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ORGANISATION
ORGANISATION
FOR
DE
ECONOMIC
COOPERATION
CO-OPERATION
ET
DE
ANO
D E V E L 0 P P E M E N T
DEVELOPMENT
ECONOMIQOES
BASIC
STATISTICS
THE
Area (1 000 sq.km)
Agricultural area, 15.5.72
(1 000 sq.km)
Forests, 1970 (1 000 sq.km)
30.5
BELGIUM
L AND
Main urban areas (31.12.1971)
inhabitants :
15.2
6.0
1 074 726
Brussels
Antwerp
672 703
Liège
440 447
Gand
224 728
THE PEOPLE
Population (31.12.1971) (thousands)
Number of inhabitants per sq.km
Population, net natural increase
(1971)
Yearly average
Yearly rate per 1 000 inhabitants
9 659
317
Net immigration (1971)
Total labour force (1972)
Agriculture, wage earners (1971)
Manufacturing, wage earners (1971)
24
3 879
13
1 140
184
000
000
000
20 251
2.09
PRODUCTION
National expenditure (1971)
Gross national product (1971)
billions of Belgian francs
1 419.0
Gross national product per head
2 940
(1971) US S
Gross fixed
investment:
Percentage of GNP (1971)
Per head (1971) US S
21.7
billions of Belgian francs:
Private consumption
Public consumption
852.3
Gross fixed
307.2
199.0
asset formation
32.0
Net exports
636
THE GOVERNMENT
Composition of the House
of Representatives:
Current government expenditure
14.1
Christian-Social Party
35.5
Belgian Socialist Party
Freedom and Progress Party
Communist Party
%
30
26
15
3
Others
26
on goods and services (1971)
percentage of GNP
Current government revenues (1971)
% of GNP
Government debt,
31.12.1972
billions of Belgian francs
711.6
Last election:
Next election:
1971
1975
FOREIGN TRADE
Exports:
Main exports in
Imports:
Main imports in 1972
% of total imports (BLEU):
1972
% of total exports (BLEU)
20
Base
Machinery and equipment
11
Minerals
Textiles
Chemicals
9
12
Machinery and equipment
Transport material
Transport material
1 1
Textiles
Base
metals
metals
15
13
7
13
and fibers
7
THE CURRENCY
Monetary unit: Belgian franc
Currency units per US dollar,
June
Note
1973:
40.3200
An international comparison of certain basic statistics is given in an annex table.
BASIC
STATISTICS
LUXEMBOURG
THE LAND
Area (sq.km)
Agricultural area, 1971 (sq.km)
Woodland, 1971 (sq.km)
2 586
1 342
840
Major city, inhabitants:
Luxembourg (31.12.1971)
78 000
THE PEOPLE
345 000
Population (31.12.1971)
Number of inhabitants per sq.km
Population, net natural increase
133
Yearly average (1966-1970)
Per 1 000 inhabitants (1966-1970)
Net immigration (average 1966-1970)
630
1.9
1911
Total labour force (1971)
147 400
Agriculture
15000
Industry
69 600
Services
62 800
Salaried employees
and wage-earners
Employers, self-employed persons
and domestic help
114 200
33 200
PRODUCTION
Gross national product (1971),
billions of francs
52.2
Gross national product per head, US S
3 030
Per head, US S
%
Agriculture
4.9
Mining and quarrying
Gross fixed investment
(average 1967-1971):
Percentage of GNP
Gross domestic product at factor cost
by origin (1969):
1.5
Manufacturing
25.9
666
44.3
Construction
7.5
Other
41.8
THE GOVERNMENT
Public consumption (1971),
percentage of GNP
11.7
Current government revenue
(1971) percentage of GNP
26.9
Central government debt
(December 31st, 1972) billion Frs
15.6
Composition of the Chamber:
Christian Social Party
Workers Socialist Party
Democratic Party
Communist Party
Social Democrat Party
Last election:
V.
37.5
21.4
19.6
10.8
10.7
1969
THE CURRENCY
Monetary unit: Luxembourg franc
Currency units per US dollar,
June
Note
1973:
40.3200
An international comparison of certain basic statistics is given in an annex table.
OECD ECONOMIC SURVEYS
Archives -
RÉFÉRENCES
- DOC
PRÊTÉ -
RETOUR- BUREAU /,ip
BELGIUM - LUXEMBOURG
ECONOMIC UNION
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
The Organisation for Economic Co-operation and
Development (OECD) was set up tinder a Convention signed
in Paris on 14th December, 1960, which provides that the
OECD shall promote policies designed:
to achieve the highest sustainable economic growth
and employment and a rising standard of living in
Member countries, while maintaining financial sta¬
bility, and thus to contribute to the development of
the world economy;
to
contribute
Member
as
to
well
sound
as
economic
non-member
expansion
countries
in
in
the
process of economic development;
to contribute to the expansion of world trade on a
in accord¬
multilateral, non-discriminatory basis
ance with international obligations.
The Members of OECD are Australia, Austria,
Belgium, Canada, Denmark, Finland, France, the Federal
Republic of Germany, Greece, Iceland, Ireland, Italy, Japan,
Luxembourg, the Netherlands, New Zealand, Norway, Portu¬
gal, Spain, Sweden, Switzerland, Turkey, the United Kingdom
and the
United States.
The Socialist Federal Republic of Yugoslavia is
associated in certain work of the OECD, particularly that
of the Economic and Development Review Committee.
The annual review of the BLEU
by the OECD Economic and Development Review Committee
took place on 25th June 1973.
© Organisation for Economic Co-operation and Development, 1973.
Queries concerning permissions or translation rights sould be
addressed to:
Director of Information, OECD
2, rue André-Pascal, 75775 PARIS CEDEX 16, France
CONTENTS
Introduction
I
7
Features of the upswing and stance of economic policy
The firmer trend of economic activity
8
Gradual tightening of demand management policy
8
13
The problem of inflation
20
Acceleration of the wage /price spiral
The Impact of international transmission of inflation
20
24
The role of domestic factors
37
III
Increase in the current external surplus of the BLEU
44
IV
Short-term prospects and economic policy problems
51
Recent trends, economic policy and short-term prospects in Luxem¬
bourg
57
n
V
Annex
Main economic policy measures taken since April 1972, Belgium
65
TABLES
Text:
1
Demand and output
2
Breakdown of gross fixed asset formation
11
9
3
4
Money supply, counterparts and credits to the economy
Indicators of the impact of general government transactions on
16
demand
17
5
6
7
8
General government account on a national accounts basis
Prices in Belgium and abroad
Prices and wages
Share of foreign trade in GNP
9
10
11
12
13
Import prices
Export prices and wage payments
Government expenditure and taxation
Aggregate tax pressure, inter-country comparisons 1965-1970
BLEU balance of payments on a transactions basis
26
31
38
40
49
14
Official forecasts
53
15
16
Luxembourg.
Luxembourg.
58
61
Demand and output
Central government transactions
19
20
21
24
OECD Economic Surveys
Statistical Annex:
A
B
National product and expenditure
Origin of gross domestic product at factor cost
72
73
C
Gross domestic asset formation
74
D
Income and expenditure of households and private non-profit insti¬
tutions
76
E
F
G
Government revenue and expenditure
Industrial production
Employment, wages and labour market
77
78
79
H
Prices
80
I
J
Money and banking
Area breakdown of foreign trade
81
82
K
Commodity breakdown of foreign trade
83
L
M
N
BLEU balance of payments
Luxembourg. Output and demand
Luxembourg. Main aggregates
84
85
86
DIAGRAMS
1
Indicators of output and demand
10
2
Labour market
12
3
Monetary trends
4
5
6
7
Consumer prices
Dispersion of price increase rates
Respective shares of imports and exports in total resources and uses
Export and import prices, actual and predicted
14
22
23
25
28
Dispersion of wage earnings
Wage corridor and productivity in manufacturing
Indicators of demand pressure
Monetary base and money supply
Foreign exchange market
Pure private consumption and tax pressure
Structure of the balance of payments
Relative degree of utilisation of resources
Luxembourg. Total industrial output and metal output
30
32
33
34
36
39
46
48
59
8
9
10
11
12
13
14
15
16
INTRODUCTION
With a keener stimulus coming from foreign demand and a gradual
strengthening of domestic demand, largely attributable to the reflationary
measures taken by the authorities, a revival of activity got under way in the
early part of 1972 and continued to gather momentum throughout the year.
During the first few months of 1973 expansion was widespread and it continued
at a rapid pace, which resulted in a higher degree of utilisation of production
capacity. The upswing was accompanied, as from the autumn, by a reversal
of trends on the labour market, with the result that unemployment declined
somewhat. The already substantial surplus on the BLEU current external
account recorded over the three previous years widened further and probably
amounted to nearly 4 per cent of GNP, this being one of the highest percen¬
tages among Member countries. The situation in regard to costs and prices
deteriorated considerably, however. Given the present stance of economic
policy, which is only moderately restrictive, the strength of domestic auto¬
nomous tendencies and the expected growth of external demand, the boom
conditions should continue throughout the year. In 1973 the real growth
rate of GNP might therefore reach 5.5 per cent, compared with the mediumterm growth target of 4.8 per cent adopted for the Third Plan for the period
1971-1975.
Of all the short-term problems now claiming the attention of the economic
policy authorities, the implementation of a suitable policy to combat inflation
seems to be the most important. Belgium, which throughout the 60s exper¬
ienced on the whole a relatively satisfactory situation with regard to costs
and prices, now has like most Member countries a very high rate of inflation,
which does not seem likely to decline significantly in the short term. The
strength of autonomous trends and inflationary pressures have prompted the
authorities to accentuate progressively the restrictive stance of economic
policy, while taking care to maintain a high level of employment.
Part I of this Survey describes the main features of the upswing and
the recent stance of economic policy. Part II contains an analysis of the
problem of inflation looked at from the medium-term standpoint. Part III
deals with the increase in the current surplus of the BLEU over recent years.
Short-term prospects and main economic policy conclusions are set out in
Part IV.
Recent trends, policies and prospects in the Luxembourg economy
are discussed separately in Part V.
OECD Economic Surveys
I
FEATURES OF THE UPSWING AND STANCE
OF ECONOMIC POLICY
The firmer trend of economic activity
Following the slowdown that occurred in 1971, the growth of industrial
activity quickened noticeably during 1972, spurred on by the brisker impetus
from foreign demand and a gradual strengthening of domestic demand. The
recovery which began in consumer durables industries spread to the inter¬
mediate goods industries, owing in particular to the drive shown by certain
export industries (steel, chemicals, oil). Activity in the capital goods sector,
which had remained at a relatively low level over the greater part of the year,
also picked up during the last quarter. Year on year, industrial production
increased by about 6.4 per cent in 1972, but its upward movement during
the latter part of the year was much more pronounced, about 9 per cent. This
coincided with a higher rate of capacity utilisation1 and a growth of orders.
The average duration of activity, guaranteed by outstanding order books,
which had remained virtually unchanged throughout the second half of 1972,
also increased during the early part of 1973. Some improvement probably
occurred too in building and public works during the past year, although
because of inadequate statistics the index of production in this sector shows
only a small growth compared with 1971. Given a relatively sustained growth
of activity in services but poor results in agriculture, in all the real rate of
growth of GNP according to the latest official estimates was about 5 per cent,
probably a slightly higher rate than that of production capacity growth and
in the event well in excess of the forecasts made early in the year2.
Private consumption, stimulated by the substantial increase in the real
disposable income of households3 and the measures to ease consumer credit
introduced in April 1 972, remained firm on the whole. It is probable, however,
that the exceptionally rapid growth of certain categories of consumer durables
during the first half of the year was partly due to a long-term process of
1
According to the business surveys published by the Belgian National Bank, this
rate rose from 82.1 per cent in January 1972 to 83.7 per cent in January 1973.
2 In their budget forecast, which was drawn up in February 1972, the authorities
envisaged two projections for the year 1972. The first one, based on autonomous trends
and the assumption of an unchanged economic policy, showed a real growth of GNP of
3 per cent.
The second, incorporating the effects of the policy measures decided on at the
beginning of the year, showed a rate of 3.8 per cent. It was based in particular on the
assumption of a distinctly smaller increase in exports of goods and services than that actually
recorded in 1972.
3
The very steep increase in nominal wages was partly offset by a more rapid rise in
prices, a levelling-off of employment and higher taxation. But overall, households' real
disposable income grew in 1972 by about 7 per cent, one of the highest rates recorded since
the beginning of the 1960s. This trend was accompanied, moreover, by a rise in the saving
ratio.
Table: Rate of increase in real disposable income of households (per cent)
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
2.3
5.6
3.4
6.2
6.3
2.6
3.3
4.7
7.1
7.3
4.0
7.1
BLEU
Table 1
Demand and output
1970 at current
prices
B. Fn.
Percentage
billion
breakdown
From previous year
(volume)
1970
1971
1972
Private consumption
Government consumption
802
62.0
8.7
-1.6
7.0
175
13.5
3.2
4.8
6.5
Gross fixed asset formation
290
22.4
9.8
-2.8
1.8
1267
97.9
8.2
-1.0
5.7
Stocks1
-13
-1.0
-3.0
3.6
-0.9
Exports: goods and services
Imports: goods and services
616
47.6
11.5
8.1
9.0
576
44.5
8.6
6.2
8.8
40
3.1
1.4
1.1
0.4
6.2
3.7
4.9
5.0
5.8
6.8
3.4
2.6
6.4
Final domestic demand
External balance1
Gross National Product
GNP implicit price deflator
Industrial production (excluding
truction)
1
1294
100%
cons¬
Changes expressed as percentages of GNP for the preceding period.
Source: Belgian statistical submission to the OECD.
catching up on purchases delayed as a result of the introduction of VAT in
January 1971. Demand for non-durable consumer goods was somewhat
erratic during most of the year, but grew distinctly firmer in the last quarter.
The growth of public consumption, due among other things to wages and
salaries increases in favour of employees of the public sector (" accord de
programmation sociale "), also proved to be a mainstay of expansion.
Despite a certain recovery during the year, gross fixed asset formation,
which had fallen by 2.8 per cent in 1971, made little headway in 1972. This
overall trend conceals divergent component movements, however. Public
sector investment, which had already risen steeply the year before, continued
to expand at a sustained rate as a result of the incentives introduced in February.
There was also a recovery in residential construction1, as evidenced by the
steep increase in building permits and the number of housing starts, together
with the growth in the guaranteed average duration of activity in first-stage
residential construction. Enterprises' propensity to invest, which had shown
a weaker trend throughout 1971 and into the early part of 1972, picked up
somewhat. But according to the latest national accounts estimates, year on
year real private productive investment remained virtually the same as in 1971.
Stockbuilding2 made no positive contribution to the growth of the eco1 The firmer trend seems largely attribuatble to the cumulative effect of the incentives
introduced by the authorities in September 1971 and March 1972. These included a reduc¬
tion, in interest rates and an increase in construction premiums, together with easier mort¬
gage terms and a raising of the ceiling on mortgage loans backed by the State's guarantee.
2 It should be noted that in the national accounts changes in wholesale and retail
stocks are included in private consumption. For recent years, however, the research depart¬
ment of the Ministry for Economic Affairs has made estimates of changes in wholesale
and retail stocks, together with an assessment of private consumption and the aggregate
change in stocks, in accordance with standardized national accounting practice. It is the
SNA definitions which are used in the tables incorporated in the text of this survey.
OECD Economic Surveys
Diagram 1
Indicators of output and demand
Industry
Percent
-
~
Index of Industrial production's.a. (Imft. scale)
~"~
Index AGEF/ I
11
- -s
I
lndcX /yy5
^
,
.
,
,
....
? Quarter over corresponding period of previous year (right scale)
ORDER-BOOKS
J
Peccant
II
II
5
1M9
1
1970
1171
1172
1173
Difference between answers " above normal " (+) and " below normal " (
Source: National Bank of Belgium, Monthly Bulletin and EEC Business Surveys.
