OECD Economic Surveys : Belgium 1977.

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by  OECD

OECD
ECONOMIC SURVEYS
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BELGIUM
LUXEMBOURG
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JUNE 1977
BASIC STATISTICS BELGIUM
THE LAND
Area (1 000 sq. km) 30.5 Main urban areas (31-12-1974)
Agricultural area inhabitants:
(1 000 sq. km) 1974 15.5 Brussels 1 054970
Tillage and temporary grassland Antwerp 665980
(1 000 sq. km) 1974 8.2 Liege 435822
Ghent 220259
THE PEOPLE
Population (31-12-1975) (thousands) 9813 Net migration (1975) 24904
Number of inhabitants per sq. km 322 Total labour force (1975) 4003000
Population, net natural increase Civilian manpower 3748000
(1975): Agriculture 136000
Yearly average Manufacturingandconstruc¬
Yearly rate per 1 000 inhabitants tion 1 493000
Other 2 119000
PRODUCTION
Gross domestic product (1976) National expenditure (1976) bil¬
billions of Belgian francs 2544.4 lions of Belgian francs:
Gross domestic product per head Private consumption 1 574.5
(1975) US$ 6340 Public consumption ' 454.8
Gross fixed investment: Gross fixed asset formation 524.6
Percentage of GDP (1976) 20.6 Net exports 0.7
Per head (1975) US$ 1392
THE GOVERNMENT
Current government expenditure on Composition of the House of %
goods and services (1976) percen¬ Representatives:
tage of GOP 17.9 Christian-Social Party 38
Current government revenue (1976) Belgian Socialist Party 29
% of GDP 41.8 Freedom and Progress Party 16
Government debt, 31-12-1976, bil¬ Communist Party 1
lions of Belgian francs 1 058.7 Others 16
Last election: 17-4-1977
Next election: 1981
FOREIGN TRADE
Exports: Imports:
Main exports in 1976 Main imports en 1976
% of total exports (BLEU): % or total imports (BLEU):
Base metals 16 Machinery and apparatus 13
Chemicals 12 Chemicals 9
Machinery and apparatus 12 Base metals 7
Textiles and fibres 7 Transport equipment 12
Transport equipment 13 Textiles and fibres 5
THE CURRENCY
Monetary unit: Belgian franc Currency units per US dollar,
average of daily figures:
Year 1976 38.61
April 1977 36.36
Note An international comparison of certain basic statistics is given in an annex tabic.
BASIC STATISTICS LUXEMBOURG
THE LAND
Area (sq. km) 2586 Major city, inhabitants:
Agricultural area, 1974 (sq. km) 1 319 Luxembourg (31-12-1974) 78300
Woodland, 1974 (sq. km) 820
THE PEOPLE
Population (31-12-1975) 358400 Total labour force (1975) 149500
Numberof inhabitantsper sq.km 139 Agriculture 9300
Population,netnaturalincreaseper Industry 70700
1 000 inhabitants in 1975 1082 Services 69500
Net migration 1975 1 388 Salaried employees
and wage-earners 127300
Employers, self-employed persons
and domestic help 22200
PRODUCTION
Gross domestic product (1976) bil Gross domestic product by origin, %
lions of francs 87.5 at market prices (1975):
Gross domestic product per head, Agriculture 3.3
US$ (1975) 6194 Energy 2.2
Gross fixed investment: Manufacturing 35.3
Percentage of GDP (1976) 27.8 Construction 11.4
Per head, US$ (1975) 1 782 Other 47.8
THE GOVERNMENT
Public consumption (1976), percen¬ Composition of the Chamber: %
tage of GDP 15.5 Christian Social Party 30.5
Current government revenue (gene¬ Workers Socialist Party 28.8
ral government)(1975)percentage Democratic Party 23.7
of GDP 30.6 Communist Party 8.5
Central government debt Social Democrat Party 8.5
(December 31st, 1976) billionFrs 18.9 Last election: 26-5-1974
THE CURRENCY
Monetaryunit: Luxembourgfranc Currency units per US dollar,
average of daily figures:
Year 1976 38.61
April 1977 36.36
Note An international comparison of certain basic statistics is given in an annex table.
