Abstract
Economic activity picked up in the course of 1999, despite the dioxin crisis of mid-year, owing to a recovery in export markets following the world financial turmoil of late 1998, supportive monetary policy in the euro area, improvements in business and consumer confidence, and continued growth in employment. The situation in labor markets remains unsatisfactory, with a high unemployment rate and a very slow participation rate. Executive Directors commended the Belgian authorities for the marked improvement in their fiscal situation in recent years.
1. This supplement is based on information on economic and financial developments in Belgium since the issuance of the staff report (SM/00/20) on February 2, 2000. This additional information does not alter the broad thrust of the staff appraisal. However, it does modify the fiscal outlook.
2. The latest cyclical indicators suggest improved short–term growth prospects. The staff’s projection of real GDP growth for 2000 has been revised upward to 3.3 percent, from 3 percent in the staff report.
3. As a result of this revision (as well as lower assumed interest costs), the general government fiscal deficit is now projected to fall from 0.9 percent of GDP in 1999 to 0.5 percent of GDP in 2000 (rather than to 0.8 percent in the staff report). It has thus become even likelier than at the time of the mission discussions that the Stability Program goal of actual budget balance in 2002 can be achieved, assuming fiscal consolidation efforts are continued as the authorities plan. Depending on growth in 2001, budget balance could even be reached in that year.1 The Belgian government adopted a new 2000–03 Stability Program at end–1999 and will soon be considered by the ECOFIN Council. Compared to the 1999–2002 Stability Program available at the time of the mission, the medium–term fiscal plan is close to the staff appraisal. In particular, real primary expenditure growth is now to be held to 1.5 percent a year as recommended by staff and a small structural budget surplus after 2002 (rather than a structural balance) is deemed desirable by the authorities. Thus, while the budget remains expansionary, the revisions for 2000 and the medium–term changes to the Stability Program mitigate concerns in the staff report that deficit reduction targets in 2000 were insufficiently ambitious.
4. Regarding monetary conditions, the ECB raised its policy rate by 25 basis points on February 3, 2000. In itself, this had only a marginal impact on the generally supportive monetary conditions for Belgium.
Belgium: Public Finances, 1993–2000
(In percent of GDP)
Belgium: Public Finances, 1993–2000
(In percent of GDP)
| 1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | |||
|---|---|---|---|---|---|---|---|---|---|---|
| Est. | Proj. | |||||||||
| Revenue | 45.4 | 45.7 | 45.4 | 46.0 | 46.3 | 46.4 | 46.3 | 45.2 | ||
| Expenditure | 52.6 | 50.6 | 49.6 | 49.7 | 48.3 | 47.5 | 47.1 | 45.7 | ||
| Primary expenditure | 41.7 | 41.1 | 40.5 | 40.9 | 40.4 | 39.8 | 40.0 | 39.1 | ||
| Federal | 14.1 | 13.8 | 13.2 | 13.2 | 13.1 | 12.7 | 12.8 | 12.4 | ||
| Social security | 19.3 | 18.8 | 18.8 | 19.1 | 18.5 | 18.3 | 18.2 | 17.8 | ||
| Local government | 5.3 | 5.4 | 5.2 | 5.2 | 5.2 | 5.2 | 5.3 | 5.2 | ||
| Regions and communities | 11.4 | 11.4 | 11.5 | 11.4 | 11.4 | 11.3 | 11.2 | 11.1 | ||