10
).
BLEU
Table 2
Breakdown of gross fixed asset formation
Current
Percentage change from previous year
prices
(volume)
Enterprises and households
1970
246
7.1
10.3
-6.0
75
1.7
11.6
-12.9
0.5
171
9.2
9.8
-3.0
-0.2
Residential construction
Productive investment
56
0
12.3
-2.8
-0.2
13.4
8.8
-3.3
-0.1
44
-2.5
7.1
15.3
10.0
290
5.6
9.8
-2.8
1.8
Public authorities
Total gross fixed asset formation
1971
115
buildings
plant and equipment
1972
1969
1970
Source: Belgian statistical submission to the OECD.
nomy in 1972, notably as a reaction against the large-scale replenishment of
stocks that had followed the introduction of VAT the previous year.
Accord¬
ing to the business surveys, stocks of finished products in industry declined
throughout the year.
At the beginning of 1973 their level was about normal.
It is probable however that, because of the faster growth of total demand,
stocks of raw materials, primary products and work in progress increased
somewhat. Although statistical difficulties preclude any accurate estimate
of the contribution made by transactions in goods and services with abroad
to the growth of GNP, the increase in the current account surplus had a signi¬
ficant multiplier effect on the economy.
Employment did not react immediately to the faster growth of output.
Dependent employment, which during the previous three years had risen at
an annual rate of 2.4 per cent, remained practically unchanged in 1972 (+0.3
per cent)1. Unemployment therefore rose during much of the year in spite
of a small increase in the labour force (0.4 per cent), probably due in part to
a cyclical downturn in participation rates. During the first nine months
of 1972, the number of wholly unemployed (" chômeurs complets indemnisés ")
was about 23 per cent higher than in the corresponding period of 197 1 . Among
persons aged under 25 this increase amounted to 51 per cent.
A turnround occurred last autumn, however. The seasonally adjusted
number of wholly unemployed, which had fallen very rapidly between Octo¬
ber 1972 and January 1973, continued to decline until May although very
slowly. Also, by comparison with the corresponding period of the previous
year, the number of unemployed in the 25-50 age group, which had levelled
off since the spring of 1972, began to fall as from November. Unemployment
among persons aged under 25 also decreased significantly, whilst the number
of jobless in the over 50 age group continued to level-off2. The statistical
series for unemployment by sex however show that although the number of
males decreased steadily from October onwards, that of females continued
1
This comparison is on a June to June basis. The business surveys show however
that there was no really marked recovery in employment until the early part of 1973.
2 In 1972 persons aged over 50 accounted on average for more than 42 per cent of
the total number of unemployed persons receiving compensation.
11
OECD Economic Surveys
Diagram 2
Labour market
1172
1
1173
Seasonally adjusted by the Secretariat.
Source: National Employment Agency.
12
BLEU
to rise, although distinctly less rapidly than during the first nine months
of 19721. The number of unfilled vacancies also began to rise again in Octo¬
ber, thus confirming the overall improvement in the labour market situation
suggested by the trend of registered unemployment. This improvement,
which was common to all three regions, was particularly marked in Flanders
however.
Gradual tightening of demand management policy
Monetary policy
The fears of a marked slowdown in economic activity in Belgium and
abroad, connected in particular with the uncertainties of the international
economic environment, had already prompted the authorities towards the
end of 1971 to give monetary policy a more expansionary stance. Credit
terms in respect of hire purchase and personal loans were eased. Then in
December the upper limit on banks' rediscounting and visa facilities with
the National Bank was raised from 8 to 9 per cent. Given the continuing
risk of a levelling-off in activity, this liberal stance was maintained throughout
the first half of 1972. During the first quarter the official discount rate was
reduced in three stages by one and a half points. At the same time the call
money rate on the money market and the rate on bank acceptances were
lowered. These rates remained relatively low until the third quarter, owing
to the downward pressure exerted by the Institut de Réescompte et de Garantie
and the Fonds des Rentes (Institute for Rediscount and Guarantee, and the
Securities Stabilization Fund). The long-term rates, whose upward movement
during the earlier phase of the cycle had been significantly less pronounced,
were also eased but much less so. In April, hire purchase and loan terms
were further relaxed.
But as the anxieties caused by the international monetary crisis gradually
subsided and the prospects of a durably firmer trend in activity began to
emerge, notably as a result of the reflationary measures introduced earlier
by the authorities and the expansion of demand on foreign markets, monetary
policy became gradually more restrictive. Because however of the disadvan¬
tages associated with quantitative ceilings, as had been the case in the previous
phase of monetary restriction (1969-70)2, a deliberate choice was made in
favour of a policy affecting the liquidity of intermediaries. It was therefore
to neutralise the effect of large-scale net inflows of foreign exchange which
occurred during the waves of speculation in June and July 1972, that a conven1
Whereas females account for some 30 per cent of the labour force, the figures for
1972 show that 40 out of every 100 wholly unemployed persons were females.
At the same
time, for every male job vacancy there were 5 unemployed males available, whereas for every
female vacancy there were 7 unemployed females registered. In May 1973 women accounted
for46.4percentoftotalunemployment,and62.7percentinthe" normal aptitude " category.
2 A rigid system of credit restriction does have, it is true, a number of disadvantages.
It tends to introduce distorsions into the structure of bank credit and it essentially penalises
the most dynamic intermediaries, as well as small and medium-sized entreprises. Its effec¬
tiveness is also reduced, as the experience of some Member countries has shown, by the
development of parallel credit networks.
13
OECD Economic Surveys
Diagram 3
Monetary trends
Percent
Perçant
INTEREST RATES
H
12
A A
/
v\
\s>
A
n
I
-
.'
/^
L
\v
V
>
\,
-.a
Discount rort
CoM money cot*
Tno§vty 017/* (clatt B) and certificates of the 5«cur/»« Stabilization Fund
Euro dollar rat*
CHANGES IN THE MONEY-SUPPLY AND THEIR COUNTERPARTS
Percentage change over corresponding period ol previous year
Foreign oisifs
C/oIms an Public sector
Domestic credits
Other
IKS
1170
1971
1172
1173
Sources: National Bank of Belgium, Monthly Bulletin; OECD, Main Economic Indi¬
cators and Bulletin of the Morgan Guarantee Trust.
14
BLEU
tion was concluded on 26th July between the Central Bank and some thirty
banks to set up a monetary reserve of 10 billion.
This requirement to set up non-interest-bearing deposits, which was
initially due to expire on 31st December, was extended in November, February
and June to cover the period up to 30th September, 1973. At the same time
this monetary reserve, which originally applied only to the banks, was broaden¬
ed to include the private savings banks, the public credit institutions and life
Insurance companies. The maximum amount of deposits accumulated with
the National Bank has risen progressively from 10 billion to approximately
25 billion francs1.
At the same time the authorities endeavoured to limit the
banks refinancing facilities.
From June 1972 to June 1973 the ceilings on
banks' visa and rediscount facilities with the Central Bank were reduced from
9 to 1\ per cent of their liabilities.
These measures were reinforced by a
rise in the discount rate: between November 1972 and May 1973 this was
raised in three successive stages from 4 to 5.5 per cent.
In February 1973
terms in respect of hire purchase and personal loans were slightly hardened.
The rate of growth of the money supply in the broad sense rose gradually
more rapidly from 1970 onwards, reaching more than 16 per cent in 1972, a
much higher rate than the nominal growth of GNP (about 12 per cent). This
trend conceals an appreciably more rapid increase (nearly 21 per cent) in
quasi-money assets than in the stock of money (14 per cent). The preference
for money holdings as opposed to other assets was however much more
marked than in 1971, which was probably connected with the low level of
interest rates over much of the year and with anticipations of their being
raised. Nearly 50 per cent of money creation in 1972 was attributable to the
expansion of credit to the economy. The faster growth of lending by banks
to enterprises and private persons was also accompanied by a rapid expansion
of lending by non-monetary financial institutions2. The authorities, and
notably Central Government, also considerably increased their recourse to
monetary institutions in order to meet their net borrowing requirements.
The creation of liquidity resulting from the balance of enterprises' transactions
with abroad (current and capital transactions), although not inconsiderable,
was nevertheless appreciably less than in 1971.
1
Whereas under the Agrément of 26th July, 1972, the reserve had been set immutably
at 10 billion, under the other agreements its amount was determined by using a system of
coefficients relating to the development over time in the liabilities of the bodies party to
the Convention. Furthermore, to prevent the reserve requirement from reducing the Trea¬
sury's borrowing facilities with the financial intermediaries, thus forcing the latter to apply
as a last resort to the Central Bank, the bodies party to the Convention undertook to maintain
their existing portfolio of public securities and funds and build it up with part of their avai¬
lable annual resources equivalent to the average over recent years.
2 The increase in borrowing by enterprises and private persons from non-monetary
financial institutions was connected with:
the upswing in demand for housing, particularly in the low-cost housing sector;
increased demand for instalment credit, as a result of the easier terms for this kind
of credit;
the growth of firms' short-term borrowing requirements as a result of the upswing
in economic activity.
15
Table 3
Money supply, counterparts and credits to the economy
Change
Amounts
Percentage
in amounts
increease
December-December
outstanding
out¬
standing
at end 1968
Total Money Supply
Money
Quasi-Money
1969
1970
1971
1972
108.7
7.7
8.2
12.3
16.1
65.3
2.6
8.3
10.1
14.0
43.4
21.8
8.0
17.7
20.8
12,2
1971
1972
45.3
73.5
32.2
42.1
13.1
31.4
1969
1970
511.1
39.2
376.5
9.8
134.6
29.4
in billion Frs.
Counterparts
External assets
Claims on public authorities
Credits to enterprises and households
Miscellaneous
86.1
7.5
11.2
27.7
16.2
8.7
12.0
26.4
248.3
23.2
11.7
12.9
46.61
9.3
4.3
4.6
15.7
182.5
14.7
22.5
36.0
51.7
8.1
11.4
16.4
20.2
-5.8
-6.2
-0.1
-3.1
-5.91
196.4
11.0
25.0
35.7
52.5
5.6
12.1
15.4
19.6
!
Lending to enterprises and households by monetary and
non-monetary institutions
1
Provisional.
Source: National Bank of Belgium; Monthly Bulletin.
I1
1
BLEU
Budget policy
General government transactions provided a sharp spur to economic
activity in 19721, chiefly due to the deliberately expansionary impetus emanat¬
ing from the central government. According to the latest national account¬
ing estimates, aggregate demand of general government in real terms rose
by more than 7 per cent, notably because there continued to be a parti¬
cularly rapid growth of gross fixed asset formation (about 10 per cent) follow¬
ing the reflationary measures taken early in the year. In money terms, the
growth of current spending was considerably greater than that of revenue
or of gross national product (17.1, 13.7 and 12 per cent respectively). Total
Table 4
Indicators of the impact of general Government transactions on demand
1968
Net borrowing (
billion)
1969
1970
1971
1972
1973
Esti-
Provi-
mates
sional
) or net lending (+) (B. Ers.
General government
Central government
-23.3
-18.1
-12.0
-26.8
-62.5
-64.7
-21.8
-16.2
-15.5
-33.5
-69.0
-68.8
-3.5
-4.3
-AJ
-3.9
-2.0
-3.5
2.0
2.4
8.2
10.6
8.5
7.6
Local government
Social Security
Demand by general government1
Government consumption
Gross fixed asset formation
Total
Transactions affecting the households account
Salaries and wages2
Transfers2
Direct taxes /gross income ratio
Transactions affecting the enterprises account
Operating subsidies2
Indirect taxes /GNP ratio
3.8
6.3
3.2
4.8
6.5
6.0
14.5
-2.5
7.1
15.3
10.0
2.0
5.7
4.6
3.9
6.8
7.2
5.9
14.4
7.0
10.7
11.7
12.6
17.8
15.4
8.2
14.0
11.9
18.2
14.0
18.9
19.4
20.4
21.1
21.3
22.1
26.0
17.5
-9.6
4.7
23.0
1.4
13.3
13.2
12.7
12.5
12.4
12.2
1.3
1.8
0.2
Estimate of total impact of general govern¬
ment transactions on demand as percentage
of GNP for preceding year3
1
Percentage change in volume from previous year.
2 Percentage change in value from previous year.
3 This estimate has been obtained by using a simplified model based on the method developed by Professor Bent
Hansen on his study Fiscal Policy in Seven Countries 1955-1965, OECD, 1969.
Source: Belgian statistical submission to the OECD.
1 In the absence of a quarterly econometric model and sufficiently accurate data on
developments in the course of the year concerning general government transactions, the
overall impact of the budget on demand can only be estimated with the aid of indirect indi¬
cators or simplified annual models with a considerable margin of error. Calculations made
by the Secretariat with the help of a simplified model based on the method developed by
Professor Bent Hansen in this study on Fiscal Policy in Seven Countries 1955-1965, OECD,
1969, seem however to confirm the assessment based on the use of indicators which shows
that the impact of general government transactions on demand, already considerable in 1971 ,
was even more pronounced in 2972.
During that year it might actually have amounted to
about 2 per cent of GNP.
17
OECD Economic Surveys
wages, salaries and transfers to households showed a very brisk acceleration
compared with 1971, mainly because of higher pay scales and pensions. The
tax burden on households grew slightly heavier, however, because of the
progressive nature of the tax on personal income. Transfers to enterprises
grew very rapidly (by nearly 25 per cent). Overall, current saving was sharply
down on 1971, from 25 billion francs to about 12.5 billion.
Given the marked
growth of public investment, net borrowing on the consolidated account of
general government therefore increased steeply.
Given the increase in inflationary pressure during the early part of the
year and the strength of spontaneous growth factors emanating from the
private sector, the official target adopted for 1973 is to keep stimuli from the
public sector to a strict minimum. In March, therefore, the new government
introduced amendments to the budget drawn up by its predecessor, which
was originally to have been put before Parliament in September-October 19721.
A marked increase in taxation was not thought desirable, so it was decided to
hold down the rate of increase in government spending instead. These
measures had not been finally prescribed at the time this survey was drafted,
but essentially they comprise a reduction in current spending together with an
appreciable phasing-out of public investment2, notably in projects with a
small capacity for creating employment. To judge from the latest estimates
available, on a national accounting basis there should be a slowdown in the
aggregate demand of general government, which would be particularly marked
in the case of investment.
In real terms, this demand should increase by
approximately 6 per cent as against more than 7 per cent in 1972. The growth
of total wages, salaries and transfers should also slow down somewhat;
however as a result of the effect over a full year of the higher scales of pay
introduced in April 1972, as an annual average the growth would still be about
14 per cent. Overall, net borrowing on the consolidated account of general
government should be about 64.7 billion Belgian francs, an amount slightly
larger than that recorded in 1972 and approximately equivalent to 3.6 per
cent of GNP.
Prices policy
Price surveillance continued, under the consultation procedures pro¬
gressively developed over previous years3. This system, which aims essen¬
tially to exert a preventive influence, is based primarily on prior declaration
1
In the initial budget gross borrowing requirements were practically identical to those
in the 1972 budget year (approximately 100 billion Belgian francs). The implementation
of the government agreement of 21st January, 1973, together with certain new developments
would have resulted in a substantial deficit in the ordinary budget. An effort to hold down
expenditure was made, so that this deficit would not exceed 6.5 billion, taking into account
the surplus yield of taxes.
2 The government has in fact decided to cut back commitments on the extraordinary
budget for 1973. Commitments for the programmes for the first half of the year in regard
to housing, provincial and educational building, together with the Economic Expansion
Fund, were approved in the proportion of 50 per cent, but for all the other programmes
a commitment level of only 37.5 per cent was authorised. Decisions concerning the instal¬
ments to be cleared for the second half-year should, in principle, be taken in June.
3 For a more detailed description of these procedures, see the two previous OECD
annual surveys of the BLEU, June 1971 and June 1972.
