
NAICS Code: 23