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Belgium: Country Economic Forecast: 21 Feb 2012

10 Pages Oxford Economics February 21, 2012 SKU: OFE6823952

Belgium became one of the first non-crisis Eurozone countries, together with the Netherlands, to fall back into recession, posting quarterly GDP falls of 0.1% in Q3 and 0.2% in Q4. The slowdown was triggered by the external environment, but this quickly fed through into business investment and consumer spending. Weaker demand and firms cutting back on investment will push unemployment up further in 2012, impinging upon consumer incomes and spending. The government's fiscal consolidation will also depress domestic demand; with the risk of more cuts if the deficit deteriorates further. We expect GDP to shrink 0.3% in 2012. We expect a modest recovery to start in late 2012, gathering pace slowly through 2013-14. Banks will take time to start lending again and the government's fiscal consolidation will continue to weigh on domestic demand and household incomes. While government action to curb the deficit is to be welcomed, and seems to have led to a reduction in borrowing costs, much remains to be done to put public finances on a secure long-term footing. Of particular importance are reforms to enable stronger employment and productivity growth. These reforms are likely to be politically difficult, but essential if potential growth is to be lifted beyond the current estimate of 1.5%.

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Belgium: Country Economic Forecast: 21 Feb 2012

Oxford Economics
February 21, 2012

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