18
BLEU
Table 5
General Government account on a national accounts basis
In billions of Belgian francs
1969
1970
1971
1972
1973
Current receipts
402.5
460.3
514.9
585.6
666.2
Direct taxes
120.9
141.9
164.4
194.6
229.6
Indirect taxes
152.9
164.9
177.6
187.2
218.2
Social Security contributions received
Other current receipts
110.1
131.0
149.5
168.8
191.4
18.6
22.6
23.4
25.0
27.0
387.4
431.9
489.6
573.1
652.0
Compensation of employees
Other consumption expenditure
Interest on public debt
111.4
124.4
140.1
165.0
188.8
47.7
50.1
58.9
77.6
65.7
37.6
43.1
47.4
51.1
Current transfers to households
156.9
178.8
200.1
236.5
269.7
33.8
35.5
43.1
53.6
59.2
15.1
28.
15.2
Current expenditure
Other current transfers
Net savings
Depreciation and other operating provisions
Capital transfers received
Capital transfers paid
Gross fixed asset formation
Net lending (+) or borrowing ( )
Lending or borrowing as percentage of GNP
58.6
24.3
12.5
3.7
4.1
4.5
5.3
5.7
4.7
5.1
5.2
4.9
4.9
4.2
5.3
37.5
44.3
-18.1
-12.0
1.6
0.9
18.0
17.9
67.2
71.6
-26.8
-62.5
-64.7
1.9
3.9
3.6
5.7
46.1
Source: Belgian statistical submission to the OECD.
of price increases. On the whole, the regulations have remained fairly liberal
throughout the period, since the government in fact only very seldom exercised
its prerogative of setting maximum prices. According to the authorities, this
policy nevertheless succeeded in curbing price increases due to speculative
factors, and in any case it seems to have helped to phase out the increases over
time. The regulations concerning declaration of price increases were relaxed
and simplified in April 19721, and in October measures were taken to enforce
wider advertising of prices. The freeze on pig meat and beef prices, introduced
in November 1972 and originally scheduled to last six months, was renewed
in April 1973 until October of the same year. In March, the term of prior
notice of price increases was extended to four months, but with a progressive
return to the standard two months' term for declarations lodged as from
August.
A temporary freeze on prices of public services was introduced at
the end of February.
1
A large number of small firms with a turnover of less than 5 million francs were in
fact exempted from the regulation.
19
OECD Economic Surveys
II
THE PROBLEM OF INFLATION
Acceleration of the wage /price spiral
During the 1960s the situation in Belgium as regards prices was on the
whole relatively favourable. The rise of both the GNP implicit price deflator
and the cost-of-living index was fairly moderate (3.3 and 3 per cent respectively
during the period from 1960 to 1970) and among the lowest recorded in Mem¬
ber countries. The rate of growth of nominal wages was also generally lower
than elsewhere. But in real terms the rise in the purchasing power of wages
seems to have been fairly comparable on average with other countries. From
1969 onwards, however, Belgium has had to contend with a progressive
increase in inflationary pressures. Over the last four years the relative perfor¬
mance on the prices front continued to be more satisfactory than in most
other European Member countries. But a marked deterioration set in at the
end of 1972, and now Belgium has a rate of price and wage growth comparable
,on average with that of other European Member countries. It therefore
seems interesting to try to find out how much the process of mounting inflation
has been influenced by international propagation and domestic factors respec¬
tively.
The increase in inflationary pressures, which was already very appreciable
from 1971 onwards at the level of the GNP implicit price deflator, did not
however show itself in the index of consumer prices until 19721. This trend
Table 6
Prices in Belgium and abroad
1960-
1965-
1965
1970
1969
1970
1971
1972
19731 » I9731 s
GNP implicit price deflator
Belgium
Europe
Enlarged EEC
Total OECD
2.9
3.6
3.7
5.0
5.8
6.8
4.1
4.2
4.7
6.4
7.3
6.6
4.0
4.2
5.2
6.5
7.1
6.4
2.8
4.2
4.8
5.9
5.6
4.7
Cost of living index
Belgium
2.5
3.5
3.8
3.9
4.3
5.5
6.5
7.0
OECD Europe
3.8
4.0
4.2
5.2
6.6
6.5
7.8
7.9
Enlarged EEC
3.6
3.8
4.5
5.1
6.3
6.2
7.2
7.7
Total OECD
2.6
4.2
4.9
5.7
5.3
4.7
8.5
6.2
1
2
3
February-March-April.
Over previous three months, annual rate, seasonally adjusted.
Over corresponding months of the preceding year.
Source: OECD, Main Economic Indicators.
1
In March 1972 the weighting of the principal components of the consumer price
index was amended. The relative weight of services was increased (30 per cent instead of
21.4 per cent as formerly) and that of food products reduced (30 per cent instead of 41.6 per
20
BLEU
Table 7
Prices and wages
Annual growth rates
19601970
1969
1970
1971
1972
1973
GNP implicit price deflator
3.3
3.7
5.0
5.8
6.8
Price deflator for total domestic demand
3.3
3.0
4.6
6.8
5.0
Consumer price index
of which: food
3.0
3.8
3.9
4.3
5.4
3.2
4.6
3.5
1.9
6.6
9.4
non-food
2.0
1.9
2.7
4.5
2.8
4.1
services
5.1
4.6
7.0
7.9
7.6
8.7
2.1
4.9
4.8
-0.61
4.1
10.7»
3.0
8.1
1.9
-4.4
5.7
21.1
1.6
4.1
5.6
0.3
3.7
8.2
7.6
8.8
8.8
11.0
14.4
8.1
8.0
11.7
12.1
14.0
Wholesale price index
of which: agricultural products
industrial products
Hourly wage rate (manufacturing)
Hourly earnings (manufacturing, mining and
quarrying, and transport)
7.0»
15.1*
1
From 1971 the wholesale price indices do not include VAT; before that date they included certain Transmission
Taxes (Taxes de Transmission).
2 January-June 1973 /January-June 1972.
3 January-May 1973 /January-May 1972.
4 March 1973 /March 1972.
Sources: National Bank of Belgium, Monthly Bulletin: National Statistics Institute, Monthly Bulletin; OECD
Main Economic Indicators.
is largely attributable to the particularly marked increase in food prices,
consistent moreover with the general trend in all other countries. But prices
of services, which had already started to climb sharply in 1970, continued to
rise rapidly and those of products other than food, the upward movement of
which had remained relatively moderate until the end of the first half of 1972,
also rose substantially faster subsequently. As for the rate of increase in
wages, whether in the case of wages or hourly earnings in industry, it rose
steadily from 1969, reaching more than 13 per cent in 1972.
Simple econometric relationships1 suggest that among the factors underly¬
ing the trend of prices unit labour costs and prices of imported products play
a predominant role, particularly at the level of the implicit price deflator for
total domestic demand, and for non-food prices in the retail prices index.
Demand pressure does not seem to have had much direct effect on prices.
Its indirect effect, through costs and especially wage costs, is significant,
however. The movement of prices during the period may also have been
cent). Owing to these changes, the rate of increase in prices based on the index from that
date is not strictly comparable with the rate recorded for the previous period. According
to official estimates, the smaller weighting given to services until March 1972 might have
caused an under-recording in the annual rate of price increase of approximately 0.2 to 0.3 per
cent during the period 1968-1971 . It should be noted that the index coverage is still relatively
narrow (32 items for food products alone, 29 for products other than food and 16 for services).
The various items are not assigned specific weightings and the index for each main category
(food products, non-food products and services) is obtained by taking the simple arithmetical
mean of the indices for the component items. However, an implicit weighting operates,
owing to the fact that the number of items differs according to category.
1 See technical note, pages 41 to 44.
21
OECD Economic Surveys
Diagram 4
Consumer prices
COMPONENTS OF THE ANNUAL OVERALL RISE
PRICES
-food
FOOD
I
t
4
:
o
i
NON-FOOD
4
2
Average annual rate of change 1965g
SERVICES
i
e
Average annual rate of change 1965-1970
4
Month ovar corresponding month of previous year
Quarter
corresponding quarter
previous year
1171
1171
1172
Source: National Statistics Institute.
22
2
1173
BLEU
Diagram 5
Dispersion of price increase rates
Rol/o of Belgium GNP price deflator
over unweighted overage at GNP deflator of 17 OECD countries
Average of 17 OECD countries
1.0
\
-r,e«S
»._ Ratio of Belgium GNP price deflator over weighted averages of OECD Europe
» Share of exports and imports in GNP (right scale)
1SM
1M7
IW
IMS
Its»
1M1
1M2
Ittl
1M4
It»
ISM
1M7
1M
ltd
Sources: National Statistics Institute and Secretariat estimates.
23
1170
1*71
ItR
OECD Economic Surveys
influenced by the trend of enterprises' financial charges. The policy of price
surveillance and control practised by the authorities probably exerted some
influence too, although how much it is difficult to say; it is probable, however,
that this policy helped to phase out the rise in prices. It is also difficult to
say whether competition was impeded by the development of large oligo¬
polistic groups, both national and international. Because of the recent
acceleration in the upward movement of prices in the OECD area and the
special characteristics of Belgium which belongs to the group of countries
particularly sensitive to the international transmission of inflation owing to
its relatively small economic size and the importance of its foreign trade
sector the following paragraphs are devoted to a study of the respective
parts played by internal and external factors in the recent price rise process.
The impact of international transmission of inflation
It is tempting to attribute the recent acceleration in costs and prices to
external influences, in accordance with a model put forward for the Scandi¬
navian countries in particular. This theory seems at first glance especially
attractive in that, of all the OECD countries, Belgium is the one in which the
proportion of imports and exports of merchandise in GNP rose most steeply
during the last decade. In 1971 it amounted to nearly 45 per cent, a figure
exceeded only in the Netherlands. Apart from the increasing convergence of
the trend of Belgian prices and that of prices in the other countries, there was
also some reduction of the dispersion of inflation rates in Belgium.
The structure of Belgian imports and the proportion of the economy's
total resources which they represent suggest that not only do import prices
Table 8
Share of foreign trade in GNP
Total
1960-1961
Goods
1970-1971
1960-1961
.
and
Services
incomes
factor
1970-1971 1960-1961
1970-1971
Netherlands
47.8
47.7
37.3
38.4
10.5
9.3
Belgium
33.5
42.4
27.6
34.0
5.9
8.4
Norway
43.3
42.3
25.3
26.0
18.0
16.3
Denmark
32.5
30.8
25.9
23.3
6.6
7.5
Austria
24.3
30.3
19.6
22.0
4.7
8.3
Finland
23.8
28.8
19.8
22.7
4.0
6.1
Sweden
25.6
27.1
19.6
21.0
6.0
6.1
Canada
21.1
25.7
16.1
20.1
5.0
5.6
United Kingdom
22.3
24.0
14.8
15.5
7.5
8.5
Germany
18.2
21.0
14.9
17.1
3.3
3.9
Italy
14.9
18.7
11.2
14.4
3.7
4.3
Australia
17.6
17.4
13.4
12.5
4.2
4.9
Spain
10.3
16.2
7.3
10.5
3.0
5.7
France
14.0
16.1
10.3
12.5
3.6
3.6
Japan
10.9
11.2
8.6
8.7
2.3
2.5
5.2
6.2
3.6
4.5
1.6
2.0
United States
Source: National Accounts of OECD Countries.
24
BLEU
Diagram 6
Respective stares of importa and exports in total
SHARE OF SPORTS IN RESOURCES
SHARE OF EXPORTS IN USES
AGRICULTURE
CRUDE
PETROLEUM
PETROLEUM.
PRODUCTS
IRON
ORE
NON-FERROUS
MINERALS
STEEL '
PRODUCTS
NOH-FERROUS
METALS
BRICKS.
CERAMIC
CLASS
PIC
IRON
PRODUCTS
MACHINERY
COMPUTER
ELECTRIC
MACHINERY
ROAD MOTOR
VEHICULES
SCIENTIFIC
OILS a
FATS
EYARH
AND THREAD
TEXTILE
FABRICS
CROCHET
FABRICS
LEATHER
LEATHER
FOOTWEAR
WOOD t
RUBBER
PRODUCTS
PLASTIC
MATERIALS
MISCELLAN.
in
m
n
i
»
«
Source: EEC Statistical Office, Input-Output Table, 1965.
25
and uses
OECD Economic Surveys
influence the trend of production costs significantly, but also that they are
largely determined from abroad. The proportion of " non-competitive "
imports in total imports and in the economy's aggregate resources is indeed
considerable. A classification based on an " input-output " table for the
Belgian economy for the year 1965 shows that more than two-thirds of imports
are used for intermediate purposes compared with nearly 17 per cent in house¬
holds' final consumption, about 10 per cent in gross fixed asset formation and
the rest (about 5 per cent) for re-export. It is in the " industrial products "
category that imports are most heavily concentrated. Imports represent
practically the entire resources of the three following industries: " crude oil ",
" iron ore " and " non-ferrous metal ores ". They also account for more
than half the resources of the " man-made materials " sector.
The dominant
influence from abroad on Belgian import prices would seem to be confirmed
by a simple econometric relationship established by the Secretariat1.
On the whole the trend of import prices from 1955 to 1968 has had a
relatively moderating influence on domestic price formation. It does not
seem either to have played a direct part of primary importance in the spiralling
of domestic prices since 1969. It was chiefly in the period 1969-70 that the
rise in import prices grew considerably more pronounced. This contributed
to the more rapid upward movement of the implicit GNP price deflator in
these two years, but the trend was significantly more moderate during the two
subsequent years. According to the indices of average values, import prices
even seem to have fallen on average by nearly 1 per cent in 1972, notably
under the influence of the effective revaluation of the Belgian franc. Admit¬
tedly, import prices began to climb rapidly again as from the autumn of 1972.
Table 9
Import prices
19601970
1969
1970
1971
1972
-0.9
National accounting implicit price deflator
1.7
3.5
5.2
2.2
BNB index of average values
1.0
2.8
4.6
1.2
-1.3
of which: producer goods
consumer goods
capital goods
INS index of average values
0.6
2.7
4.7
0.7
-3.5
2.6
1.3
2.9
3.6
1.7
2.2
3.4
4.1
4.3
2.7
1.5
3.0
3.8
0.9
-0.7
materials
1.2
4.7
2.7
-4.3
-2.3
capital goods
0.4
1.2
4.6
5.5
-0.4
consumer durables
1.0
4.2
5.0
2.9
8.4
of which: raw
materials
and
auxiliary
Sources: National Statistics Institute; Monthly Bulletin and National Bank of Belgium; Monthly Bulletin.
Note The National Bank of Belgium calculates the indices of unit values from customs statistics, using
a variable sample (Paasche index). This index is then taken by the National Statistics Institute which converts
it into a Fischer index so as to establish the national accounting implicit price deflator.
The National Statistics Institute also publishes an index of average values, which is similarly based on custom
statistics but uses a fixed sample (Laspeyres index).
The two indices do not have the same coverage.
The
NBB index covers 90 per cent of goods whereas the NS1 index covers only 80 per cent of goods.
1
See technical note.
26
BLEU
It may be asked whether inflation has been transmitted through the
impact of foreign trade prices on the rate of wage increases. This assumption
needs indeed to be investigated, owing to the very important place held by
the " competitive sector " in the structure of Belgian production (exportoriented industries and rival import-based industries). This explanation1
implies, on the one hand, that prices in the competitive sector are aligned with
international prices and, on the other, that productivity gains are on average
appreciably more rapid in the competitive sectors than in the " sheltered "
sectors.
At constant rates of profit, the growth of labour productivity there¬
fore permits wage increases which also depend on the rapidity with which
foreign trade prices rise2. Since the various socio-occupational categories are
endeavouring to maintain their relative income levels, these increases then
spread to all the other sectors, causing costs and prices to rise in the sectors
sheltered from competition, notably services.
