Table Of ContentOECD
ECONOMIC SURVEYS
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BELGIUM
LUXEMBOURG
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JULY 1976
BASIC STATISTICS BELGIUM
THE LAND
Area (1 000sq. km) 30.5 Main urban areas (31-12-1973)
Agriculturalarea inhabitants :
(I 000sq. km) 1973 15.7 Brussels 1 063274
Tillage and temporary grassland Antwerp 669208
(1 000sq. km) 1973 8.3 Liège 437262
Ghent 221 090
THE PEOPLE
Population (1-7-1975) (thousands) 9801 Netmigration (1974) 25000
Numberofinhabitantspersq. km 321 Total labourforce(1974) 3985000
Population,netnaturalincrease Civilianmanpower 3801 000
(1974) : Agriculture 140000
Yearlyaverage 7000 Manufacturingandconstruc¬
Yearlyrateper 1 000inhabitants 0.7 tion 1 565000
Other 2096000
PRODUCTION
Gross domestic product (1975) National expenditure (1975) bil¬
billionsofBelgian francs 2304.1 lionsofBelgian francs :
Gross domesticproductperhead Privateconsumption 1 410.8
(1975) US t 6388 Publicconsumption 384.6
Grossfixedinvestment : Grossfixedassetformation 501.5
PercentageofGDP(1975) 21.8 Netexports 56.4
Perhead(1975) US t 1 390
THE GOVERNMENT
Current government expenditure on Composition oftheHouseof %
goodsand services (1975) percen¬ Representatives :
tageofGDP 16.7 Christian-Social Party 32
Current government revenue (1975) Belgian SocialistParty 27
% ofGDP 40.8 Freedom and ProgressParty 15
Government debt. 31-12-1975, bil¬ CommunistParty 3
lionsofBelgian francs 928.8 Others 23
Lastelection : 10-3-1974
Nextelection : 1978
FOREIGN TRADE
Exports : Imports :
Main exportsin 1974 Main imports in 1974
% oftotalexports (BLEU): % oftotal imports(BLEU) :
Basemetals 24 Machineryandequipment 14
Chemicals 13 Chemicals 9
Machineryand equipment 10 Basemetals 9
Textilesandfibres 8 Transportmaterial 9
Transportmaterial 8 Textilesandfibres 6
THE CURRENCY
Monetaryunit : Belgian franc Currencyunitsper USdollar :
actualaverageratein 1975 36.80
asat May 1976 39.18
Note An internationalcomparisonofcertain basicstatisticsisgiveninanannextable.
BASIC STATISTICS LUXEMBOURG
THE LAND
Area(sq. km) 2586 Majorcity,inhabitants :
Agricultural area, 1974(sq. km) 1 319 Luxembourg(31-12-1974) 78300
Woodland, 1974(sq. km) 820
THE PEOPLE
Population (31-12-1974) 357400 Total labourforce(1974) 150500
Numberofinhabitantspersq. km 138 Agriculture 9700
Population,netnaturalincreaseper Industry 74000
1000inhabitantsin 1974 Services 66800
Netmigration 1974 5 100 Salariedemployees
andwage-earners 126800
Employers, self-employed persons
and domestichelp 23700
PRODUCTION
Gross domestic product (1975) bil¬ Gross domestic product by origin
lionsoffrancs 79.4 at market prices (1974): %
Gross domestic product per head, Agriculture 3.3
US * (1975) 6037 Energy 2.7
Grossfixed investment, 1975 : Manufacturing 44.2
PercentageofGDP 28.6 Construction 7.5
Perhead.US * 1 730 Other 42.3
THE GOVERNMENT
Publicconsumption (1975), percen¬ Composition ofthe Chamber : %
tageofGDP 15.6 Christian Social Party 30.5
Currentgovernment revenue (gene¬ WorkersSocialistParty 28.8
ralgovernment)(1975)percentage DemocraticParty 23.7
ofGDP 33.1 CommunistParty 8.5
Centralgovernmentdebt Social DemocratParty 8.5
(December31st.1974)billionFrs 16.4 Lastelection : 26-5-1974
THE CURRENCY
Monetaryunit : Luxembourgfranc CurrencyunitsperUSdollar :
actualaverageratein 1975 36.80
asat May 1976 39.18
Note Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.
