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BELGIUM'S PRIVATE SECTOR STAGNATION.

Slow growth in both internal and external demand for Belgian goods and services will contribute to lackluster GDP expansion of 1.4 percent in 2003 and 1.5 percent in 2004. With unemployment lingering above 7.5 percent, consumer confidence will remain depressed well into the first half of next year, and that will put downward pressure on sales of high-end durables.

Belgian private sector consumption of goods and services should show anemic growth of 1.7 percent in 2003 and 1.8 percent in 2004. Persistent upward pressure on Belgian production costs will undermine cost competitiveness of local goods and services. As a result, sales should experience growth of less than 2.5 percent year-on-year through the remainder of this year and first quarter of 2004. By contrast, sales of imported goods and services should rise about 3 percent in 2003 and 5.4 percent in 2004.

The macroeconomic climate is generally favorable to increased household expenditure on goods and services, yet sustained upward momentum in Belgian sales will not be seen until a generalized EU economic recovery gets well underway. Faced with slack demand for Belgian goods, business leaders will leave expansion plans on hold through the remainder of this year. Fixed capital formation growth will be nil this year, rising to about 2.6 percent in 2004. Orders for materials and services associated with plant expansion should experience minor year-on-year losses during the fourth quarter, but production equipment orders should show anemic gains of from 0.5 to 2 percent.

Demographic factors paint a bleak panorama for medium- to long-term demand for household consumer goods. About 17 percent of Belgiums populace is over the age of 65 and this is symptomatic of a consumer base beyond its prime. Population growth should turn negative by the middle of this century and ultimately erode the consumer base.
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Publication:Market Europe
Article Type:Brief Article
Geographic Code:4EUBL
Date:Sep 1, 2003
Words:308
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