OECD Economic Surveys : Belgium 1986.

66 Pages·3.215 MB·English

by  OECD

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION DE COOPERATION ET OE OEVELOPPEMENT ECONOMIQUES
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OECD ECONOMIC SURVEYS
BELGIUM-
LUXEMBOURG
AUGUST 1986
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
PursuanttoarticleI oftheConventionsignedinParison 14thDecember,
1960,andwhichcameintoforceon30thSeptember,1961,theOrganisation
Tor Economic Co-operation and Development (OECD) shall promote
policiesdesigned:
- toachievethehighestsustainableeconomicgrowthandemployment
andarisingstandardoflivinginMembercountries,whilemaintaining
financial stability, and thus tocontribute to thedevelopment ofthe
worldeconomy;
- to contribute to sound economic expansion in Member as well as
non-membercountriesin theprocessofeconomicdevelopment;and
- to contribute to the expansion of world trade on a multilateral,
non-discriminatory basis in accordance with international obliga¬
tions.
TheSignatoriesoftheConventionontheOECDareAustria, Belgium,
Canada, Denmark, France, the Federal Republic of Germany, Greece,
Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal,
Spain,Sweden,Switzerland,Turkey,theUnited Kingdomandthe United
States.ThefollowingcountriesaccededsubsequentlytothisConvention(the
datesarethoseonwhichtheinstrumentsofaccessionweredeposited):Japan
(28thApril, 1964), Finland (28thJanuary, 1969), Australia (7thJune,
1971) and New Zealand (29th May, 1973).
TheSocialistFederalRepublicofYugoslaviatakespartincertainworkof
theOECD (agreementof28thOctober, 1961).
Publiéégalementen français.
©OECD, 1986
Application forpermission toicproduceortranslate
allorpart ofthis publicationshould be madeto:
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2, rueAndré-Pascal, 75775 PARISCEDEX 16, France.
CONTENTS
BELGIUM
Introduction 9
I. Performance and adjustment in Belgian industry 10
A. Main featuresofindustrial adjustment 11
Overview 11
Trade, productive structureand performance 14
Productivestructure and economies ofscale 16
The appropriateness ofthe Belgian product mix 18
Labour costs, prices and profitability 21
B. The role ofeconomicpolicy in industrial adjustment 25
Direct aid to industry 25
Macroeconomic policies 29
C. Summary 31
II. Monetary and fiscal policy 32
A. Fiscal policy 33
B. Monetary policy and financial flows 38
III. Recent trendsand short-term prospects 41
A. Recentdomestic developments 41
B. External relations 46
C. Short-term prospects 50
IV. Conclusions 53
Notes and References 56
LUXEMBOURG
Introduction 61
I. Structural adjustment and overall performance 61
Overall macroeconomic performance 61
Restructuringofthe steel industry 62
Development ofnew industries 64
Growth ofthe financial market 64
II. Economic policy 66
Fiscal policy 66
Incomes policy 67
III. Recent trends and short-term prospects 68
Notes and References 70
Annexes:
I. Definitions ofthe Belgian public deficit 73
II. Chronology ofmain economicpolicy measures 74
Statistical annex 78
TABLES
Belgium
Text
1. Comparative macroeconomic performance 10
2. Composition ofGDP 12
3. Indices ofstructural change in manufacturing 12
4. Relative employment performance 13
5. Relative investment performance in manufacturing 13
6. Foreign trade as a percentage ofmanufacturing value added 15
7. International comparison ofsectoral output shares, by R & D content 17
8. Relative production sharesand revealed comparative advantage in trade 18
9. Constant market share analysis 19
10. Structureofaid to industry 26
11. Trend ofgovernment aid 27