OECD ECONOMIC SURVEYS
BELGIUM-
LUXEMBOURG
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
The Organisation for Economic Co-operation and Devel¬
opment (OECD) wassetupunderaConventionsignedin Parison
14th December, i960, which provides that the OECD shall pro¬
mote policies designed:
to achieve the highest sustainable economic growth and
employment and a rising standard of living in Member
countries, while maintaining financial stability, and thus
to contributeto thedevelopmentoftheworld economy;
to contribute to sound economic expansion in Member as
well as non-member countries in the process ofeconomic
development;
to contribute to the expansion ofworld trade on a multi¬
lateral, non-discriminatory basis in accordance with inter¬
national obligations.
TheMembersofOECDarcAustralia,Austria,Belgium,Cana¬
da, Denmark, Finland, France, theFederal RepublicofGermany,
Greece, Iceland, Ireland, Italy, Japan, Luxembourg, the Nether¬
lands, New Zealand, Norway, Portugal, Spain, Sweden, Switzer¬
land, Turkey, the United Kingdom and the United States.
The Socialist Federal Republic ofYugoslavia is associated in
certainwork ofthe OECD, particularly that ofthe Economic and
DevelopmentReview Committee.
The annual review of Belgium and Luxembourg
by the OECD Economic and Development Review Committee
took place on 13th May, 1977.
The present Survey has been updated subsequently.
<© OECD, 1977.
Queries concerning permissions or translation rights should be
addressed to:
Director ofInformation, OECD
2, rueAndré-Pascal, 75775 PARIS CEDEX 16, France.
TABLE OF CONTENTS
BELGIAN ECONOMY
Introduction
I Recent trends in demand and activity 8
1 Domestic demand 8
2 Output and employment 12
3 Prices and incomes 16
II Balance of payments 20
III Economic policy 24
Fiscal policy 24
Monetary policy 27
IV Forecasts and economic policy conclusions 32
1 Short-term forecasts 32
2 Economic policy conclusions 35
LUXEMBOURG ECONOMY
Recent trends 38
Fiscal policy 40
Monetary policy 41
Short-term prospects 41
Annex I The new method of calculating imports and exports in the
framework of the balance of payments for BLEU 43
Annex II Main Belgian economic policy measures since June 1976 45
Statistical annex 50
TABLES
Text:
Belgium
1 Demand and output 8
2 Prices and wages 18
3 Components of households' appropriation account 19
6 OECD Economic Surveys
4 BLEU balance of payments
a) Current balance on a transactions basis 23
b) Balance of payments on a settlements basis 23
5 General government account on a national accounts basis 26
6 Indicators of the impact of general government transactions on
aggregate demand 27
7 Money supply and counterparts 30
8 Bank liquidity 30 and 31
9 Forecast for 1977 33
Luxembourg
10 Demand and output 42
Statistical annex:
Belgium
A Gross domestic product 50
B Origin of gross domestic product at market prices 51
C Gross domestic fixed asset formation 52 and 53
D Income and expenditure of households and private non-profit
institutions 54
E Government revenue and expenditure 55
F Industrial production 56
G Employment, labour market and wages 57
H Area breakdown of foreign trade 58
I Commodity breakdown of foreign trade 59
Luxembourg
J Demand and output 60
DIAGRAMS
1 Composite indicator and indicators of demand 11
2 Industrial production 13
3 Indicators of supply 14
4 Labour market 15
5 Price trends 17
6 Effective rate of exchange of the Belgian franc and other currencies 22
7 Interest rates 28
8 Monetary indicators 29
THE BELGIAN ECONOMY
INTRODUCTION
The recovery in activity which began in Belgium at the end of 1975 lost
momentum during the course of 1976 both because of weaker foreign demand,
reflecting the economic situation in Belgium's client countries, and because of
the sluggishness of the main components of private domestic demand. The
recovery did not bring any appreciable improvement in the employment situation
but, at the very most, unemployment among males levelled off. Weakness of
demand pressure and the introduction of an anti-inflation policy helped to ease
strains on prices and wages. The public sector deficit, which had risen
sharply in 1975, showed a further increase in 1976, notably because of the
weakness of the recovery and the cost of maintaining a high level of
unemployment. The current balance was slightly in deficit. In 1976 the Belgian
franc came up against two waves of pressure against which the authorities took
vigorous action, mainly in the form of a policy of high-interest rates which
they were, however, able to relax during the past months.