The implied conditions of the Scandinavian model appear to have been
fairly well met in Belgium's case. Work by the National Statistics Institute3
would seem to confirm that the largest productivity gains observed during
the period 1953-1969 occurred in the export-oriented industries4, especially
iron and steel, chemicals, non-ferrous metals, knitted goods, metal goods
and shipbuilding. An export price function formulated by the Secretariat
suggests too that in accordance with the results obtained for other countries
of relatively modest economic size but very open, such as the Netherlands
and Norway, external influences play an important part in determining export
prices5. The dispersion of wage rates by industry has also been relatively
small since the middle of the last decade, which lends further credence to the
theory of a rapid spread of wage increases through the whole economy.
It is therefore likely that in 1969-70 the increase in inflationary pressures
in Belgium was due in part to external factors. The export prices of Bel¬
gium's main trading partners on that country's foreign markets showed a
significant acceleration. At the same time Belgian export prices rose distinctly
more rapidly and there was some acceleration in the upward movement of
wages. It should be noted, however, that these two years were marked by
1 This model is taken from the studies done by a number of economists belonging
to what is now commonly called The School of Scandinavian Economists. See in particular
PRIM 1 Model ofthe mechanism ofprice formation and income distribution in an open economy,
Statistik Sentral byra Oslo, 1970; Odd Aukrust, Wage-price interdépendance in competitive
and sheltered sectors, roneoed paper drafted for the OECD regional trade union seminar
on prices policy, OECD, November 1972; G. Edgren, K. O. Faxen-C-E Odner, Wages,
growth and income distribution, Swedish Journal of Economics, 1969; A quarterly model of
the Finnish economy, Bank of Finland, 1972. See also the OECD, Economic survey of
Norway, Paris, 1973, and the chapter on international transmission of inflation in OECD,
Economic Outlook, No 13, July 1973.
2 The Norwegian model makes explicit reference to a wage corridor determined by
the trend of labour productivity and that of prices.
3 National Statistics Institute, Monthly Bulletin, " Value Added per Worker in Indus¬
try, 1953-1969", Nos. 10-11, October-November 1972.
4 It is interesting to note that in the industries producing soaps, synthetic detergents,
household maintenance products, perfumes and cosmetics, productivity increased according
to a cubic parabola, whereas in the chemical and steel industries the increase followed a
squared parabolic trend.
5
Sec technical note.
27
OECD Economic Surveys
Diagram 7
Export and import prices, actual and predicted
1963
«100
1963
=100
__ Actual
I»
Predicted
m
EXPORT PRICES
112
108
10»
104
1M
100
100
116
IMPORT PRICES
"*
112
112
101
MS
104
104
100
100
'55
'58
'57
'58
'58
'80
'81
'82
'83
'84
'85
'86
'87
'88
'88
'70
71
'72
Source: Secretariat estimates.
high demand pressure which influenced the determination of wage rates. It
does not seem, however, that with the Scandinavian model it is possible to
account for the trend of wages during 1 97 1 -72. The growth of wages continued
at a rapid pace1, whilst Belgian export prices and those of Belgium's chief
trading partners expressed in Belgian francs showed a marked slowdown
during that period.
The continuing rapid growth of wages in industries in the competitive
sector could, admittedly, be due to particularly large gains in productivity.
Unfortunately, there are no aggregate figures covering the trend of earnings
1
The following table drawn up by the Ministry for Employment and Labour shows
that despite the slowdown in activity observed in 1971 and over a part of 1972, the growth
28
BLEU
per worker, productivity and prices in the competitive sector as opposed to
sheltered sectors. There are certain indications, however, that productivity
growth was not particularly rapid during the period 1971-721.
In manu¬
facturing and in certain major export-oriented industries productivity gains
per worker were probably not very large in 1971, a year in which there was a
decline in investment that was particularly pronounced in such industries as che¬
micals and related activities ( 18 per cent), iron, steel and non-ferrous metals
( 14.6 per cent). Appreciably larger productivity gains were admittedly
recorded in 1972. The Secretariat's estimates suggest that during the last
two years the trend of earnings per worker in the competitive sector moved
well outside the wage corridor determined by labour productivity and export
prices.
The current account surplus increased considerably in recent years,
rising from about 1.9 per cent of GNP in 1968 to approximately 3.5-4 per cent2
in 1972. It should therefore be ascertained whether this trend helped in any
significant way to bring about excessive demand pressure during the period.
of negotiated minimum wages due to the revision of basic pay scales continued at a rapid
pace, approximately 6 per cent a year.
Percentage change
dec
1972/
dec
1971/
dec
1970/
dec
1971
dec
1970
dec
1969
Hourly wages
Linkage to price trends
Revision of wage rates
6.5
5.3
5.9
5.8
5.7
Impact of shorter working
1.5
0.9
0.5
13.9
12.0
(05
Jan. 1973/
Jan. 1972
Jan. 1972/
jan 1971
13.4 %
13.2 %
Total increases
4.3
jan
jan
1971/
1970
Hourly earnings
Aggregate nominal increase
13.3 %
Taking into account too the linkage to prices and the implementation of negotiated
programmes to shorten the working week, the aggregate nominal growth of hourly wages
accelerated appreciably over the period. The growth of nominal earnings, however, would
seem to have levelled off somewhat. The survey carried out by the National Statistics
Institute on average gross hourly earnings of operative in industry (" enquête rapide ")
shows that from January 1972 to January 1973 the increase was 13.4 per cent, i.e. much
the same rate as in the previous two years. Thus, the inference is that in 1972 the other
factors which influence the trend of earnings in addition to the trend of wage rates themselves
had a less favourable impact than during the two preceding years. These factors include
bonuses and gratuities, shifts in category and the impact of the actual duration of work.
1 According to official estimates, the rates of increase in value added at constant
prices per worker in industry (including water, gas, electricity, mining and quarrying) was
the following:
1969
1970
1971
1972
10 % 2.9 % 3.4 % 6.8 %
2 The balance on current account cannot be determined exactly. In the Belgian
national accounts the external account is largely based on balance-of-payments statistics
relating essentially to settlements and therefore affected, among other things, by leads and
lags. An adjustment based on customs statistics for foreign trade was therefore made by
the Secretariat in order to obtain an external account on a transactions basis.
The results
obtained are still approximate, however, which makes any breakdown of GNP between
total foreign demand and the foreign balance rather tentative.
29
OECD Economie Surveys
Diagram 8
Dispersion of wage earnings
1M6
1*66
1,2
2
The rot» of growth of wage earnings on each
11
'"
(index 1965 = 100) is shown as a ratio of the
rate of increase in total manufacturing industry (expres-
10S
*'
.
sed as equal to 100)
io»
'».
104
'':'
"*.Y
102
104
m
£
/
ig2
/
100
(1
(5)
M
IS
"
'-
m
_
»
:..-,
';
.
'
(
,
\
-
98
-'I-
'v-'^'»
>
m
.'.
-
' ~;',y :'' v..
1) Tobacco
.1)
"
; ;
"
.».
IKS
IMt
1KZ
1N3
1H4
'
94
i*
' '
r-';
«
5) Basic metals
2)
2) Textile
Textile
6)
6) Electrical
Electrical
M
3)
3)
machinery
7) Elecrroieehnics
8S
Furniture
Furniture
4) Chemicals
«
-
1*H
INI
1M7
IHJ
ItH
1|7t
1171
1172
Source: National Bank of Belgium, Monthly Bulletin.
The short-term indicators available1 suggest that the years 1969 and 1970
were characterised by heavy pressures on production, at any rate from the
second half of 1969 onwards. This is corroborated, moreover, by a Secre¬
tariat study on potential GNP during the period 1955-712. This study suggests,
1
The indicators referred to were: the short-term economic indicator of the Krediet-
bank, the " synthetic curve " of the National Bank and the series of rates of capacity utilisation
in industry taken from business surveys.
2 The estimate of the production potential of the Belgian economy was based on a
conventional production function of the Cobb-Douglas type estimated for the period 1 st quar¬
ter of 1961-4th quarter of 1971. The specifications of this function are as follows:
Ln Y = -1.610 + 1.079 (.61 Ln E + .39 Ln K) + .215 Ln Cu + .005 T
(-1.0)
(5.2)
(5.2)
(3.3)
R2
= .997
SE
= .008
DW
=1.0
30
BLEU
Table 10
Export prices and wage payments
Annual rate of change from previous period
I960
1969
1970
1972
1971
I
1970
II
I
II
Total exports
Belgium
1.0
4.8
4.6
0.5
Main competitors
1.4
3.1
5.2
4.6
1.4
1.6
2.0
4.3
3.4
1.8
3.4
5.7
6.1
8.1
8.0
11.7
12.5
12.5
-2.0
2.9
-1.5
3.0
2.6
-0.9
0.9
-0.2
-3.0
2.9
12.9
16.7
of which: Manufactures
Belgium
Main competitors
Hourly earnings
Export prices are expressed in Belgian francs.
Sources: National Statistics Institute. Monthly Bulletin: National Bank of Belgium, Monthly Bulletin;
OECD, Main Economic Indicators and Secretariat estimates.
however, that the current surplus directly contributed relatively little to
increased demand pressure during the period 1969-70 (contrary to the trend
that occurred during the earlier upswing of the cycle in 1964-65). The improve¬
ment in the current balance helped to keep up levels of activity in 1971-1972,
but this period was marked by some relaxation of aggregate demand pressure,
notably in 1971. It is true that in spite of this trend the gap between actual
and potential GNP remained relatively small. This purely static approach
does not however take into account the dynamic effect of an increase in exports
on the other components of demand, i.e. the multiplier effect of a growth of
exports on GNP. Owing however to the heavy pressure of demand recorded
during the period 1969-70, it is likely that this multiplier effect was relatively
slight, as suggested by the simulations made for the year 1969 on the basis
of an econometric model of the Belgian economy1.
It may be asked whether the surplus on the balance of official settlements
has contributed to feed inflation through excessive creation of money. This
does not seem to have been the case in 1969-70, when the foreign assets hol¬
dings of the Central Bank increased only moderately and when the growth of
the money supply stayed well below the rate of increase in gross national
product at current prices. In 1971 and 1972, however, a more rapid growth
Y
Real GNP
E
K
Total employment
Stock of capital
Cu
T
Indicator of the degree of utilisation of capacity
Trend measuring the impact of technical progress.
Because of the overgreat elasticity of production in relation to the labour factor obtained
when no constraint was imposed on the function, the coefficients of the function were fixed
in such a way that their value was approximately equal to the respective shares of capital
and remuneration of labour in the national income.
It should also be noted that the results
depend in part on the estimate made for potential employment, which is somewhat uncertain.
The indicator of the degree of utilisation of the stock of capital relates only to industry and
not to the economy as a whole.
1
A. van Peeterssen: An econometric model of the cycle and growth in Belgium.
Cahiers économiques de Bruxelles n° 43, 3rd quarter, 1969.
31
OECD Economic Surveys
Diagram 9
Wage corridor and productivity in manufacturing
Per cent annual change
Boundary estimated as the product of
output per mon-year and domestic prices
output per man-year and main competitors prices
rf~ Gross earnings per worker
»
./\
14
12
\ ^
V--
J
1M0
L
1M1
I
1*2
1M3
1M4
INS
1IM
1N7
1M
J
1M
I
1171
L
1171
1172
Sources: National Statistics Institute and Secretariat estimates.
of the money supply coincided with a distinctly larger accumulation of foreign
assets by the National Bank. It is difficult however to judge the effectiveness
of the sterilisation policy practised by the authorities1. Given the risk of a
marked slowdown in economic activity, demand management policy became
1
On the basis of the following quarterly regression covering the period 1971-1972,
the average multiplier between the monetary base (BM) and the money supply in the strict
sense (Mi) was about 2.
AMM, = 2.00 ABM + 1.59
(12.4)
R2
=
0.78
SD
=
5.94
DW
=
1.86
(1.6)
The very simple tests made in order to show the compensating effects of a change in
the Central Bank's foreign assets holdings on bank liquidity and the money supply did not
yield any significant results. They do suggest, however, that any change in foreign holdings
during a given quarter had an immediate impact in that quarter but that this impact was
partly neutralised in the following quarter.
32
BLEU
Diagram 10
NBB
Indicators of demand pressure
SYNTHETIC CURVE
curve reflects the main results
of. the monthly Business Survey
ï
-
ol the National Bank o? Belgium
CAPACITY UTILISATION INDEX IN INDUSTRY
Sources: National Bank of Belgium; OECD, Economic Outlook, Occasional Studies,
July 1973.
33
OECD Economic Surveys
Diagram 11
Monetary base and money supply
COUNTERPARTS
Contributions
jH|
in
OF
THE
MONETARY
BASE
%
Claims on Public Sector
^; Credits to Private Sector
Monetary base (percentage increase over
corresponding period of previous year)
Billions of Francs
40
QUARTERLY CHANGES
Osm Money supply
30
£H§ Monetary base
IN
CURRENCY
IN
PERCENT
OF
CIRCULATION
MONEY
SUPPLY
\/
IMS
1S70
1871
1972
Sources: National Bank of Belgium, Monthly Bulletin; IMF, International Financial
Statistics and Secretariat estimates.
34
BLEU
progressively more expansionary during 1971. But an active policy of public
debt management was followed in order to limit the impact of the external
surplus on the economy's liquidity1. This policy was pursued during the
early part of 1972 and supplemented in July by the institution of a monetary
reserve and the reduction of ceilings for banks' rediscounts and visas with the
Central Bank2. Part of the sterilisation effect was offset, however, by an
increase in the bank credit multiplier during the period3.
The reorganisation in May 1971 of the two-tier exchange market in order
to separate transactions on the two markets as much as possible4 and thus
discourage speculative inflows of capital was admittedly a positive factor but
the revaluation of the Belgian franc seems to have been of only moderate help
in reducing inflationary pressure. During the period preceding the Washington
agreements in August-December 1971 when the Belgian franc was allowed to
float together with certain other currencies, it underwent a very slight effective
devaluation6. Following the general realignment of parities in December 1971,
the Belgian franc was revalued upwards by 2.8 per cent against gold and
11.6 per cent against the dollar. Throughout 1972 it remained very stable on
both the controlled (official) market and the free market. On the first of
these markets it moved consistently in the upper part of the " tunnel " and
1 The Treasury placed some issues of long-term securities on the capital market to
mop up excess liquidity and to finance the repayment of its short and medium-term external
debt, payable in foreign currency and held not only abroad but also by the Belgian monetary
institutions and by the Central Bank.
2
For further details on monetary policy, see the paragraphs of the draft report dealing
with main economic policy trends.
3 The bank credit multiplier is defined as the reciprocal of the coefficient determined
by the ratio of the currency in circulation to the money supply. This ratio declined pro¬
gressively during the period under consideration, from 32.2 per cent in September 1970 to
29.4 per cent in September 1972.
4 Under the provisions governing the two-tier market prior to the reform of May 1971
all foreign exchange received from abroad could be sold on the official market, whereas
all payments could be transacted on the free market. Because of this asymmetry, there
was in principle no limit to the depreciation of the Belgian franc on the free market. Its
appreciation, on the other hand, encountered the limit of the official market price, thereby
robbing this arrangement of all effectiveness in discouraging speculative inflows of capital.
It should be noted that the aim of the reorganisation was not to separate the two markets
completely. To allow some regulating mechanism to exist, certain transactions still carry
the right to be negotiated on either market, so that rates on the two markets are not allowed
to diverge for too long.
Moreover, from a more general standpoint, the two tier exchange
market system is unable to prevent speculative capital inflows taking the form of leads and
lags. For further particulars of the 1971 reform, see the previous OECD Economic Survey
of BLEU, June 1972.