OECD ECONOMIC SURVEYS
BELGIUM-
LUXEMBOURG
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
The Organisation for Economic Co-operation and Devel¬
opment (OECD) wassetupundera Conventionsignedin 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 the development ofthe world 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.
TheMembersofOECDareAustralia,Austria,Belgium,Cana¬
da, Denmark, Finland, France, the Federal 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
certainworkofthe OECD, particularly that ofthe Economic and
Development Review Committee.
TheannualreviewofBelgium andLuxembourg
bythe OECDEconomicandDevelopment Review Committee
tookplaceon25th May, 1976.
ThepresentSurveyhasbeenupdatedsubsequently.
© OECD, 1976.
Queries concerning permissions or translation rights should be
addressed to:
Director ofInformation, OECD
2, rue André-Pascal, 75775 PARIS CEDEX 16, France.
CONTENTS
Introduction
Part I The Belgian Economy 9
I Recent developments 9
Demand 9
Output 12
Employment 13
Prices and incomes 17
Prices and competitiveness 19
The BLEU balance ofpayments 21
II Broad lines of economic policy 27
Monetary policy 27
Fiscal policy 33
Employment and industrial restructuring policy 36
Prices and incomes policy 37
Medium-term economic policy 38
m Short-term prospects and economic policy conclusions 44
Short-term prospects 44
Economic policy conclusions 44
Part II The Luxembourg Economy 47
Recenttrends 47
Fiscal policy 49
Monetary policy 49
Employment policy 50
Short-term prospects 50
Conclusions 51
Annex: Main economic policy measures taken in Belgium since July 1975 53
OECD EconomicSurveys
TABLES
TEXT :
1 Demand and output 11
2 Prices and wages 18
3 Components ofhouseholds' appropriation account 19
4 (a) BLEU balance ofpayments on a transactions basis 22
(b) BLEU balance ofpayments on a settlements basis 22
5 Foreign trade
(a) Foreign trade on a national accounts basis 23
(b) Average values ofBelgium's foreign trade 23
6 Money supply and counterparts 28
7 Bank liquidity 32
8 Indicators of the impact ofgeneral government transactions on aggregate
demand 34
9 General government account on a national accounts basis 35
10 Main elements ofthe forecast for 1976-1980 40
11 Forecast for 1976 42
12 Luxembourg Demand and output 48
Statistical Annex :
A Gross domestic product 58
B Origin ofgross domestic product at market prices 59
C Gross domestic fixed asset formation 60
D Income and expenditure ofhouseholds and private non-profit institutions 62
E Government revenue and expenditure 63
F Industrial production 64
G Employment, wages and labour market 65
H Area breakdown offoreign trade 66
I Commodity breakdown offoreign trade 67
J Luxembourg Demand and output 68
DIAGRAMS
1 Synthetic indicator and indicators ofdemand 10
2 Indicators ofsupply 14
3 Labour market 16
4 Exportprices, domestic prices and domestic costs ofmanufactures 20
5 Exchange rates against the Belgian franc 25
6 Performance ofthe Belgian franc on the exchange market 26
7 Monetary indicators 29
8 Interest rates 31
INTRODUCTION
The Belgian economy went through a phase of recession between the third
quarter of 1974 and the fourth quarter of 1975. The first signs of an upturn in
production did not appear until the beginning of 1976. This recession, during
which the employment situation deteriorated considerably seems, however, to have
been less pronounced in Belgium than in most ofthe other OECD countries; on the
other hand, though less pronounced than in 1974,priceandwagepressuresremained
strong. The downturn in world trade caused Belgian and Luxembourg exports
to fall; but because of the drop in imports due to flagging demand, the BLEU
trade balance and current balance on a transactions basis showed a surplus.