The Belgian economy therefore entered 1977 in rather difficult circum¬
stances: a high unemployment rate and a still considerable inflation rate, despite
a certain easing that had taken place, accompanied by a large public deficit.
Admittedly, the situation might improve somewhat in 1977. However, the growth
rate is only likely to show a moderate increase and it does not look as if there
will be any appreciable recovery in public finance as early as this year, against
the background of the economic policy currently being enacted.
Part I will be devoted to the main trends of demand, output and employment,
and of incomes and prices during the past twelve months, and Part II to ana¬
lysing the pattern of the BLEU balance of payments. Part III will be directed
to an examination of economic policy. The last part will review the short-term
prospects and present the economic policy conclusions.
OECD Economic Surveys
I RECENT TRENDS IN DEMAND AND ACTIVITY
1 Domestic demand
The first tangible signs of an upturn in demand in Belgium appeared in
autumn 1975 and the revival continued until the following spring, before losing
considerable momentum. According to the Belgian experts' estimates, final
domestic demand showed a volume growth of 1.4 per cent1 in 1976 whereas the
OECD Secretariat's forecasts of a year ago, which coincided with those of the
Belgian experts, counted on a 2.8 per cent growth rate. Apart from the statis¬
tical uncertainties, the considerable differences between the forecast and the
outturns mainly concern enterprises' fixed investment, which is estimated to have
declined by nearly 12.5 per cent in volume terms as against the 5.5 per cent
decrease forecast, and residential investment, which was up 13.4 per cent instead
of the forecast 5 per cent. The public component of demand played a dynamic
role in 1976 but still went up less rapidly than in 1975. Finally, stock liquidation
which had been both rapid and substantial in 1975 gave place in 1976 to stock
building, a movement which contributed largely to the growth in GNP.
Table 1 Demand and output
Percentage change
irom previous year (volume)
B. Frs. Asa
billion percentage 1974 1975 1976
ofGNP
Private consumption 1 244.5 59.1 2.6 0.9 2.3
Government consumption 312.9 14.9 3.7 7.2 3.6
Gross fixed asset formation 470.5 22.4 6.7 -3.6 -2.7
Residential construction 130.4 6.2 13.7 -6.2 13.4
Productive investment 275.6 13.1 7.2 -4.5 12.6
of which: building 110.0 5.3 1.1 -8.0 -4.4
equipment 164.6 7.9 11.5 -2.3 -18.1
General government 64.5 3.1 -6.7 6.1 5.5
Final domestic demand 2027.9 96.3 3.6 0.8 1.4
Change in stocks2 45.2 2.2 0.9 -3.0 1.6
External balance2 +31.7 1.5 (-0.2) (0.3) (-0.8)
Exports of goods and services1 1 286.4 61.1 11.3 -9.4 7.2
Imports of goods and services' 1 254.7 59.6 12.3 -10.3 8.9
GNP at market prices 2 104.8 100.0 4.2 -1.9 2.3
GNP price deflator 12.8 12.3 9.0
Industrial production (excluding construction) (cid:9) 3.4 -10.0 10.2
Productivity in industry3 5.8 1.2 12.5
1 Including factor incomes.
2 Changes expressed as percentages ofGNP forthe preceding year.
3 Industrial output per man hour.
Sources: National Statistics Institute; Ministère des Affaires Economiques et Statistiques.