5
The average effective rate of revaluation of the Belgian franc was obtained by using
a triple weighting which essentially reflects the relative magnitude of the total trade of each
country, the scale of the direct trade relations it maintains with Belgium and the relative
competition it provides on third markets of importance to Belgium. For further particulars
of the method used, see the Technical Annex to OECD Economic Outlook No. 10, Decem¬
ber 1971. On the basis of 1970 = 100, the effective exchange rate for the Belgian franc since
1971 has been as follows:
I
II
III
TV
1971
99.0
98.3
98.1
103.4
1972
102.0
101.8
102.0
102.2
1973
104.8
35
Diagram 12
Foreign exchange market
FOREIGN EXCHANGE RATES OF MAJOR CURRENCIES
SNAKE AND TUNNEL
Percentage deviations with respect to dollar parities of October 1967
24
1.
1 dsvaluad (11.11.67)
2.
Franch franc davslvad (10.1.49)
32
3. DM flaatad (30.9.'49) ond ravaluad (34.10.69)
4.
Canodlan dollar flaatad (1.6.70)
9.. DM and Dutch aulldsr floated, Swiss franc ravaluad (9.5,71)
6. Doll oi gold can«arllallll* airsaartdad (13.1.71);
20
aio[er curranclas da (acta flaarad.
7^ Smithsenlan raallgmant ; dollar fanaally davoluad;
. yen, DM and athar curranclas ravaluad (18.12,71)
II
tm
t. t tlootad (33.6.72)
9. Swiss franc 'flaatad (23.1.73); dollar davaluad, yen,
and Italian ll'ro flaatad (13.2.73)
10. Mortals clasad (2.3.73);
Belgian
Y
II
franc
DM r.volo.d - |olnt float*
Last obsarvatian alattadi
14
u
I
21.6.73
12
0\
r
3
It
S
t
1972 April.
Kay
June
July
Source: OECD Secretariat.
August
September
October
November
December
January
February
March
April
May
June 1973
I»
BLEU
very often reached the upper side of the " Community snake ". The effective
revaluation of the Belgian franc remained moderate, however: about 2 per cent
up on the rate in force in 1970. Following the new parity changes introduced
in February-March 1973 and the Belgian authorities' decision to take part
in the joint float against the dollar by a number of European currencies, the
Belgian franc underwent a further effective revaluation of about 2 per cent.
In all therefore, by comparison with 1970 the effective revaluation of the
Belgian franc in May 1973 was only about 4 per cent, which is relatively slight,
given the size of the current surplus and the inflationary pressures on the
economy.
The role of domestic factors
Domestic factors, too, were partly responsible for the rising rate of
inflation over the recent years. Food prices, for instance, were admittedly
determined to a great extent by prices of imported farm products but also
by producer prices; however, these were in turn considerably influenced by
exogenous factors (quasi-structural imbalance between world beef supply and
demand, rise in prices of cereals and livestock feed). But the existence of
temporary disequilibria on some markets also played a significant part. Thus
in 1972 the general trend of rising food prices was reinforced by a sharp increase
in potato prices. In 1971, however, the rise in retail food prices had been
particularly small (1.9 per cent as an annual average) by comparison with the
trend recorded in the other countries of the European Economic Community.
The trend of prices was also affected during the period under consideration
by the changeover from a system of cumulative taxes (general turnover tax)
to VAT. Admittedly, this adjustment of indirect taxation introduced in
January 1971 had but a relatively moderate impact. According to official
estimates, the " mechanical " impact on consumer prices during the first
four months of 1971 was about 1.7 per cent, prices of non-food products being
more particularly affected. These fairly favourable results, notably by com¬
parison with the experience of other Member countries (3.1 per cent in the
Netherlands, 2.8 per cent in the United Kingdom and 2.5 per cent in Ger¬
many) can be explained by the particularly active prices policy followed by
the Belgian authorities1 and by the right choice of an introductory period
when some demand pressure was absorbed. This immediate rise in prices
was passed on to wages through the automatic indexing clauses built into
collective agreements and from which the vast majority of wage-earners
benefit in practice.
More generally, it may be asked what effect the indexing mechanism had
on price rises. It would seem that this procedure in fact had a moderating
effect in that wage-earners did not feel encouraged to press for excessive pay
increases to offset the anticipated effect of the price rise. Behavioural changes
might also have played a part, however. One of the major factors in the
growth of inflationary pressure during these last years has been the increase
1
For further details concerning this period, see the two previous OECD annual
surveys of the BLEU, June 1971 and June 1972, and the annual report of the National
Bank for 1971.
37
OECD Economic Surveys
in unit labour costs, reflecting not only a particularly rapid nominal growth of
wages but also a practically unparalleled rise in real earnings. This trend
admittedly has its positive social aspects, notably for the least well-off sociooccupational categories and for the organised groups capable of defending
the increase in their purchasing power; but the effects on prices cannot easily
be overlooked. It is true that demand pressure remained comparatively
strong in 1971-72, but the breadth of the gap observed between the actual
movement of wage payments and the predicted trend based on econometric
relationships covering the 1960s could reflect a change in the behaviour of
wage-earners.
This might be connected with, among other things, heavier tax pressure
in conjunction with the rapid growth of government spending. It is interesting
to note that because of the strongly accelerating trend over the last few years,
the proportion of Belgium's gross national product represented by total
expenditure by general government has become one of the highest in the
countries of the EEC (prior to the latter's enlargement), after the Netherlands,
whereas in the middle of the last decade it was the lowest.
This trend has
been accompanied by an increase in the fiscal and quasi-fiscal burden on the
economy and by heavier direct taxation pressure on households. From 1967
to 1971, the amount of households'wage contributions to Social Security
and direct taxes rose from 12.2 to 14.5 per cent of their total gross income.
The growth of tax pressure was particularly marked in 1971. Also, the
increase in taxation was appreciably larger at primary income level, i.e. on
income financing what has been called " pure private consumption "K It is
Table 11
Government expenditure and taxation
1961
1967
1968
1969
1970
1971
1972
1966
Government expenditure as percentage of
GNP1
15.4
16.7
17.1
16.9
16.9
18.1
18.8
Taxation in percent of GNP2
Taxes bearing directly on production costs3
29.1
31.8
32.6
33.1
33.8
34.6
35.3
25.6
28.1
28.2
28.4
28.9
29.2
29.1
Direct taxes on households4
11.0
12.2
13.0
13.3
14.0
14.5
15.0
1
Government consumption and gross fixed asset formation of general government.
2
3
Indirect taxes + directs taxes on households and corporations + contributions to Social Security.
Indirect taxes + direct taxes on corporations + contributions to Social Security as a percentage of gross
domestic product at factor cost.
4 Direct taxes + employees' contributions to Social Security as a percentage of gross income of households (excludng employers' contributions to Social Security).
Sources: OECD: National Accounts of OECD Countries; estimates provided by the Belgian authorities.
1
Primary income is defined as the share of households in national income, therefore
excluding transfers from general government to households. Pure private consumption
denotes private consumption less transfers to households (i.e. consumption subsidised by
the public sector). This concept was formulated by the OECD Secretariat in a study on
" Expenditure Trends in OECD countries, 1960-1980 (Paris, 1972) and was designed to high¬
light the problems involved in financing the growing share of public expenditure, either
through a shift in the distribution of national income away from households, or through
a rise in the household savings ratio or an increase in taxation.
38
BLEU
Diagram 13
Pure private consumption and tax pressure
PRIVATE CONSUMPTION AND PURE PRIVATE CONSUMPTION
(9
IN PERCENT OF GNP
PRIVATE' CONSUMPTION
(5
01
-
57
-
M
-
44
-
PURE
PRIVATE
CONSUMPTION
45
42
-
40
-
TOTAL TAXES IN PERCENT OF GNP
NORTHERN
EUROPEAN
-
42
-
40
-
3B
-
35
-
32
-
30
COUNTRIES
31
-
FRANCE
GERMANY
36
34
NETHERLANDS
32
W*
-
30
-
2»
-
'
\
BELGIUM
\
ITALY
21
-
J
IN*
1M1
J
L
1MZ
1N3
1M4
I
IMS
J
1IM
1M7
Source: EEC Statistical Office, National Accounts, 1972.
39
J
L
1W
net
I
1171
J_
1S71
1172
OECD Economic Surveys
possible therefore that the crossing of a certain limit of direct tax pressure
coupled with a rapid increase in prices resulted in a new awareness on the part
of the various socio-occupational categories and the trade union organisations.
Wage-earners may thus have been prompted to include this element in their
pay claims and non-wage earners to offset the tax burden by raising the prices
of their services.
1 1 should be noted, however, that the econometric tests carried out in
order to try to determine the influence of tax variables on the trend of prices
and wages did not yield very significant results. Where taxation and its trend
are concerned , Belgium is not in a particularly unfavourable position by
comparison with the other OECD countries as a whole. Total tax pressure1,
which was slightly below the average in the early 1960s, is now slightly above
Table 12
Aggregate tax pressure, Inter-country comparisons 1965-1970
(0
Aggre¬
gate
axation
(2)
(4)
Pure
(3)
Taxation
private
Ratio
borne
consump¬
1/2
by house¬
tion
(5)
Income
of house¬
holds
holds
(6)
Raito
4/5
Sweden
6.5
0.7
United Kingdom
7.0
1.0
7.0
io.i
1.9
5,6
Netherlands
8.4
1.7
4.9
7.7
3.6
2.1
3.8
9.2
Canada
7.0
1.5
4.6
Switzerland*
5.8
1.3
4.5
7.4
2.0
Norway
7.4
1.7
4.3
4.1
2.9
1.4
Denmark
9.1
2.7
3.4
10.6
4.7
2.3
12.2
4.0
3.1
14.6
5.3
2.7
6.9
2.5
2.8
11.5
5.1
2.3
11.0
4.0
2.8
11.9
4.1
2.9
Ireland
9.0
3.3
2.7
United States
4.6
1.7
2.7
7.4
2.2
3.4
Belgium
7.9
3.4
2.3
10.2
4.7
2.2
Austria
5.5
2.6
2.2
7.3
4.7
1.6
Australia
4.5
2.7
1.7
Greece*
Finland*
Spain
11.3
7.3
1.5
1L8
8.8
1.3
Germany
5.7
3.9
1.5
8.0
4.7
1.7
France
4.7
4.0
1.2
6.4
4.9
1.3
Italy
5.9
5.2
1.1
5.9
3.4
1.8
Japan
1
2
Direct taxes, indirect taxes, contributions to Social Security.
Household consumption minus transfers to households by general government.
Direct taxes borne by households plus employees' contributions to Social Security.
4
5 Gross compensation of employees, households' income from property and entrepreneurship, less interest
on customers' debt; employers contributions to Social Security have also been excluded from the primary income
of households.
Note
The figures in columns 1 , 2, 4 and 5 are as reduced by the implicit price deflator for private consumption
and are expressed per capita.
1965-1969.
Source: OECD: National Accounts of OECD Countries.
1
Total tax pressure is measured by the ratio of aggregate taxation (direct, indirect
and contributions to Social Security) to GNP.
40
BLEU
but it is still well under the average for the Member countries of Northern
Europe1. The ratio of per capita real growth of total taxation and pure
private consumption over the period 1955-1970 was relatively high in Belgium
compared with other Member countries, but was around the half-way mark
for the period 1965-1970. This ranking is not basically changed, moreover,
by taking into account the real elasticity of direct taxation (including wage
contributions to Social Security) in relation to the primary income of house¬
holds. Admittedly, Belgium's relative position may have deteriorated over
the last two years and in any case, owing to the various institutional factors
or socio-political traditions involved, the limit beyond which tax pressure may
constitute an independent stimulus to inflation may vary from one country
to another.
Owing to the statistical difficulties met with, the relatively limited scope
of the analysis carried out and the unreliability of certain results, particular
caution is called for in making any diagnosis. The foregoing tends to suggest,
however, that external factors in the broad sense have played a part in the
growth of inflationary pressures since 1969, inasmuch that imported inflation
has sometimes had significant effects on domestic costs and prices. It does
not seem, however, that inflation has acted as a powerful stimulus, exerting
its effects continuously throughout the period under review. It is true that
price and wage developments abroad may also have had demonstration
effects in Belgium. But in any event, purely internal factors have also played
a part. Some of these are easily identifiable and have been of a temporary
nature, such as the introduction of VAT and the imbalances on certain markets
for food products. Others, of a more structural nature, have probably
exerted a diffuse influence that is much more difficult to identify, such as indi¬
vidual and collective behavioural changes connected with, among other things,
the increase in tax pressure.
TECHNICAL NOTE
Main results of the econometric relationships on which the analysis
in the text is based.
Implicit price deflator for total domestic demand
The relationship covers the period 1955-1971, the statistical adjust¬
ment obtained is fairly satisfactory and the coefficients of the variables
are significant:
PIDI
= 0.57 CUM + 0.26 PIT + 0.50
R2
= 0.84
SD
= 0.72
DW
= 2.4
(7.0)
(4.5)
(1.5)
1 Denmark, Finland, the Netherlands, Norway and Sweden. Austria, although not
belonging to this geographical group, was included in the calculations.
41
OECD Economic Surveys
The definition of the variables figuring in the equation is as follows :
PIDI
Implicit price deflator for total domestic demand.
CUM
Unit labour costs measured by the ratio of the rate ofgrowth
of the total wage bill to that of real GNP at factor cost.
PIT
R2
SD
Implicit deflator of prices of total imports.
Coefficient of multiple correlation.
Standard deviation of the aggregate estimate of the equation
DW
Durbin and Watson " D " value.
The Student " / " values are given in brackets.
Consumer prices
(1) The results for the " non-food products " component of the
consumer price index are less significant. In particular, there is seen
to be too strong a positive serial autocorrelation of the residuals. It is
probable, however, that the results are partly affected by the statistical
imperfections of this index:
PPNA
= 0.231 HE + 0.066 PGI
(6.2)
R2
= 0.59
SD
= 0.55
DW
= 1.06
PPNA
HE
PGI
DIPB
(2.6)
0.057 D1PB + 0.704
(2.2)
(1.4)
Prices of non-food products.
Gross hourly earnings in manufacturing.
Wholesale prices of imported raw materials.
Industrial productivity over 8 quarters.
Figures refer to the annual percentage change over one quarter
by comparison with the corresponding period in the previous year.
(2) Owing no doubt to the poor quality of the statistics, the
equation showing the trend of food prices is not very satisfactory:
PPA
= 0.29 PAP + 0.17 CUM
(6.8)
R2
= 0.53
SD
= 1.36
DW
= 0.58
PPA
(3.1)
0.13 PD + 2.13
(3.3)
(7.2)
PAP
Food prices
Weighted agricultural producer prices . t = 0.50
CUM
Indicator of the unit labour cost in the food processing
t = 0.50.
industries.
PD
Indicator of demand pressure
of agricultural production.
42
deviation from the trend
BLEU
Import prices
(1) The following function suggests that at the level of aggregate
Belgian imports prices are largely determined by foreign influences:
LnPMT = 0.34 LnWPXT + 0.37 LnPXND + 0.02 LnFR + 0.92
(7.1)
R2
= 0.88
SD
= 0.01
DW
= 1.44
(4.8)
(3.6)
(3.6)
PMT
Price of total imports.
WPXT
Export prices of OECD countries weighted by the structure
PXND
FR
of Belgian imports.
Export prices of non-OECD countries weighted by the
structure of Belgian imports.
Freight rates.
The results are a good deal less significant, however, when only
the prices of imported manufactures are taken into account.
Export prices
The value of the coefficients of the explanatory variables of the
following equation and the Student "t" values suggests that export prices
in respect of all Belgian exports are more influenced by those of Belgiums,
main trading partners than by the domestic trend of prices. The
results also suggest that Belgian export prices are also influenced by
the level in demand pressure on external markets.
ln PXTF
= 0.46 ln PDF + 0.19 ln (S
(2.9)
T) + 0.66 ln WWXT
(2.7)
(2.9)
+ 0.06T+
1.15
(2.3)
(-2.1)
R2
= 0.81
SD
= 0.01
DW
= 1.41
PXTF
= Export prices in respect of all Belgian exports.