12. Government aid to the national sectors 29
13. Public sector transactions 33
14. Central government budget: forecasts and outturns 34
15. Saving and lending capacity by agent 34
16. Financing ofthe economy's borrowing requirement 40
17. Labour share in factor incomes 43
18. Households' appropriation account 43
19. Demand and output 44
20. The labour market 45
21. BLEU balance ofpayments 48
22. Capital movements 48
23. Short-term prospects 51
Luxembourg
1. Comparative performance 62
2. Structureofoutput and employment 63
3. Central government budget 67
4. Recent price and wage trends 68
5. The labour market 69
6. Short-term prospects 70
Belgium
StatisticalAnnex
Selected backgound statistics 78
A. Grossdomestic product 79
B. Origin ofgross domestic product at marketprices 80
C. Grossdomestic fixed capital formation by branch 81
D. Incomeand expenditureofhouseholds and private non-profit institutions 82
E. Incomeand expenditure ofenterprises 83
F. Government revenue and expenditure 84
G. Industrial production 85
H. Labour market and wages 86
I. Area breakdown offoreign trade 87
J. Commodity breakdown offoreign trade 88
K. BLEU balance ofpayments 89
Luxembourg
Selected background statistics 90
L. Gross national product 91
M. Labour force, employment and unemployment 92
DIAGRAMS
Belgium
1. International comparison ofdegreeofopeness 14
2. Effect ofproductcomposition on export growth 20
3. Real labour cost gap 22
4. Breakdown ofrelative labourcosts 23
5. Indicators ofcompetitivenessand profitability 24
6. Medium-term trend ofpublic finance 35-36
7. Interest rates 39
8. Price trends 420
9. Foreign trade indicators 47
10. Exchange rate against selected currencies 49
Luxembourg
1. Comparative trend ofemployment 65
BASIC STATISTICS BELGIUM
THELAND
Area(1 000sq. km) 30.5 Main urbanareas(1-1-1984) inhabilants:
Agriculturalarea (I 000sq.km) 1982 14.0 Brussels 982434
Tillage(1000sq.km) 1982 7.1 Antwerp 919008
Liege 594378
Ghent 484590
THE PEOPLE
Population(1-1-1984),thousands 9853 Netmigration (1984) -515
Numberorinhabitantspersq.km 323 Totallabourforce(1984,thousands) 4214
Population,netnaturalincreaseper Totaldependantemployment 2997
1 000inhabitantsin 1984 0.5 Agriculture 12
Manufacturingandconstruction 979
Other 2007
PRODUCTION
Grossnationalproduct(1984),billionsof Grossnational productbyorigin,atmarket %
Belgianfrancs 4458.4 prices(1984)
Grossnationalproductperhead(1984) USS 7835 Agriculture 2.5
Grossfixedinvestment:PercentofGNP(1984) 15.5 Industry 24.9
Perhead (1984) USS 1 225 Construction 5.5
Other 67.1
THEGOVERNMENT
Currentgovernmentexpenditureongoods CompositionoftheHouseof %
andservices(1984),percentageofGNP 53.2 Representatives:
Currentgovernmentrevenue(1984)percentofGNP 46.3 Christian-Social Party 29
Governmentdebt,31-12-1984,billionsof BelgianSocialistParty 28
Belgiansfrancs 4265 Liberal Party 21
Frontdémocratiquedesfrancophones 3
Volksunie 8
Ecologistes 9
Others 6
Lastelections: 13-11-1985
FOREIGNTRADE
Exports: Imports:
Mainexportsin 1984percentoftotal Mainimportsin 1984,percentoftotal
exports,SITC(BLEU): imports,SITC(BLEU):
Ironandsteelproducts(67 +68) 12.3 Ironandsteelproducts(67 +68) 6.1
Chemicalsproducts(5) 12.7 Chemicalsproducts(5) 10.0
Machineryandapparatus(71 to77) 9.7 Machineryandapparatus(71 to77) 11.5
Textileproducts(65) 5.7 Textileproducts(65) 3.2
Transportequipment (78 +79) 11.4 Transportequipment(78 + 79) 10.2
THECURRENCY
Monetaryunit: Belgianfranc CurrencyunitsperUSS,averageofdailyfigures:
Year 1985 59.4281
June 1986 45.7327
Note: Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.
