Belgium should boost employment and restrain public spending

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Page 84

Growth in Belgium picked up during 2005, from 0 percent in the first quarter to 2.5 percent (at an annual rate) in the fourth, owing to stronger growth of exports and household consumption.

According to the IMF's annual economic review, annual growth should strengthen to slightly above 2 percent in 2006 from 1.5 percent in 2005 as demand from trading partners continues to increase, private consumption improves in response to tax cuts, and residential construction remains resilient.

Inflationary pressures are also growing, however, because of higher wages and oil prices.

As elsewhere in Europe, population aging is weighing on the budget and on growth, while employment is significantly lower than the EU15 average. With a balanced budget since 2000, public debt has fallen as a share of GDP, allowing the government to fund the costs of aging through interest savings. The authorities are implementing the Generation Pact, designed to increase jobs for young, low-skilled, and older workers. Since 2004, the financial sector has been strong and profitable.

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The IMF Executive Board applauded the economy's continued good performance and was optimistic about the near-term outlook and growth projections. Urging the authorities to curb medium-term spending, Directors advised adding a comprehensive approach to tax reform to efforts to reduce public...