PDF
ST
= Domestic price measured by the GNP implicit price deflator.
= Demand pressure on external markets measured by devia¬
tions from the trend of the weighted growth of foreign
markets.
WWXT
= Export prices of Belgium's main competitors weighted
according to two criteria: the importance of competitors
on each of Belgium's export markets and the weight of
these markets in total Belgian exports. For a detailed
description of the weighting system used, see:
F. Meyer-zu-Schlochtern and Akima Yajima, "OECD
Trade
Model:
1970 Version".
OECD Economic Out¬
look, Occasional Studies, December 1970.
43
OECD Economic Surveys
Wage equation
The following relationships suggest that the movement of wage
rates is strongly influenced by the rise in prices and by the degre ofdemand
pressure:
TS
= 1.32 PCi-j + 37.4 PD + 0.54 DDPC
(9.6)
R2
= 0.71
SD
= 1.40
DW
= 0.80
TS
(3.2)
(1.2)
19.47
(2.6)
Hourly wage rates.
PG-!
Consumer prices.
PD
Demand pressure, synthetic indicator of the National Bank.
DDPC
Price acceleration variable for which the positive values
have been used for:
[(PG-i/PQ-a) x 100
(PC._,/PC.-«) x 100] x 2
Demand pressure also seems to affect the rate of wage drift.
GS
= 0.94 TS + 0.04 PD
(14.8)
R2
(2.4)
13.2
(2.3)
= 0.86
SD
= 1.0
DW
= 1.1
GS
Wage earnings.
It should be noted that the impact of demand pressure on the
determination of wage rates and earnings remains significant regardless
of the indicators used, whether these be indicators of strain on the
market for goods or strain on the labour market. The following variables
have in fact been tested: rate of utilisation of capacity in industry, Natio¬
nal Bank synthetic curve, Kredietbank short-term indicators, discrep¬
ancy beetwen actual and potential GNP, unemployment rate.
m
INCREASE IN THE CURRENT SURPLUS
OF THE BLEU
In accordance with the trend generally observed in the BLEU during
the initial period of a cyclical upswing1, the economic recovery that occurred
in 1972 coincided with a strengthening of the balance on current transactions.
The growth of exports of merchandise2 accelerated steadily during 1972
1 This can be explained by the importance of the foreign sector in the BLEU economy.
Changes in the rate of growth of exports have a motive influence on activity, fluctuations
in which are subsequently passed on with some delay to imports.
2
Analysis of foreign trade developments in real terms already seriously affected in
the past by the unsatisfactory price indices, is even more difficult for the last two years.
The abolition of customs formalities at the Belgian-Dutch border early in 1971 resulted
in under-recording of the value of exports to the Netherlands or exports to other countries
(notably Germany) via this border.
This phenomenon was probably aggravated by the
44
BLEU
under the influence of the cyclical upswing that occurred in the countries
that are Belgium's chief trade partners. Year on year the growth of exports
in real terms was probably about 12.5 per cent. The development of domestic
activity was passed on to imports, which showed a real growth of about
10.5 per cent. The terms of trade on the other hand improved. According
to the Secretariat's estimates and on a transactions basis, the BLEU trade
surplus amounted to about 1,150 million SDRs and the current account
surplus to approximately 1,200 million1. The foreign trade figures thus far
available do not show any clear trend for the first few months of the current
year. It is likely, however, that the trade balance will continue to show
a considerable surplus in 1973.
The gradual widening of the current account surplus over the last few
years grew considerably more pronounced in 1972, when it amounted to nearly
4 per cent of GNP. The cumulative surplus for the period 1969-72 can be
estimated at between 2.7 and 2.9 billion SDRs, depending on the basis of
calculation used2. This was essentially due to the improvement in the trade
balance. The current invisibles balance fluctuated fairly considerably over
the period, but on the whole remained fairly close to equilibrium, the surplus
on private services and transfers being offset by the deficit on government
transfers. It does not seem, as far as one can judge, that cyclical factors
played any significant part in this trend. The development of economic
activity in Belgium continued to be relatively in step, as in the past, with
that in the countries that are Belgium's chief trading partners, and on the
whole the average degree of utilisation of resources during the period 1969-72
was comparatively high. Studies by the Secretariat on the margin of slack
introduction in 1971 of a temporary export tax, which may have accentuated the transit of
goods by this border because of the tax evasion opportunities thus offered. Imports were
also under-recorded, but to a lesser degree. An adjustment was made by the National
Statistics Institute to eliminate the effect of this phenomenon, but the quality of this adjust¬
ment is not entirely satisfactory. The export tax was repealed in 1972, but the customs
statistics probably continued throughout that year not to record real trade flows in full.
1 The official balance of payments drawn up by the Research Department of the
National Bank records transactions with abroad on the basis of bank settlement statistics
provided by the Belgium-Luxembourg Exchange Institute. It is therefore particularly
affected by leads and lags. For the last few years the Bank has made an estimate of the
current account balance and its chief components on a transactions basis. The method used
is to reclassify payments relating to merchandise transactions according to the time at which
the particular transaction took place. Transactions in a given month can thus be reconstituted
and compared with payments for that month, which shows the changes in leads and lags.
This method enables thus to obtain an estimate of the current balance on a transactions
basis with a time-lag of approximately nine months. This estimate is nevertheless inaccurate
inasmuch as transactions not giving rise to payments are not recorded, which is the case in
particular with imports and exports of capital goods in kind related to direct investment.
This method differs furthermore from that used by the Secretariat, which consists of estimating
transactions on the basis of customs statistics. However, because of the disruptions that
have affected these statistics, the basis of estimation for 1971 and 1972 is somewhat less
reliable than for previous years.
2 According to the Secretariat estimates, the surplus on a transactions basis was
1.7 billion SDRs. This figure proves to be very close to that shown in the official balance
on a settlements basis (2.9 billion). In short, therefore, the results seem fairly plausible
inasmuch that over a four-year period, leads and lags, which are essentially a short-term
phenomenon, should be relatively neutral. This assumption presupposes, however, that
the first and last years are not affected by large-scale movements, which seems to have been
the case in 1972 but not in 1969.
45
OECD Economic Surveys
Diagram 14
Structure of the balance of payments
On a transactions basis
Millions of SDRs
Millions of SDRs
12N
1200
TRADE
CURRENT
BALANCE
BALANCE
400
-MO
_20O
BAL.ANCE ON NON-MONETARY
TRANSACTIONS
Millions of SDRs
RESERVES
3000
exchange
I
o
INI
IN!
1M)
1M4
ION
M
1M7
1M
1M
lilt
1171
117?
Sources: IMF, International Financial Statistics and Secretariat estimates.
46
BLEU
in Member countries1 would tend to suggest that on average Belgium had
less spare capacity than its main trading partners.
The increase in the trade surplus seems therefore related in great part
with structural factors. Although because of the statistical difficulties men¬
tioned earlier it is not possible to make any really thorough investigation,
the Secretariat's calculations show that in real terms the elasticity of imports
to GNP does not seem to have changed significantly during the last few years2.
On the other hand, the elasticity of BLEU exports to the weighted growth
of foreign markets tended to be significantly higher during the period 1969-72
than the average for the years from 1960 to 19683. This improvement in
export performance is attributable to the interaction of various factors, some
of which were brought to light in the previous OECD annual survey of Belgium.
Thus the growth of foreign investment taking the form of large production
units selling a high proportion of their output abroad was probably a very
important factor in the promotion of Belgian exports4. Gains in market
shares were particularly significant in some industries where there is a large
percentage of foreign capital (notably automobiles and chemicals).
1 The margin of slack was measured by the percentage gap between potential and
actual GNP. Potential GNP for each country was calculated on the basis of Gobb-Douglas
type production functions. The margin of slack obtained for each country was then weighted
by that country's share in Belgium's total exports. The resulting average was compared
with the calculations made for Belgium mentioned in paragraph 27 of this survey.
It should
be stressed, however, that because of the method used caution should be exercised when
making intercountry comparisons about levels.
2 The test used to reveal any structural change in import elasticity over the recent
period consisted in establishing a half-yearly import function covering the period 19561968 and using demand pressure and potential GNP as explanatory variables. The values
observed during the period 1969-1972 were then compared with the results calculated on
the basis of the equation. These calculations show that the mean error observed during
this last period is of the same order of magnitude as the standard deviation of the equation
for the period 1956-1968:
LnM = 1.25 LnBC + 2.12 LnCGNP + 0.01 CHBC
(2.5)
R*
= 0.99
SD
= 3.2 %
DW
= 1.0
(42.8)
(1.3)
9.51
(4.2)
M
Index of volume of imports.
BC
Percentage deviation between actual and potential levels of GNP.
CGNP
Potential GNP.
CHBC
Acceleration term tracing the difference between the GNP gap for a given
period and that for the previous period.
3 A test similar to that used for imports was applied to exports; but in this case the
values observed for 1969-72 were a good deal higher than those calculated on the basis of
the equation covering the period 1956-68.
These results corroborate other Secretariat
calculations indicating that gains in market shares were distinctly larger in these last four years
than during the period 1960-68:
LnX = 1.1 LnS + 0.91
(43.4)
R2
= 0.99
SD
= 3.5 %
(8.0)
DW = 0.90
X
S
4
Index of volume of exports
Index relating to the weighted growth of export markets in volume.
OECD Economic Survey of the BLEU, June 1972, pp. 42 to 50.
47
OECD Economic Surveys
Diagram 15
Relative degree of utilisation of resources
Gap between actual and potential GNP in percentage
Belgium
77 OECD countries
\
^"'
55
1
51
57
51
59
M
II
12
B3
M
IS
M
17
M
IS
71
71
72
The 17 OECD countries have been weighted by the average of Belgium exports to
these countries over the period 1961-1971.
Source: OECD, Economic Outlook, Occasional Studies, July 1973.
The increased concentration of Belgian exports in certain rapidly expand¬
ing regional markets was another favourable factor during the period. The
BLEU's foreign markets expanded at a higher rate than those of the OECD
countries taken as a whole. In real terms the rate of growth of Belgium's
export markets is higher, moreover, than the theoretical rate calculated by
weighting market growth by the regional pattern of Belgian exports in the
early 60s1. Also, to judge from the movement of the index of unit values,
export prices for both manufactures and other categories of goods remained
competitive by comparison with those of the BLEU's main rivals2. In fact,
it would seem that in spite of the faster rate of inflation in Belgium and the
effective revaluation of the Belgian franc, the trend of unit labour costs
correct¬
ed for exchange rates adjustments did not deteriorate by comparison with
the situation in the main competitor countries.
1
The growth of export markets is represented by the growth which would have occurred
in Belgian exports if their share of total OECD area exports to 19 regional markets had
remained unchanged in relation to the previous year. By implication, therefore, this method
consists of weighting the rate of growth of total OECD area exports in real terms to each
market by the relative weight of that market in Belgian exports. The difference between
the actual percentage change in Belgian exports and the growth of export markets measures
the gains or losses of market shares.
2 Owing to statistical difficulties, the calculations made in this area are somewhat
open to question and must be regarded as very approximate. They are shown in Table 10.
48
BLEU
The large current surplus recorded in recent years was largely offset,
however, by net outflows of non-monetary capital. In 1972 these were equi¬
valent to some 1,200 million SDRs. Movements of long-term private capital
showed a deficit of 405 million SDRs.
Net direct investment was somewhat
down on the previous year, whilst net purchases of foreign securities by Belgian
and Luxembourg residents increased substantially, from 370 million in 1971
to 635 million in 1972. The spurt in port-folio investment can be very largely
explained by the relatively more attractive yields on certain foreign securities,
satisfactory performances on foreign stock exchanges and the growth of Euro¬
bond issues. Movements of long-term public capital (excluding errors and
omissions) showed net outflows of 111 million SDRs. Movements of shortterm capital showed a deficit of about 350 million SDRs owing to the unwinding
of leads and lags, the final repayment by the Treasury of its short-term foreign
Table 13
BLEU balance of payments on a transactions basis
In millions of SDRs
Annual
1968
1969
1970
1971
1972
5 721
8 228
10164
11692
12 700
14 850
5 636
7 998
9 593
10 898
12 250
13 700
85
230
571
794
450
1150
average
960-1968
Exports fob
Imports fob
Trade balance
Balance on services and private trans
fers
Official transfers
Balance of current transactions
115
184
34
138
300
400
-65
-108
-126
-178
-300
-350
135
306
479
754
450
1200
25
-114
252
-334
-302
-516
Long-term capital movements
(a)
Private
(b) Official
47
-86
290
-266
-186
-405
-22
-28
-38
-68
-116
-111
Basic balance
160
192
731
420
148
684
-128
-404
^140
-370
97
-575
-15
-40
-4
60
-104
-109
17
-252
287
110
141
70
-156
-85
273
139
335
-257
-957
-1403
-2 532
-3 862
-3 812
327
801
1318
2 805
4 001
4147
87
-408
202
383
280
71
69
69
Private short-term capital and errors
and omissions
Official short-term capital
Balance of non-monetary transactions
Commercial banks
(a)
(b)
Assets
Liabilities
Balance on official settlements
Allocation of Special Drawing Rights
Miscellaneous assets and liabilities
Change in reserves (increase = -f)
Pro
mem:
Estimates
1
15
38
-2
3
54
-37
101
-370
200
457
403
367
67
28
74
724
830'
62
250
740
722
of the current
balance by the National Bank of
Belgium
(a) On a settlements basis
lb)
335
on a transactions basis
(593)i
(500)1
Seven months
Sources: Secretariat estimates: Belgian statistical submission to the OECD: National Bank of Belgium
Monthly Bulletin.
49
OECD Economic Surveys
exchange debt and part of its gold debt. Overall, the balance on non-monetary
transactions was probably close to equilibrium. Given a net inflow of 335 mil¬
lion of banking funds1, the surplus on the official settlements balance was
thus in fact significantly smaller than that on the current transactions account.
The accumulation of reserves in 1972 was mainly the result of the growth
in foreign currency holdings (367 million SDRs) following the Central Bank's
interventions on the foreign exchange market pursuant to the international
agreements to which Belgium was a party2. SDR holdings resulting from
the January allocation and from transfers increased by 118 million. Reserves
in gold, however, were down by 35 million, mainly because of sales to the
Treasury, which proceeded to redeem a proportion of the Certificates denomin¬
ated in gold held by the Bank for International Settlements. During the first
three months of 1973 the public sector's net official holdings rose by about
500 million SDRs, notably because of the international monetary disturbances
which led the Central Bank to intervene actively on the exchange market
during the first two months of the year. The balance on non-monetary
transactions probably showed only a small surplus, but the banks' foreign
position deteriorated considerably. Factors underlying this situation were
the wave of speculation by non-residents anticipating an upvaluing of the
Belgian franc and the growth of banks' spot liabilities with an aim to balance
the increase in their forward purchases of foreign assets related to forward
sales by residents.
1 To curb capital inflows connected with changes in leads and lags, the banks were
ordered by the Belgium-Luxembourg Exchange Institute to maintain unchanged, as from
9th March, 1972, their spot debtor position on the regulated market in foreign currencies
and vis-à-vis abroad in Belgian francs. Provisional overruns of 10 per cent at maximum
were authorised, however, so as not to disrupt the normal unwinding of current transactions.
As from 24th August the limit was set at an amount equal to the average of the positions
at 18th and 25th July and those at 2nd and 8th August, 1972.