Although inflationary pressure eased relatively little, economic policy was progres¬
sively relaxed as the employment situation grew worse, which led to an upturn in
domestic demand; this, combined with a revival of exports, caused activity to pick
up in the fourth quarter of 1975. Whether this improvement is maintained or not
in 1976 will depend, to a large extent, on international developments. Belgian
exports may well lead the recovery, if world trade continues to develop, since the
components of domestic demand are likely to make only relatively moderate
headwayinview ofthefact thateconomicpolicy has been shifted to a more cautious
stance during the past few weeks. In these circumstances, there would be only a
slight improvement in the employment situation.
The Luxembourg economy, which is very dependent on the external sector for
its growth, experienced a severe recession in 1975. Gross domestic product fell by
about 7.7 per cent in volume termsandby4.2percentinvalueterms. Inspiteofthis
setback, household consumption continued to grow; indeed, governmentassistance
served to keep unemployment from increasing too much, although there was a
steep rise in short-time working and outstanding job applications. By the end of
1975, foreign markets were becoming a little firmer and 1976 should see a slight
growth. But the Government's spending in 1975 cut heavily into the reserves of
the various State funds, which has necessitated a fairly tight budget policy for the
medium term in orderto improvethe authorities' financial situation.
Part I of the Survey deals with the Belgian economy. In the first section
thetrendsindemand, output and employmentoverthelasttwelvemonthsarediscus¬
sed, together with those ofprices and incomes and the BLEU balanceofpayments.
The broad lines of Belgian economic policy, notably in the monetary and fiscal
fields, areconsidered in the second section. The short-term outlookfor the Belgian
economy and certain economicpolicyconclusions are the subject ofthefinal section.
Part II of the Survey reviews the Luxembourg economy and its short-term
prospects and presents various economic policy conclusions.
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Part I
THE BELGIAN ECONOMY
I RECENT DEVELOPMENTS
Demand
As a result ofdeclining final demand, both domestic and external, the Belgian
economyexperiencedasevererecessionduringaperiodofeighteenmonthsbeginning
in the summer of 1974. The provisional figures for the Belgian national accounts
show a fall in GNP of 1.4 per cent in volume terms in 1975, whereas the forecasts
established a year ago, both by the Belgian authorities and by the OECD, were for
zerogrowthofGNP. Thegrowthoffinaldomesticdemandhadbeenover-estimated,
as regards both private consumption and productive or housing investment; on the
other hand, contrary to expectations, public expenditure (investment and consump¬
tion) showed a moderate increase owing to the strongly reflationary policy pursued.
Stocks had a much more negative impact than foreseen in that their contribution
toGNPwasabout 3percent,asagainstaforecastofonly 0.5percent. External
demand also fell by more than expected and exports were down nearly 7 per cent
in volume terms. However, the fall in imports due to declining production and
stock liquidation was slightly more pronounced, about 9.5 per cent, so that, all
told, theforeign balance1 improved in real termsin 1975.
Private consumption grew by 1 per cent in real terms in 1975, a moderate
figure that can be explained by the slight fall in households' real income because of
the decline in activity and the persistence ofa high rate ofinflation. Furthermore,
the household savingsratio wasdown slightly ontheveryhigh levelwhich itattained
in 1974. This modest growth ofprivate consumption in fact conceals two different
movements. During the first half of 1975 private consumption remained at the
depressed level to which it had fallen at the end of 1974, especially where consumer
durables were concerned. In the second half of the year, and notably in the final
quarter, consumption picked up significantly as households began to sense that the
economic climate was improving and the Government's economic policy was eased;
there was thus an appreciable increase in demand for durable goods, especially
automobiles2. The partial indicators so far available suggest that the upturn in
1 Theforeignbalance goods,servicesandfactorincomes accordingtothenationalaccounts
definition.
2 The trend in private car registrations has been very stable in Belgium over the last four
years, which has not been the case in the major European countries taken as a whole. On the
basisof1972 = 100,privatecarregistrationshavemovedasfollows:
1972 1973 1974 1975
Belgium 100 101.4 100 100
MajorEuropean countries* 100 100 85.8 90.4
* Federal Republic of Germany. Great Britain, Italy, Netherlands,
Switzerland,Austria,Scandinaviancountries,France.
