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Belgian economic growth ‘will tumble’ in 2005

27 May 2005

BRUSSELS – Belgian economic growth in 2005 will tumble to less than 2 percent, threatening an increase in the public budget deficit, the government’s official economic advisory body warned Friday.

The Federal Office of the Budget, the BFP, predicts economic growth will shrink to 1.7 percent this year, compared to 2.7 percent in 2004.

The organisation warned that if no new financial measures were taken by the government, the country would again face a budget deficit.

It said growth would pick up again the following year, at a predicted increase of 2.6 percent before shrinking again from 2007. Growth would eventually settle at around 2 percent, concluded the BFP.

The BFP’s diagnosis is slightly more optimistic than that of the Organisation for Cooperation and Economic Development (OCDE). On Tuesday, it published its spring predictions which concluded the economy would grow at a rate of just 1.3 percent this year, rising to 2.4 percent next year.

In December, the OCDE had forecast growth of 2.4 percent this year and 2.7 percent for next.

Given the latest evidence, 1.7 percent is the maximum growth rate that can be hoped for, agreed BFP commissioner Henri Bogaert. A zero growth rate for the first three months of this year has led to a lowering in confidence, he explained.

BFP believes a budget deficit could reach 0.5 percent of gross domestic product (GDP) and 1.5 percent in 2006.

On Tuesday, however, Prime Minister Guy Verhofstadt announced a special budget meeting for June to take action in response to the economic slow-down.

Despite its gloomy prediction, BFP nevertheless believes Belgium’s public debt will continue to be reduced over the next five years, although at a slower rate – reaching 83 percent of GDP in 2010, compared to 95.8 percent in 2004.

BFP warns some 60,000 jobs will be lost in industry between now and 2010, but foresees an extra 274,000 jobs will be created in the service industry, leading to a reduction in the unemployment rate – by 2010 12.9 percent of the population will be unemployed compared to 14.4 percent in 2004.

[Copyright Expatica 2005]

Subject: Belgian news