2
In accordance with the decisions taken at the time of the Washington agreements
in December 1971 on the widening of currency fluctuation bands, whereby the maximum
spread at any time between two currencies was increased to 4.50 per cent, the Central Bank
had to intervene by buying or selling dollars on the exchange market when the Belgian franc
touched the ceiling or the floor of the " tunnel ". Following the Basle Agreement of 10th
April, 1972, whereby the maximum spread at any moment between exchange rates for curren¬
cies of EEC Member countries was reduced to 2.25 per cent, the Central Bank also had to
intervene, as from 24th April, by buying or selling EEC currencies as soon as the Belgian
franc touched the upper or lower side of the " Community snake ". Moreover, after the
Basle Agreement the Benelux countries decided to hold at 1.5 per cent the bands of fluctuation
between the florin and the Belgian franc, as had been the case since 23rd August, 1971 . It
should be noted that under the Basle Agreement, Central Bank intervention has been financed
by very short-term loans from creditor countries. The settlement of liabilities in connection
with these loans should in principle be financed by the various instruments of each debtor
country's reserves in proportion to the composition of that country's official holdings.
For further information about the principle of Central Bank dealing in Community curren¬
cies, see the following article in the Bulletin of the National Bank of Belgium, a Les marges
de fluctuations entre monnaies communautaires », 47th year, Tome II, Nos. 1 and 2, July/
August 1972.
50
BLEU
IV
SHORT-TERM PROSPECTS
AND ECONOMIC POLICY PROBLEMS
Short-term outlook
The outlook at the end of the first half of 1973 is that growth will continue
at a rapid pace over the next few months. The present stance of demand
management policy does not seem likely to have more than a moderately
restrictive effect; the currently firmer trend of domestic demand due, among
other things, to the upswing in private productive investment should continue
to be accompanied by a sustained expansion of export markets. Overall,
the real rate of growth of GNP expressed as an annual average might therefore
amount to about 5.5 per cent in 1973, namely a higher rate than the increase
in production capacity. The present improvement in the labour market
situation should therefore continue, but certain difficulties encountered by
various categories of workers or in certain regions will probably persist.
The rise in prices and wage payments should continue in accordance with
recent trends, owing notably to the increase in demand pressure, On a
transactions basis, the current surplus might show a further increase or, at
any rate, remain at the particularly high level recorded in 1972.
Private consumption will probably continue to provide a keen stimulus
to activity. In real terms, the growth of households' disposable income
should, in fact, be of the same order as that, recorded in 1972 (about 7 per
cent). In view of the foreseeable increase in demand pressure, it is unlikely
that negotiated wages will follow a more moderate trend. The number of
wage-earners in industry, which remained practically stationary in 1972,
should also show a marked increase, which according to the official esti¬
mates might be about 1.2 per cent. In view of the rising level of activity,
the downward trend in the length of the working week over recent years
should moreover be slightly less marked than in 1972.
Variations in the
household savings ratio are difficult to predict. The official projections are
based on the assumption of a certain decrease linked with, among other
things, the continuance of strong inflationary pressures. The recent expe¬
rience of many countries, where despite the faster upward movement of
prices the savings ratio has tended to rise in periods of large real increases
in incomes, suggests however that a high savings ratio will be maintain¬
ed in 1973, especially since interest rates have taken an appreciable upturn.
Gross fixed asset formation should expand a good deal more rapidly.
The currently firmer trend in productive investment by private enterprises
should become more pronounced, given the excellent prospects for activity
and the mounting pressure on capacity1. The more rapid growth of production
should also result in an expansion of self-financing capacity. There is a
likelihood, however, that because of the rapid rise in unit labour costs, invest-
1 The provisional results of the survey carried out in March by the National Bank,
although up on the previous ones, still showed an attitude of relative caution on the part
of entrepreneurs. Experience shows, however, that investment projects generally undergo
considerable upward adjustments in periods of cyclical upswing.
51
OECD Economic Surveys
ment will aim just as much to rationalise production as to enlarge capacity.
Residential construction will probably expand considerably, given the present
increase in the number of building starts. The raising of interest rates,
coupled with the rapid rise in construction prices, is liable however to cause
some falling-off in activity, the effects of which admittedly are unlikely to be
felt until the beginning of 1974.
In view of the recent restrictive measures
mentioned earlier, investment by general government should, on the other
hand, show a marked slowdown.
Exports, which represent the chief exogenous factor of demand, will
probably continue to show a sustained growth throughout 1973. In real
terms, the expansion of the BLEU's foreign markets should show a substantial
acceleration reflecting the rapid development of activity in other Member
countries. Although certain sectors or enterprises will probably be affected
by the impact of the recent parity changes, notably in trade relations with
the United States, at the level of all export sectors the effective revaluation
of the Belgian franc should have only relatively moderate repercussions this
year, especially since these generally take some time to emerge. In spite
of the expected rise in costs, the competitive position of Belgian industry
will therefore remain relatively strong and if, in contrast to the excellent
results obtained over the last few years, exporters were to sustain losses in
market shares, these would remain moderate. The enlargement of the Euro¬
pean Economic Community and the tariff cuts introduced on 1st April, 1973
should, moreover, have a favourable impact on the development of exports.
Overall, according to the Secretariat's forecasts, the volume of BLEU exports
of merchandise might therefore increase by about 11.5 to 12 per cent. The
growth of aggregate demand will result in an even greater recourse to imports
in that spare capacity will diminish considerably. Year-in-year in real terms,
imports might therefore increase by approximately 11.5 per cent. On the
basis of these assumptions together with that of slightly less favourable terms
of trade, the trade surplus on a transactions basis and according to balanceof-payments definitionsmight be of the order of 1.5 million SDR's, which
whould also apply to the surplus on the BLEU current account.
By and large, the current improvement in the labour market situation
should continue, in response to the faster growth of GNP. But in spite of
the official measures taken in regard to employment1, difficulties connected
with structural issues are liable to persist in regard to certain categories of
workers or certain areas. Thus the employment of persons aged over 50
and that of females might continue to pose special problems, notably in view
of the likelihood that the economic upswing will cause some rise in female
labour force participation rates. There are also good grounds for believing
that, despite a larger growth in the number of wage-earners and the efforts
1 Pursuant to the recommendations produced by the National Employment Conference,
a number of measures were introduced in 1972 and early in 1973. Among those designed
to bring about a better knowledge and functioning of the labour market were: a reform of
the placement services, the setting-up of 1 8 sub-regional employment committees and a number
of schemes to improve briefing, guidance and reception for young persons. Further efforts
were also made to improve occupational training: in addition to retraining facilities for
some 20,000 persons in 1973, the new legislation on " time-credits " entitles workers taking
advancement courses to paid holidays.
52
BLEU
of the authorities to combat structural unemployment, in 1973 the unemploy¬
ment rate will still be relatively high in the Walloon area. During the last
cyclical upswing much less unemployment was absorbed in that area than
in Brussels or in Flanders1. The Walloon area, where there is a preponderance
of long-established industries, seems to have stepped up investment in rational¬
isation projects since 1969. Plant conversions and large-scale reassignments
are now under way there, which could result in increased difficulties as regards
the redeployment of less-skilled labour and older persons2.
On the best of assumptions, the upward movement of costs and prices
seems likely to continue at a rate roughly comparable with that observed
during the previous year. Given the size of the increase at the end of 1972
and the trend already observed during the first four months of 1973, the
rate of growth expressed as an annual average will probably be a good deal
higher than in the previous year, notably where the consumer price index
is concerned. Even admitting that supply moves more into line with demand
and thus brings pressure to bear on agricultural producer prices, the effects
on consumer prices of food products will not be apparent for some time.
Prices of non-food products will continue to move up, owing to the rapid
rise in unit labour costs, the foreseeable persistance of the rise in prices of
raw materials due to the upswing in world demand, heavier financial charges
linked with higher interest rates and, to a certain degree also, the increase
in demand pressure. Given, moreover, that the effective revaluation of the
Belgian franc has been relatively modest and that strong inflationary pressures
will probably continue to be felt in most other Member countries, there is
no reason to expect that the moderating effects exerted by foreign competition
Table 14
Official forecasts
Annual percentage changes by volume
1973
Official
1972
forecasts
1973
1970
Objectives
of the Plan
Private consumption
Government consumption
7.0
5.9
4.1
6.5
6.0
4.3
Gross fixed asset formation
1.8
5.5
7.0
10.0
2.0
9.2
0.5
5.5
4.7
-0.2
6.7
7.4
5.7
5.8
4.7
-0.9
0.1
Public sector
Housing
Other private sector investment
Final domestic demand
Stocks1
0.1
External balance1
0.4
Exports of goods and services
Impotrs of goods and services
GNP at market prices
9.0
10.1
8.8
11.0
9.6
4.9
5.5
4.8
1
9.6
Changes are expressed as a percentage of GNP for the preceding period.
Source: Belgian statistical submission.
Ministry of Economic Affairs: Les lignes deforce du plan 1971-1975.
1 From 1968 to 1970 the number of wholly unemployed fell. by 21 per cent in the
Walloon area, compared with 31.4 per cent in the Brussels area and 38.7 per cent in Flanders.
2
In April 1972, 52 per cent of unemployed males in thé Liege area were aged over 50.
53
OECD Economic Surveys
will be very significant. As for prices of services, they should continue to
follow their present upward trend in conjunction with a continuing rapid
rate of increase in wage payments.
Economic policy problems and conclusions
Because of its great dependence on external transactions, the Belgian
economy is now benefiting to a very large extent from the considerable upswing
in activity being experienced in the OECD area, but in return is undergoing
the consequences of an inflationary environment that is world-wide. Exports
are growing at a rapid pace, activity is buoyant with a consequent reduction
of unemployment, and strains on prices and costs are increasing. These
trends, however, conceal deep-reaching and probably large-scale changes in
the economy.
(a)
(b)
(c)
Belgium, which was conspicuous in the past for a very moderate
growth of prices and wages that was one of the smallest among
Member countries, has moved gradually into line with the other
countries in recent years.
For some years there has bee» a surplus in the BLEU current balance
of payments and this has now taken on considerable proportions.
Owing to structural changes in the production system and the labour
market, unemployment, which is still at a relatively high level, is
being reduced only slowly despite the firmness of expansion.
It would therefore seem useful, in the interests of clarifying certain econo¬
mic policy problems, to put the recent trends in a medium-term perspective
by referring to a number of quantitative targets laid down in the " Broad
Unes of the 1971-1975 Plan ".
Real GNP will probably rise fast in 1973 (by about 5J per cent according
to the official projections), and it may therefore reasonably be hoped that
by the time the Third Plan is halfway through its term the aggregate growth
target (4.8 per cent as an annual average) will have approximately been reached.
But apart from the fact that the price target (4 per cent on average for the
GNP implicit price deflator) has hitherto been largely exceeded, economic
growth is accompanied by an appreciably different allocation of resources
from that foreseen. Private productive investment is diverging considerably
from the Plan's projections. Taking into account the decline that occurred
in the two previous years and despite the upswing expected in 1973, this category
of investment will in fact have increased in real terms in 1971-73 by only
about 1 per cent a year, as against the 7 per cent forecast in the Plan. A
considerable shortfall will also have taken place in residential construction.
On the other hand, the current external surplus, which on a national accounting
basis was forecast to represent 0.6 per cent of GNP in 1975, rose from approxi¬
mately 3 per cent of GNP in 1 9 1 7 to about 4 per cent in 1 972, one of the highest
percentages among Member countries.
This sizeable surplus is probably very largely of a structural nature,
since cyclical factors do not seem to have played an important part in this
trend. In recent years phases of economic activity in Belgium have been
more or less synchronous with short-term economic trends abroad, and
54
BLEU
on the whole the degree of utilisation of resources has been at least as high
as in the country's main trading partners. The growth of foreign investment
in large production units in Belgium designed to sell a large proportion of
their output on foreign markets has probably been a major factor in the con¬
siderable market shares gains recorded in recent years. More generally,
this phenomenon probably reflects the BLEU's role as a processor within
a wider economic area. The trend of export prices suggests too that, on
average, Belgian products have till now remained largely competitive. Despite
a tendency to accelerate, unit labour costs do not seem to have risen more
than in other countries. Moreover, the effective revaluation of the Belgian
franc, following the various parity changes introduced since 1969, remained
very modest (approximately 4 per cent in May 1973).
There is thus reason to expect a continuation or even a further widening
of the current external surplus in 1973. Even assuming, in accordance with
the official forecasts, that a slight decrease is recorded, the size of the surplus
will probably remain important both from the point of view of better equili¬
brium in international payments and domestic policy aims. Some reduction
of the transfer of real resources to the rest of the world that the surplus repre¬
sents could help to diminish inflationary pressures at home. More importantly,
the persistence of a very sizeable current surplus would not conform with the
pattern of allocation of resources sought by the Plan. It is interesting to note
that the current surplus recently represented approximately the same proportion
of available resources as public sector net demand and that efforts are now
being made to reduce the latter, despite the existence of major requirements
such as those in regard to public investment. That the growth of public
expenditure should be temporarily slowed down in a period of high demand
pressure is quite understandable. It seems, nevertheless, essential in a mediumterm perspective that economic policy should be so designed as to promote
some shift in the use of resources away from net exports and in favour of
collective needs.
Of all the problems now claiming the attention of the economic policy
authorities, a return to a more moderate trend of prices has assumed priority
status. As in many Member countries, price rises have become much more
pronounced during the last few months. But this phenomenon seems to
overlie a more fundamental trend which has progressively come to light
during the last few years. Because of its economic size and its very pronounced
integration into world markets, Belgium is admittedly particularly sensitive
to the effects of international transmission of inflation. The analysis contained
in Part II of this Survey suggests, however, that although imported inflation
has sometimes given a powerful impetus to the upward movement of costs
and prices, external factors are not wholly responsible for the increase of
inflationary pressures. These are also largely attributable to domestic factors.
Some of these factors are easily identifiable and have been of a temporary
nature, such as the introduction of VAT in 1971 or the disequilibria on certain
agricultural markets. Others are of a more structural nature and exert a
diffuse influence that is much more difficult to identify, such as certain changes
in economic behaviour.
The chances of a more moderate trend in costs and prices, therefore,
depend just as much on the success of the measures taken in the other Member
55
OECD Economic Surveys
countries as on the implementation of appropriate policies to control inflation
in Belgium. The authorities have rightly given a gradually more restrictive
cast to demand management. Monetary policy has been tightened progres¬
sively since the second half of 1972 and some of its tools have been improved.
The setting-up and management of a " monetary reserve " is probably a more
flexible solution than the direct quantitative controls on credit growth introduc¬
ed during the earlier restrictive phases of monetary policy. The reorganisation
of the two-tier exchange market in 1971 in order to discourage speculative
capital inflows has also given a greater degree of autonony to monetary policy,
although as a result of the Belgian franc floating together with other European
currencies, the two-tier market now functions in different circumstances.
Where budget policy is concerned, the authorities have already decided to
phase out certain public investment projects and have to make cuts in expen¬
diture in order to limit the budget deficit. In the present circumstances,
stimuli from the public sector should indeed be reduced as far as possible.
However, the use of conventional demand management tools to stem
inflation encounters considerable constraints in view of other objectives of
economic policy, and in any case is liable not to prove as effective as required.
(a)
Some measures have indeed been taken to maintain the develop¬
ment of low-cost housing construction, but it is also desirable that
the tightening of monetary policy should not interfere with the
improvements now under way in private productive investment.
(£>)
As pointed out by the " Conseil Central de l'Économie " in one
of its opinions on the short-term economic situation, " measures
to control inflation should not end by compromising the satisfaction
of essential collective needs ". On the other hand, increases in
taxation which may eventually prove necessary would be liable, if
too heavy, to prompt further demands of taxpayers for a rise in
incomes and thus in fact lose some of their effect on demand.
(c)
More generally, drastic action to curb demand
envisaged by the authorities
which is not, indeed,
could have undesirable effects
on
employment. In net terms, the goal of full employment adopted
by the Plan presupposes that jobs will be found for about 133,500 per¬
sons over the period 1971-1975. But a little over 100,000 young
persons on average come on to the labour market each year, and
it is this category of labour which is particularly affected by slow¬
downs in activity.
It should be recalled that at the end of 1972
the number of wholly unemployed amounted to nearly 100,000 per¬
sons or twice the figure forecast in the Plan. Despite a foreseeable
improvement in 1973, particular difficulties will continue to exist
in regard to certain categories of workers and certain regions, with
the result that the unemployment rate may remain relatively high.
