BNB: Belgium Must Enact Further Cuts To Hit Deficit Target
BRUSSELS (MNI)- The Belgian government needs to implement further
budget cutting measures in order to meet its 2012 deficit target of 2.8%
of GDP, which would take it below the 3% EU limit, according to an
analysis of current policies by the National Bank of Belgium.
Taking into account only policies that have already been clearly
defined and agreed, including a planned E1.3 billion federal spending
freeze, the public deficit would fall to 3.4% of GDP in 2012 — still
above both the EU limit and the government’s target, the central bank
said during a presentation of its annual report.
If new data on the budgetary performance of Belgium’s regions is
used, the projected budget gap based on measures so far would be only
3.1% of GDP.
The analysis does not include all the proposed cuts and reforms
currently being discussed by the government.
If Belgium fails to get its budget deficit below the 3% limit, it
runs the risk of fines under toughened EU fiscal governance rules
adopted last December.
At 4% of GDP in 2011, Belgium’s government deficit was virtually
unchanged from 2010, according to the central bank’s data.
The National Bank of Belgium also revised down its growth forecast
for this year by half a percentage point to -0.1% following a very mild
contraction in the second half of 2011 and a stagnant start to 2012.
As a result of recently announced tax hikes to plug the
government’s budget deficit, the central bank also adjusted its
inflation forecast for 2012, increasing it by 0.2 percentage points to
The bank also raised its unemployment forecast 0.7 percentage point
to 7.7% and noted a deterioration of Belgium’s competitive position in
terms of labour costs and productivity compared with its three largest
trading partners, Germany, France and the Netherlands.
The growing weight of the public sector in the economy, which now
employs 1.3 million people, is a particular challenge that the
government needs to address, the central bank said.
The adjustments to the National Bank of Belgium’s forecasts were
made to take account of the budget cuts announced by the new government
last year, which were made just after the previous forecast exercise.
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