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OECD warns of inflation

Published on 24/05/2007

24 mei 2007

BRUSSELS – The Organisation for Economic Cooperation and Development (OECD) is very optimistic about growth in the euro-zone. The organisation is concerned however about rising inflation.

Inflation is approaching the limit of 2 percent regarded as acceptable by the European Central Bank. The OECD is therefore not ruling out that the interest rate in the euro-zone may be increased. The executive board of the ECB will meet in early June and has already hinted that it may take that opportunity to raise the interest rate to 4 percent.

The OECD predicts growth of 2.7 percent in the euro-zone this year, rather than the 2.2 percent forecast last November. Growth last year came to 2.8 percent, according to the OECD half-yearly growth prognoses presented in Paris today.

Belgium’s growth in 2007-2008 will be somewhat more moderate, but strong enough for the economy to be functioning at full capacity by the end of this period.

Domestic demand will be supported by increased employment and higher incomes. A stronger competitive position should improve the performance of the export markets, the OECD said. The organisation expects that rising pressure on costs will only affect inflation gradually.

The OECD also believes that the government will have to cut back on expenditures on all levels if it wants to increase the budget surplus by 0.2 percentage points of gross national product.

The Belgian economy grew 3 percent in 2006.

[Copyright Expatica News 2007]

Subject: Belgian news