Economic projections for Belgium, 2004-2005

In light of an increased transparency, the National Bank of Belgium has decided to publish twice a year, in June and December, the macroeconomic projections for the Belgian economy for the current and the following year. These projections represent the national part from the broad macroeconomic projection exercise conducted within the Eurosystem, for which the ECB publishes the aggregated results for the euro area economy. At the current juncture, the recovery of the world leading economies in 2003 is projected to hold on in the course of 2004 and 2005. Although growth would stay beneath that of the international environment, the Eurosystem expects the ongoing recovery in the euro area to gain momentum throughout 2004 and 2005 and inflation to be moderate. GDP growth in Belgium would exceed that of the euro area, pursuing the upturn since mid-2003, and should increase from 1.1 p.c. in 2003 to 2.3 p.c. in 2004 and 2.6 p.c. in 2005. The recovery that has initially triggered exports would gradually extend to investment, which would be supported by accommodating financial conditions and stronger economic activity. Furthermore, consumption is likely to firm in the following years caused by a rise in employment and households’ disposable income. Job creation would amount to 15,000 jobs in 2004 and 44,000 in 2005. Still, the unemployment rate is likely initially to rise further due to the higher increase of the working population. Headline inflation is expected to stay in line with the Eurosystem’s definition of price stability at 1.8 p.c. and 1.7 p.c. in 2004 and 2005. Although energy prices increased considerably in the first part of 2004, inflation is likely to stay modest due to limited wage increases and subdued pressures from activity and import prices. Despite an improvement in economic activity, the general government balance is expected to show a deficit of 0.3 p.c. of GDP in 2004 and of 1.0 p.c. in 2005, taking into account the measures which have already been taken and the less positive impact of non-recurrent measures in 2004 and 2005 compared to 2003