Identifier
Created
Classification
Origin
07BRUSSELS2164
2007-07-03 12:03:00
UNCLASSIFIED
Embassy Brussels
Cable title:  

BELGIAN ECONOMIC STEWPOT: June 25, 2007

Tags:  ECON EFIN EINT EINV SENV BE 
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VZCZCXYZ0000
RR RUEHWEB

DE RUEHBS #2164/01 1841203
ZNR UUUUU ZZH
R 031203Z JUL 07 ZDK
FM AMEMBASSY BRUSSELS
TO RUEHC/SECSTATE WASHDC 5807
INFO RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNMEN/EU MEMBER STATES
RUEHRB/AMEMBASSY RABAT 2356
UNCLAS BRUSSELS 002164 

SIPDIS

SIPDIS

STATE FOR EB/OIA, EB/TPP/IPE AND EUR/UBI
TREASURY FOR OASIA/ICN - ATUKORALA
USDOC FOR 4212/OECA/JLEVINE
RABAT for W. BUSH

E.O. 12958: N/A
TAGS: ECON EFIN EINT EINV SENV BE
SUBJECT: BELGIAN ECONOMIC STEWPOT: June 25, 2007


1-2. Strong Macro-Economic Outlook

3. Belgian CO2 Emissions Fall - Finally
4-5. Private Equity Investment Booming in Belgium

6. Belgian Film Industry Prospers
7-8. Fewer Belgians Traveling to the U.S.

9. Belgian Beer Exports Up

10. 2007 Budget derailed?



-----------------------------
Strong Macro-Economic Outlook
-----------------------------
UNCLAS BRUSSELS 002164

SIPDIS

SIPDIS

STATE FOR EB/OIA, EB/TPP/IPE AND EUR/UBI
TREASURY FOR OASIA/ICN - ATUKORALA
USDOC FOR 4212/OECA/JLEVINE
RABAT for W. BUSH

E.O. 12958: N/A
TAGS: ECON EFIN EINT EINV SENV BE
SUBJECT: BELGIAN ECONOMIC STEWPOT: June 25, 2007


1-2. Strong Macro-Economic Outlook

3. Belgian CO2 Emissions Fall - Finally
4-5. Private Equity Investment Booming in Belgium

6. Belgian Film Industry Prospers
7-8. Fewer Belgians Traveling to the U.S.

9. Belgian Beer Exports Up

10. 2007 Budget derailed?



--------------
Strong Macro-Economic Outlook
--------------

1. (U) Belgium's macro-economic outlook is quite
favorable, according to projections released by
the Belgian National Bank (central bank). The BNB
revised the 2007 GDP growth estimate upward from
2.1 to 2.5 percent, compared with 3.0 percent
growth reached in 2006. BNB forecasts 2008 GDP
growth at 2.2 percent. Inflation continues to
drop, from 2.3 percent in 2006 to 1.6 percent in
2007, and is expected to hold at about that level
in 2008. Public debt should drop to 85.6 percent
of GDP by the end of 2007, and reach 82.7 percent
in 2008. While still above the EU objective of no
more than 65 percent of GDP as public debt, it
reflects remarkable progress from the 134 percent
Belgium faced in the last decade.


2. (U) With falling unemployment, Belgian
companies face labor shortages. Unemployment
should average 7.6 percent in 2007 and could drop
to 7.2 percent in 2008, down from 8.2 percent in

2006. The Federation of Belgian Employers (FEB)
claims that 300,000 positions are unfilled in the
country, 120,000 of them in fields where Belgium
lacks qualified employees. Even in francophone
Wallonia, with unemployment rates of up to 25
percent in certain areas, some employers struggle
to find employees with necessary skills.
Belgium's delay in fully opening its labor
markets to workers from the "new" EU-ten member
states eliminates a relatively easy means to
address the problem. The FEB fears that skilled
labor shortage will lead to upward pressure on
wages, ultimately boosting inflation, and
hampering competitiveness. Addressing Belgium's
constrained labor market ? and regional/sectoral

stubborn unemployment ? is a key issue in the
negotiations to form a new government following
the June 10 federal elections.

--------------
GHG Emissions Fall - Finally
--------------

3. (U) In a new study released by the European
Environment Agency, data show that Belgium's
greenhouse gas emissions actually dropped in
2005, declining by 2.6 percent over 2004 (outside
the aviation sector). Earlier data showed
Belgian output still climbing. This rate was
significantly better than the EU-15 as a whole,
which registered only a 0.8 percent drop. In
actual quantities, Belgium produced 143.8 million
tons of greenhouse gases (CO2 among others) in
2005, which is 2.1 percent less than it generated
in 1990, the Kyoto Protocol baseline year. The
good news is tempered by the fact that some of
the reduction was due to an unusually mild
winter, and growing popularity of diesel cars ?
which are marginally more fuel efficient. We
await final data from 2006 to see if Belgian
emissions are really trending downward or if 2005
was an exception. Belgium will need to record a
similar rate of progress for several years to
achieve its target of a 7.5 percent reduction of
1990 emissions by 2012.