| Intergovernment transfers | -8.4 | -8.3 | -8.1 | -8.0 | -7.7 | -7.6 | -7.5 | -7.4 | ||
| Interest payments | 10.9 | 9.5 | 9.1 | 8.7 | 7.9 | 7.7 | 7.1 | 6.6 | ||
| Balance | -7.2 | -4.9 | -4.2 | -3.7 | -2.0 | -1.0 | -0.9 | -0.5 | ||
| Federal | -5.8 | -4.6 | -3.8 | -3.4 | -2.7 | -1.9 | -1.8 | -1.1 | ||
| Social security | -0.5 | 0.5 | 0.0 | -0.2 | 0.4 | 0.4 | 0.5 | 0.2 | ||
| Local government | -0.1 | 0.1 | 0.4 | 0.3 | 0.3 | 0.2 | -0.1 | 0.1 | ||
| Regions and communities | -0.8 | -0.9 | -0.7 | -0.4 | -0.1 | 0.2 | 0.5 | 0.3 | ||
| Memorandum items: | ||||||||||
| Primary balance | 3.7 | 4.5 | 4.9 | 5.0 | 5.9 | 6.6 | 6.3 | 6.1 | ||
| Structural balance | -5.3 | -3.2 | -2.8 | -1.7 | -0.8 | -0.2 | 0.0 | -0.3 | ||
| Structural primary balance | 5.7 | 6.3 | 6.3 | 7.1 | 7.1 | 7.5 | 7.1 | 6.3 | ||
| Output gap | -3.8 | -3.0 | -2.5 | -3.4 | -2.1 | -1.5 | -1.5 | -0.3 | ||
| Debt | 135.9 | 134.5 | 131.8 | 128.3 | 123.0 | 117.4 | 115.0 | 110.7 | ||
| Net debt | 126.7 | 126.2 | 125.3 | 122.4 | 118.0 | 112.3 | … | … | ||
| (Growth rate, in percent) | ||||||||||
| Memorandum items: | ||||||||||
| Primary expenditure | 1.6 | 1.6 | 0.9 | 2.0 | 2.3 | 1.2 | 2.6 | 1.1 | ||
| GDP growth | -1.4 | 3.0 | 2.5 | 1.0 | 3.5 | 2.7 | 2.0 | 3.3 | ||
Belgium: Public Finances, 1993–2000
(In percent of GDP)
| 1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | |||
|---|---|---|---|---|---|---|---|---|---|---|
| Est. | Proj. | |||||||||
| Revenue | 45.4 | 45.7 | 45.4 | 46.0 | 46.3 | 46.4 | 46.3 | 45.2 | ||
| Expenditure | 52.6 | 50.6 | 49.6 | 49.7 | 48.3 | 47.5 | 47.1 | 45.7 | ||
| Primary expenditure | 41.7 | 41.1 | 40.5 | 40.9 | 40.4 | 39.8 | 40.0 | 39.1 | ||
| Federal | 14.1 | 13.8 | 13.2 | 13.2 | 13.1 | 12.7 | 12.8 | 12.4 | ||
| Social security | 19.3 | 18.8 | 18.8 | 19.1 | 18.5 | 18.3 | 18.2 | 17.8 | ||
| Local government | 5.3 | 5.4 | 5.2 | 5.2 | 5.2 | 5.2 | 5.3 | 5.2 | ||
| Regions and communities | 11.4 | 11.4 | 11.5 | 11.4 | 11.4 | 11.3 | 11.2 | 11.1 | ||
| Intergovernment transfers | -8.4 | -8.3 | -8.1 | -8.0 | -7.7 | -7.6 | -7.5 | -7.4 | ||
| Interest payments | 10.9 | 9.5 | 9.1 | 8.7 | 7.9 | 7.7 | 7.1 | 6.6 | ||
| Balance | -7.2 | -4.9 | -4.2 | -3.7 | -2.0 | -1.0 | -0.9 | -0.5 | ||
| Federal | -5.8 | -4.6 | -3.8 | -3.4 | -2.7 | -1.9 | -1.8 | -1.1 | ||
| Social security | -0.5 | 0.5 | 0.0 | -0.2 | 0.4 | 0.4 | 0.5 | 0.2 | ||
| Local government | -0.1 | 0.1 | 0.4 | 0.3 | 0.3 | 0.2 | -0.1 | 0.1 | ||
| Regions and communities | -0.8 | -0.9 | -0.7 | -0.4 | -0.1 | 0.2 | 0.5 | 0.3 | ||
| Memorandum items: | ||||||||||
| Primary balance | 3.7 | 4.5 | 4.9 | 5.0 | 5.9 | 6.6 | 6.3 | 6.1 | ||
| Structural balance | -5.3 | -3.2 | -2.8 | -1.7 | -0.8 | -0.2 | 0.0 | -0.3 | ||
| Structural primary balance | 5.7 | 6.3 | 6.3 | 7.1 | 7.1 | 7.5 | 7.1 | 6.3 | ||
| Output gap | -3.8 | -3.0 | -2.5 | -3.4 | -2.1 | -1.5 | -1.5 | -0.3 | ||
| Debt | 135.9 | 134.5 | 131.8 | 128.3 | 123.0 | 117.4 | 115.0 | 110.7 | ||
| Net debt | 126.7 | 126.2 | 125.3 | 122.4 | 118.0 | 112.3 | … | … | ||
| (Growth rate, in percent) | ||||||||||
| Memorandum items: | ||||||||||
| Primary expenditure | 1.6 | 1.6 | 0.9 | 2.0 | 2.3 | 1.2 | 2.6 | 1.1 | ||
| GDP growth | -1.4 | 3.0 | 2.5 | 1.0 | 3.5 | 2.7 | 2.0 | 3.3 | ||
In a recent statement, the National Bank concludes that balance could be reached by 2001.