Country Report Belgium October 2017

Country Report Belgium October 2017

  • October 2017 •
  • Report ID: 325791

Outlook for 2018-22



  • The Economist Intelligence Unit expects Belgium to remain a single state over the medium term. Since joining the coalition the main Flemish separatist party has put calls for devolution to one side, and it will continue to do so.
  • Friction between the coalition parties stems primarily from the government's programme of fiscal retrenchment and economic liberalisation. Political stability is supported by the centre-right positioning of all government parties.
  • Improving the public finances, boosting competitiveness and making economic growth more inclusive are the main policy areas. Flanders is likely to lead Belgium's Brexit negotiations; it exports more to the UK than Wallonia does.
  • We expect a pick-up to 1.7% growth in 2017 and 1.6% in 2018 as a cyclical upturn in the euro zone supports external demand and domestic demand strengthens. We forecast an annual average growth rate of 1.2% in 2019-22.
  • Consumer price inflation will be above the euro zone average throughout the forecast period (2018-22), reflecting higher public-sector service prices and some barriers to competition. We expect inflation of between 1.8% and 2% in 2018-22.
  • We do not expect a return to the EU's excessive-deficit procedure in 2018-22, but the government will struggle to reduce the budget deficit. Public debt will remain above 100% of GDP; however, financing costs will remain low.
  • The current account will remain close to balance in 2018-22. Low global oil prices will keep import costs constrained and the country's competitiveness will recover, but rising consumer imports will mostly offset the improvement.


Review



  • The New-Flemish Alliance (N-VA) announced its platform for the 2019 general election. Instead of promoting an autonomous Flemish state, in line with its separatist roots, it focused on questions of security, identity and the economy.
  • Bart De Wever, the N-VA leader and mayor of Antwerp, is leading a crack-down on drug smuggling through the Port of Antwerp. Seizures of cocaine and incidents of violent crime have increased sharply in recent years.
  • The government's failure to develop a plan to meet its notional target of phasing out nuclear power by 2025 received media attention after the city of Aachen, in Germany, ramped up its campaign against the Tihange plant.
  • In August consumer price inflation picked up to 1.9%, in line with an uptick across the euro zone. This reflected a minor rise in global oil prices; core inflation (on the "health index" used for indexation agreements) was stable.
  • The merchandise trade deficit widened from EUR840m in January-June 2o16 to EUR2.6bn in January-June 2017, partly reflecting rising imports of vehicles and pharmaceuticals but mostly because of the higher cost of fuel imports.


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Country=Belgium Date=201710 Topic=Demand Publisher=TheEconomistIntelligenceUnit Price=1000