Economic projections for Belgium – Spring 2011

At the beginning of 2011, the recovery phase seen in the global economy over the past two years reached a degree of maturity. Activity in the various economic regions should gradually progress from being export-led to become more broadly based. At the same time, the improvement in the economic situation, especially in the emerging countries, triggered a rapid rise in commodity prices. However, serious factors of uncertainty still linger. The legacy of the 2008-2009 crisis, the seriously degraded public finances in most advanced economies on both sides of the Atlantic require consolidation measures. Similarly, financial institutions in general will have to continue their restructuring. These factors, which could hold back the economy, are compounded by the risks resulting from the natural disasters in Japan and political and social tensions in the Middle East and North Africa. In the euro area, there are significant internal divergences, for instance the unexpected vigour of the recovery in Germany and, conversely, the decline in activity in the economies facing serious structural problems. The recovery is expected to continue, but less vigorously than at the beginning of 2011. In Belgium, recent developments in economic activity have been better than previously predicted. The Belgian economy, in Germany’s wake, has succeeded in taking advantage of the revival in global demand, while private consumption has rapidly picked up. Business and household investment should gradually recover too. Overall, growth came to 2.1 % in 2010; it is projected to reach 2.6 % in 2011 before subsiding to 2.2 % in 2012, thus outpacing growth in the euro area. The continuing expansion of activity is likely to be supported by consolidation of the labour market. Job creation should be maintained as, in net terms, around 77 000 additional jobs will be generated between the end of 2010 and the end of 2011. The decline in unemployment which had begun in early 2010 is expected to continue steadily, reducing the average unemployment rate from 8.4 % in 2010 to 7.3 % in 2012. In parallel with the clear recovery of activity and demand at global level, external inflationary pressures strengthened considerably in Belgium during 2010 and at the beginning of 2011. Overall, as an annual average, the rise in consumer prices is projected to increase from 2.3 % in 2010 to 3.4 % in 2011, before dropping back to 2.2 % in 2012, as energy price inflation is set to calm down. However, sustained wage growth could increasingly drive up underlying inflation. According to the latest data, public finances ended the year 2010 with a deficit of 4.1 % of GDP. In the macroeconomic context described above, the deficit is projected at 3.5 % of GDP in 2011. However, it is likely to increase again in 2012 to 4.1 % of GDP. The debt ratio is expected to fall from 96.6 % of GDP in 2010 to 95.4 % in 2012.