BASIC STATISTICS LUXEMBOURG
THELAND
Area(sq.km) 2586 Majorcity,inhabitants:
Agriculturearea, 1983(aq.km) 1274 Luxembourg(1981) 78924
Woodland, 1982(sq km) 821
THEPEOPLE
Population(1-1-1984) 365800 Totalemployment(1984,thousands) 158.3
Numberofinhabitantspersq.km 141 Agriculture 7.0
Population,netnaturalincreaseper Industry 53.0
1 000inhabitantsin 1983 0.1 Services 98.3
Netmigration 1983 244 Dependentemployees 139.1
Employers,self-employedpersonsanddomestichelp 19.2
PRODUCTION
Grossdomesticproduct(1984),billionsoffrancs 204.1 Grossdomesticproductbyorigin,at %
Grossdomesticproductperhead,US$(1984) 10921 marketprices(1982):
Grossfixedinvestment: Agriculture 2.9
PercentofGDP(1984) 19.9 Industry,energy 47.9
Perhead,US$(1984) 2175 Construction 5.5
Other 43.7
THEGOVERNMENT
Publicconsumption(1984),percentofGDP 13.2 CompositionoftheChamber: %
Currentgovernmentrevenue(generalgovernment) ChristianSocial Party 39.1
(1982)percentofGDP 56.0 WorkersSocialist Party 32.8
Centralgovernmentdebt,PercentofGDP DemocraticParty 21.9
(December31st, 1982) 22.0 CommunistParty 3.1
Others 3.1
Lastelection: 17-6-1984
THECURRENCY
Monetaryunit: Luxembourgfranc CurrencyunitsperUSS,averageofdailyfigures:
Year 1985 59.4281
June 1986 45.7327
Note: Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.
ThisSurveyisbasedontheSecretariat'sstudypreparedfor
theannualreviewofBelgiumandLuxembourgbytheEconomic
andDevelopment Review Committeeon IOth July 1986.
Afterrevisionsinthelight ofdiscussionsduringthereview,
final approval ofthe Surveyfor publication was given by the
Committeeon 31st July 1986.
BELGIUM
INTRODUCTION
Overthepasteighteen months,underthecombinedeffectoftheimprovementincertain
aspects ofthe international environment and the continued pursuitofan adjustment policy
associatingfiscal,incomesandemploymentpolicies,substantialprogresswasmadeinseveral
areas: the rise in consumer prices eased in 1985 and was down virtually to zero in the six
months to May 1986; corporate profits continued to pick up; the level of unemployment
startedtofall;andaslightcurrentaccountsurpluswasachievedin 1985afteranequilibrium
in 1984. Nonetheless, there is clearly some way to go before the economy is fully back on
course,asisevidencedinparticularbyacertainsluggishnessofinvestment,thestillhighlevel
of unemployment and Belgium's continued insufficient export performance.
However, itis intheareaofpublicfinancethatthedisequilibria aremostacute. Despite
thelaunchingin 1984ofacorrectiveplaninvolvingamountstotallingover6 percentofGDP
overthreeyears,theTreasuryborrowingrequirementstillamountedto 12 percentofGDPin
1985. The public finance slippage entailed a rapid build-up of public debt, with gross
outstandings exceeding 120per cent of GDP in 1985, one of the highest ratios among the
OECDcountries. A newcorrective programmewas therefore launched in May 1986, which
continuesandamplifiesthefirstwiththeaimofreducingthe borrowingrequirementto8 per
cent by 1987. The monetary policyobjective is to maintain stable exchange rate within the
EMS and -subject to this constraint- allow interest rates to fall. As a result of the
improvement in current foreign trade it was possible to raise the central rate ofthe Belgian
francveryslightlyontheoccasionoftheEMSparityalignmentinApril 1986andtolowerthe
Central Bank intervention rate substantially. Finally, the government reserves the right to
continue to intervene in wage setting should wages rise above the competitiveness norm.
Thankstothemorefavourableimpactoftheinternationalenvironment,particularlythe
terms-of-trade impact of the fall in the dollar and oil prices, growth is likely to strengthen
somewhat in 1986; however it will probably ease again in 1987 when the public finance
corrective programme takes full effect. This programme is indeed likely to lead to a
substantialrealfallingeneralgovernmentprocurementofgoodsandservicesinvolumeterms
and anabsolutereduction in thelevel oftransferstohouseholds. Should thisbeso, domestic
demand growth could bedown to 1 per cent, againstan expected European average ofover
3 per cent. This further widening of the demand differential would probably be in some
measure offset by an improvement in the foreign trade contribution to growth. But GDP
growth is still unlikely to be more than 1'Aper cent in real terms, which would result in a
further decline in employment. On the other hand, the slowdown in inflation could be
consolidated,narrowingthegapwiththeleastinflationarycountriestolessthan 1 percentage