--------------
Private Equity Investment Booming in Belgium
--------------

4. (U) A survey conducted for the European
Venture Capital Association, in partnership with
the Belgian Venture Association (BVA) found that
private equity (PE) investment in Belgian
companies nearly tripled in 2006. Total PE
investment in Belgium was 855 million euros in

2006. From 2005 to 2006, foreign private equity
firms increased their investments in Belgium by
61%, and now account for 39% of private equity
investments in Belgium. Apart from a one-time
investment of 750 million euros in 2004, this is
the highest level of foreign investment in
Belgium in the past six years. For their part,
Belgian private equity investors increased their
investments abroad by 59%. Total private equity
investment by Belgian investors, both at home and
abroad, quadrupled from 2005 to 2006, from 193
million euros to 940 million euros. Most of this
investment was in venture capital and buy-outs.
Investment in the high-tech sector increased
modestly, while non-high-tech investment showed a
dramatic increase.


5. (U) The trends are consistent with overall
foreign direct investment (FDI) in Belgium. The
UN Conference on Trade and Development (UNCTAD)
World Investment Report 2006 found that the stock
of FDI in Belgium more than doubled between 2002
and 2005, with an annual growth rate of 29%.
Belgium represented 5% o the total world stock
of FDI in 2005. Guy Geldhof, Secretary General
of the BVA, believes that the high level of
investment in Belgium reflects a general trend
upwards in the level of private equity investment
in all of Europe, boosted by a large number of
buy-outs and investments in expansion capital.
Foreigners ar attracted to Belgium because it
has a highl open economy and consists of many
medium-size enterprises with reasonable
valuations, making acquisitions affordable.
2007 is likely to be another banner year for
private equity investment in Belgium, as several
major Belgian PE firms have already reached their
2006 numbers only halfway through the year.

--------------
Belgian Film Industry Prospers
--------------

6. (U) Belgians see an average of 2.5 movies each
per year. While most are foreign films, the 20
to 25 Belgian-made films each year are growing in
popularity. Flemish filmgoers like movies that
are spin-offs of successful TV shows; these
rarely play well in the francophone south.
Walloon films will play well in Flanders ?
especially if the Walloon flick is produced with
French counterparts and gets recognition at the
Cannes film festival. Belgian movie directors
often have successful film debuts, but due to
problems with funding, casting, and production,
many are unable to continue that success. To
foster the industry, both Walloon and Flemish
community governments subsidize film-making; the
French Community allocating 9.3 million euros in
2006 for it, and the Flemish Audiovisual Fund
allocating 9.75 million euros to it.

--------------
Fewer Belgians Traveling to the U.S....
--------------

7. (U) Despite the Visa Waiver program that
exempts Belgians from a visa requirement for
travel to the U.S., and despite a highly
favorable Euro-to-dollar exchange rate, fewer
tourists in 2006 traveled across the Atlantic for
their vacations. According to the Belgian Tour
Operators Association (ABTO),organized group
tours to the New World fell 20% between 2005 and

2006. This was confirmed by Carlson Wagonlit
Travel, the top travel agency network in Belgium.
"Tourist travel to the US has diminished by at
least 15%.


8. (U) The 15-20 percent drop-off in Belgian
tourism parallels other European rates: in
comparison to the year 2000, the number of
British tourists to the States in 2006 dropped
11%, German tourism dropped 22%, and French are
down 28%. On the other hand, notes Gillis, the
number of people traveling for business purposes
is up 10-12 percent over the course of the last
12 months. Cheap prices do attract some
visitors, however: the number of plane tickets
purchased by students and backpackers increased
by 15 percent in 2006.

--------------
Belgian Beer Exports Heading Up
--------------

9. (U) According to the Belgian Brewers
Association, 2006 was a very good year. Although
domestic beer consumption decreased by 1.1 ,
production at Belgium's breweries grew by 6 and
net exports increased by 15 . Exports now
account for 55 percent of total Belgian beer
production. Despite the small decrease in
domestic consumption, beer remains the preferred
alcoholic beverage of choice in Belgium ? 89
liters (27 gallons) consumed per resident. The
slight decrease is likely the result of changing
consumption habits and fewer people frequenting
hotels, restaurants, and cafes. Belgian brewers
have been investing more in production and in
developing better packaging and promotion for
their expanding foreign markets.

--------------
2007 Budget derailed?
--------------

10. (U) A memorandum from the Finance Ministry
shows a shortfall of some 600 million euros over
earlier projections for the first five months of
this year. To make matters worse, the European
Statistical Office has ruled against budgetary
measures such as the sale of uncollected taxes to
banks and other financial institutions, a measure
which the Verhofstadt government was hoping would
bring in some 160 million euros in 2007 revenues.
If one also takes into account the Christian-
democratic party objections to one-shot budgetary
measures, such as the takeover of pension funds
and the sale of government buildings, another 1.3
billion euros extra will have to be found by the
next government coalition, bringing the total of
extra revenues/cuts needed to more than 2 billion
euros.
FOX