1 The provisional Belgian national accounts figures for 1975 and 1976 should be
used with caution because of the statistical problems their calculation involved. For example
the estimates for the rate of growth of GNP vary considerably depending on the standpoint
from which they were drawn up (Income - Supply - Demand) and, in order to align these
estimates, substantial statistical adjustments had to be introduced. Thus, where final domestic
demand is concerned, the estimates based on the different components of demand suggest a
volume growth rate of 2.4 per cent for 1976, whereas after statistical adjustment, allowing
for presumed increases in incomes, the figure is brought down to 1.4 per cent.
Belgium-Luxembourg
Private consumption showed only moderate growth in 1976 (2.3 per cent
by volume) despite an increase in disposable real income put at 3.6 per cent.
The savings ratio2 is estimated to have increased by one point between 1975
and 1976. The persistence of a high rate of inflation during the greater part of
the year, which is likely to have encouraged households to maintain the level
of their deposits in real terms, together with the brisk advance of investment in
housing would probably account for this saving behaviour. However, the growth
of consumption may have been underestimated to judge by changes in certain
indicators during the year. Thus, the index of retail sales, deflated for the
increase in prices, probably went up by 4 per cent in 1976. Furthermore, the
trend of VAT receipts over the year also seems to reflect a more vigorous growth
in consumption. After the brisk advance in demand for durables that took place
at the end of 1975, it was feared that there might be some falling-off early in
1976. In fact, this occurred in the second half of the year. But, during the
last two months of 1976 and, according to the partial information available,
at the beginning of 1977, consumption seems to have picked up again. Car
registrations have shown a very strong upward movement over the past two years'*
even though, in contrast with the trend in most OECD countries, they did not
fall off appreciably in 1974. During the early months of 1977 this movement
continued, which probably reflects anticipatory behaviour in view of the expected
increase in prices.
The volume of non-residential private investment fell in 1976 for the second
year in succession. In 1975, it suffered a relatively moderate decline (4.5 per cent)
because the large-scale programmes committed in 1974 still had positive effects
on deliveries. But in 1976 the fall in productive investment amounted to nearly
12.5 per cent in volume terms. The decline over both years taken together
was therefore of about 17 per cent. Several factors contributed to this situation.
The degree of capacity utilisation had fallen sharply since 1973, from 85.4 per cent
in May 1973 to 73.5 per cent in January 1977, and the proportion of enterprises
willing to expand their capacity was down from 33 per cent in May 1973 to
4 per cent in May 1975. Since then it has fluctuated around a level below
10 per cent. Enterprises furthermore postponed certain replacement or rationa¬
lisation investment projects because of their poor financial results for 1975'.
In 1976 enterprises' financial results improved mainly because of an appreciable
increase in turnover and the resultant growth in profit margins. According to
provisional estimates, hourly wages rose by 12 per cent in industry and produc¬
tivity'1 by 14.8 per cent, which means that the decrease in the wage bill per unit
produced is likely to have been less than 2.5 per cent. Interest payments are
estimated to have risen by 16 per cent and prices of imports used in production
by 6.5 per cent. Given the average increase in unit selling prices (5.5 per cent)
and the rise in the volume of industrial production (9.3 per cent), gross corporate
2 Over the past years, the household savings ratio is estimated to have moved as
follows:
1970 1971 1972 1973 1974 1975 1976
17.1 16.7 18.1 17.7 18.1 17.4 18.5
3 Registrations of passenger cars:
1973(cid:9)1974(cid:9)1975(cid:9)1976
Thousand vehicles 340.9 335.9 364.8 419.6
Increase +1.6% -1.5% +8.6% +15.0%
4 According to an annual survey carried out by the Kredietbank, in 1975 enterprises'
financial results showed a nominal fall in gross profits of 28 per cent compared with 1974.
5 Increase in volume of production by hour worked.