It should be noted in this connection that with budget policy gene¬
rally aimed at restraint, the authorities are endeavouring to maintain
labour-intensive public investment projetés.
It is, therefore, likely that the fight against inflation in Belgium as in
other Member countries, requires increasing use of measures other than
demand management. It would, in particular, seem desirable to strengthen
56
BLEU
structural, sectoral and regional policy measures aiming at increasing compe¬
tition and reducing the various kinds of bottlenecks that inhibit the expansion
of production. Increased mobility in the labour market and improvement
of vocational training facilities, apart from their beneficial effects on employ¬
ment, are also of considerable importance in this connection and it is desirable
that the reforms already initiated or envisaged by the authorities be carried
through rapidly. Such " supply management " policies, however, can only
produce significant results over the medium term. In the meantime, price
surveillance and controls of the type in force at present can play a useful
but limited role: by phasing out price increases, they can at least prevent
unduly rapid spreading and mutual reinforcement of inflationary expectations;
but they can hardly have lasting effects of any importance in the presence
of considerable cost push, originating both from external factors and from
the rise of the main categories of incomes at rates well in excess of average
productivity gains. It should be recalled that the longstanding indexation
to prices of wages and certain other incomes has moderated their rate of
increase in so far as it has prevented additional claims being put forward
merely to offset anticipated price rises. There is evidence that this mechanism
continued to have some moderating effect in the recent period, though clearly
insufficient to counter the influence of numerous and strong inflationary
factors. The question arises, therefore, whether additional anti-inflationary
measures other than demand management could profitably be considered
in a country where procedures for consultation between labour, management
and the authorities on many aspects of economic policy are highly developed.
The Belgian authorities, however, take the view that the success of any novel
initiatives in the field of anti-inflation policies will very largely depend on
co-ordinated action being undertaken on an international scale. In any
event, effective action to combat inflation remains a prerequisite for continued
and balanced expansion of the economy and for the achievement of the Plan's
other major objectives.
V
RECENT TRENDS, ECONOMIC POLICY
AND SHORT-TERM PROSPECTS IN LUXEMBOURG
The cyclical slackening of economic activity during the second half of
1971 was in fact short-lived and not very marked. Industrial output again
began to grow steadily in the second quarter of 1972, and in the fourth quarter
it grew at an annual rate, seasonally adjusted, of approximately 9.5 per cent.
Continuing the trend of the past two years, the metal-processing industries
showed the fastest growth rates, but the chemical industry also progressed,
confirming the diversification towards which industry is tending in Luxembourg.
There was also considerable activity in the construction sector, thanks in parti¬
cular to the very mild winter. The growth in output was mainly due to the
build-up of foreign demand for iron and steel products, and particularly to
the high level of demand for semi-finished products from the industries produc¬
ing consumer durables in the EEC countries. However, the growth of domes57
OECD Economic Surveys
Table 15
Luxembourg: Demand and output
Annual
percentage changes by volume
1971
billions
1971
1972
1973*
of francs
Private consumption
Government consumption
29.8
4.0
4.2
4.0
6.2
3.2
2.5
2.0
Gross fixed asset formation
15.8
8.0
4.0
Final domestic demand
51.8
5.1
Stocks1
0.3
Total domestic demand
52.1
External balance1
4.1
2.5
-0.6
5.1
3.5
2.5
-4.0
0.2
3.5
8.0
Exports of goods and services
40.3
-4.0
5.0
Imports of goods and services
GNP at market prices
40.3
0.6
4.8
3.7
52.1
0.7
3.5
6.0
1
Changes expressed as a percentage of GNP for the preceding period.
2
Official forecast.
Source:
STATEC.
tic demand also lent considerable impetus, mainly as a result of private consump¬
tion and investment in residential construction and in the public works sector.
On the other hand, productive investment in private sector enterprises1 levelled
off after reaching an exceptionally high level in the preceding years. Taken
overall, the average annual growth rate in volume of GNP was probably
in the region of 3.5 per cent.
The recovery of economic activity has given rise to a relatively rapid
growth in dependent employment (3.8 per cent). The number of workers
in industry rose by 4.1 per cent in 1972, the fall in the numbers of those work¬
ing in the iron and steel and the mining industries ( 1.8 per cent) being more
than offset by the high level of growth in other branches (8.7 per cent). The
overall trend does however mask a drop in the number of employed workers
of Luxembourg nationality ( 1.5 per cent) and a big increase in the number
of foreign workers (11.8 per cent)2. The available figures suggest that
the increase in salaries speeded up in 1972. The nominal increase in wages
and salaries as a result of the movement of the sliding scale was substantially
greater than in 1971 (approximately 5.7 per cent as against 4.6 per cent in
1971), mainly because of the change in the method of indexation which resulted
in the payment of an " advance instalment "3. In 1972, the renewal of the
1
Mainly because of a slight fall in investment in the iron and steel industry.
2 In 1 972, foreign workers accounted for 45.7 per cent of workers in industry compared
with 42.6 per cent in 1971 and 28.9 per cent in 1960. The proportion of foreign workers
was relatively lower in the iron and steel industry and mining at the end of 1972 (27.4 per
cent of the total) than in the other branches taken together (58.4 per cent). In the construc¬
tion sector, the proportion was 71.3 per cent, of which 28.9 per cent were Portuguese and 24. 8
per cent Italian.
3 The advance instalment allocated in May 1972 amounted to 1.5 per cent, resulting
as of that date in an overall increase in wages due to the movement of the sliding scale of
2.9 per cent.
58
BLEU
Diagram 16
Luxembourg total industrial production and metal output
ill iiliiliiliilnl ill iiIiiIiiIiiIhIiiI nl nliiliiliil. iliilnlnli. In IiiIuL.Im
1966
1967
1968
1S69
1970
1971
1972
Source : OECD, Industrial Production, Quarterly Supplement to Main Economic Indicators.
majority of collective agreements in industry, which are usually valid for
two years, also resulted in a bigger increase in wages and salaries in real terms
than in 1 9711. Moreover, the new collective agreement in respect of employees
in banking and insurance brought about a rapid increase in pay which is
partly a catching-up process. It is however probable that the increase in
the variable portion of private sector wages (fringe benefits and bonuses) slowed
slightly in relation to 1971, largely as a result of the worsening of financial
results in the iron and steel sector in 1971 2.
1 According to information supplied by the Société ARBED, the average wage cost
in the iron and steel sector rose by 10.6 per cent in 1972, 5.7 per cent of this being due to
the sliding scale.
2 It is interesting to note that in all probability because of the trend in fringe benefits,
there is a marked correlation, with a lag of about a year, between the rate of variation of
gross average earnings in industry and trends in productivity.
59
OECD Economic Surveys
The Luxembourg economy has not escaped from the general increase
in inflationary pressure apparent in most other Member countries. Although
consumer prices rose substantially less than in other countries, they never¬
theless rose much faster than in the past. The 5.2 per cent rate recorded for
1972 shows an increase over 19711 and is almost double the average annual
rate of increase during the period 1965-1968. The rate of increase in the course
of the year was even greater (approximately 5.9 per cent from December to
December). As in other Member countries, the rise in prices is largely a result
of dearer foodstuffs, particularly meat, fish and potatoes. However, some
regulated prices also rose substantially (water, doctors' fees, insurance). In line
with past trends, prices of Luxembourg products increased far more rapidly
than those of imported goods2. During the first few months of 1973, the
increase in consumer prices continued at a high level in the region of 6 per
cent per annum.
As the recovery of foreign demand became more pronounced and inflation¬
ary pressure increased, the policy for regulating demand gradually became
more restrictive. In addition, a number of monetary measures were taken
in conjunction with decisions by the Belgian authorities. In order to influence
bank liquidities, it was decided under the terms of an agreement between the
" Commissaire au Contrôle des Banques " and the Luxembourg banks to
make convertible franc accounts held by non-residents subject to the constitu¬
tion of monetary reserves along lines similar to the system in force in Belgium3.
In November moreover, consumer credits, which had increased at an annual
rate of approximately 35 per cent during the first three quarters of 1972 were
made subject to a system of control4. Furthermore, saving banks and establish¬
ments in Luxembourg were asked to hold their loans to Belgian enterprises
down to normal limits so as to prevent an excessive increase in loans similar
to the trend observed in 1970 and 1971s. Luxembourg's role as an international
capital market continued to increase in 1972; international loan issues amount¬
ed to the equivalent of $ 5 billion in 1972, as against 3.4 billion in 1971 and
2.4 billion in 1970. Between 1965 and 1972, employment in the banking
sector more than doubled, increasing from 2,076 to 4,676 employees. 1971
saw the introduction of an international clearing system for stocks and shares
with the participation of 71 financial establishments.
1
In the consumer price index, the weighting of services is only 13.3 per cent which
seems extremely low in view of the structure of consumption. Application of the weighting
which is implicit when national accounting data are taken into account hardly alters the
1972 results, but does give a substantially higher rate of increase for 1971 (5.5 per cent as
against 4.7 per cent).
2 The imported goods included in the index mainly consist of manufactured products,
and the rise in their cost is partly offset by productivity gains, whereas the Luxembourg
products are mainly foodstuffs and services.
3
The reserve is deposited in a special account in the Banque Nationale de Belgique,
and at the end of April 1973 exceeded Luxembourg francs 600 million.
4 Up till 31st March, 1973, credit establishments were asked not to exceed their amounts
outstanding on 30th September, 1972 by more than 5 per cent.
5 Claims on the private sector, which amounted to only Luxembourg francs 48. 1 billion
at the end of 1969, reached 107.7 billion at the end of 1970 and 140.5 billion at the end of
the first half of 1971 . However, the credit control system introduced in Belgium between 1969
and 1971 obliged Belgian banks to fix credit ceilings; the credit margins available to the
banks were 6.7 billion (out of a total of 260.9) at the end of 1969, 3.1 billion at the end of
1970 and 5.4 billion in June 1971.
60
BLEU
Government operations in 1972 probably gave little impetus to production.
Contrary to official estimates, which forecast a deficit of about Luxembourg
francs 2 billion, the budget outturns probably showed a slight surplus as a
result of additional tax revenue partly due to the faster rate of growth and the
increase in prices1. The 1973 budget provides for a deficit similar to that
in 1972, but its structure is different. The increase in capital expenditure
(+43.5 per cent compared with 1972) should be partially offset by a surplus
on current operations due, in part, to a more realistic estimate of tax revenue.
Furthermore, the Luxembourg Government has undertaken, as part of the
anti-inflation programme, not to increase VAT rates during 1973 and to
Table 16
Luxembourg: Central Government transactions
Millions of Luxembourg francs
1971
1968
1969
1970
19711
Provi¬
sional
1973
19721
Fore¬
casts
account
Current transactions
8.99
10.46
12.45
11.88
14.05
12.69
Indirect taxes
3.37
3.73
4.24
4.25
4.85
4.58
5.67
Direct taxes
4.11
5.16
6.58
6.03
7.39
6.41
7.69
Receipts
Other receipts
15.19
1.51
1.57
1.63
1.60
1.81
1.70
1.83
-8.58
-8.76
-9.68
-10.77
-10.77
-11.70
-12.96
Wages and Social Security
-2.87
-2.98
-3.33
-3.80
-3.81
^
-4.73
Current transfers
-4.53
-
-5.01
-5.20
-5.45
-5.77
-6.40
Other
-1.18
-1.24
-1.34
-1.76
-1.51
-1.69
-1.83
0.41
1.70
2.77
1.12
3.28
0.99
2.23
0.13
0.24
0.25
0.33
0.24
Expenditure
Balance on current transactions
Capital transactions
Recepits
0.26
0.23
Expenditure
Direct investment
-1.30
-1.06
-1.33
-1.94
-1.57
-2.09
-3.05
Capital transfers
-0.52
-0.66
-0.79
-0.82
-0.88
-1.03
-1.28
Loans and participations
Balance on capital transactions
-0.12
-0.12
-0.13
-0.13
-0.16
-0.15
-0.13
-1.68
-1.61
-2.12
-2.65
-2.36
-2.94
-*.22
-1.27
0.09
0.65
-1.53
0.92
-1.95
-1.99
1.27
-0.09
-0.65
1.53
-0.92
1.95
1.99
-0.25
-0.35
-0.47
-0.32
-0.65
-0.34
-0.33
General Balance
Financing of budget balance
Overall balance
Amortization of public debt
Borrowings
1.19
0.72
0.50
0.91
0.81
0.96
1.02
Treasury, net (disbursement +)
0.33
-0.46
-0.68
0.94
-1.08
1.33
1.30
1
Initial forecasts.
Source: Ministry of Finance: Budget for the Financial Year 1973.
1 The 1972 Budget provided for a nominal increase in GNP of 5.1 per cent, of which
3 per cent was due to the trend in prices. Initial results for 1972 show an increase in GNP
of 3.5 per cent in volume terms and 8.7 per cent in terms or value.
In addition, the new
method of distributing revenue from excise duty inside the BLEU should provide Luxembourg
with approximately a further Luxembourg francs 415 million per annum.
61
OECD Economic Surveys
postpone until after 30th June a number of investment projects worth Luxem¬
bourg francs 300 million and accounting for some 10 per cent of total govern¬
ment investment for 1973 and almost one-third of credits for public construction
for the same financial year.
With regard to prices, a series of measures tending to consolidate the
system of control in force came into operation during the second half of 1972.
Thus beef and pig meat prices were temporarily frozen at the level reached
at the end of November 1972. The freeze was subsequently extended to
a number of goods and services1.
Because of the acceleration in the growth rates of Luxembourg' main
trading partners, foreign demand should provide the main driving force
for expansion in 1973. According to official forecasts, exports should increase
by 8 per cent in volume terms and by 21 per cent in value terms. Domestic
demand on the other hand, will probably slow a little. The rate of growth of
household consumption may be much the same as the previous year. The
entry into force of new collective agreements and the application of the old
ones (particularly in the iron and steel industry) will probably result in an
increase in per capita wages comparable to that recorded in 1972. The expected
widening of the brackets of the income tax scale applied to private individuals
should have a beneficial effect on households' disposable income, but this
will probably be offset by a slower increase in government transfers to private
persons. Government consumption should also increase at a slightly slower
rate than in 1972. According to official forecasts, gross fixed capital formation
should not increase at all in 1973. The vigorous activity in residential cons¬
truction and the growth of Central Government investment, particularly in
infrastructural work on roads, will probably be offset by a fall in productive
investment by enterprises. It is possible, however, that growing pressure
on productive capacity may compel enterprises to revise their investment
plans in an upward direction. Taken overall, the growth of GNP could be
of the order of 6 per cent, and be accompanied by an increase in the GNP
price deflator or more than 10 per cent, largely attributable to the sharp rise
expected in steel prices. In line with the general trend observed in other
Member countries, consumer prices should also rise to a certain extent, from
an annual average of 5.2 per cent in 1972 to approximately 6 per cent in 1973.
On the basis of the National Accounts and at current prices, the surplus on
transactions in goods, services and factor incomes with abroad should amount
to approximately Luxembourg francs 3.4 billion, i.e. more than 5 per cent
of GNP. This trend can certainly be attributed to the rapid growth in the
volume of exports, but it is also explained by the considerable improvement
in terms of trade linked with the big increase expected in steel prices.
1 Household goods, clothing, locally made building materials, taxi fares. In addition,
a regulation dated 16th May, 1972 established maximum selling prices for milk, fresh cream
and butter.
62
Annex
MAIN ECONOMIC POLICY MEASURES TAKEN
SINCE APRIL 1972
BELGIUM
LU
CD
<
û.
<
Où
MAIN ECONOMIC POLICY MEASURES TAKEN
SINCE APRIL 1972
BELGIUM
Monetary policy
1972
April
Easing of hire-purchase controls and hire-purchase financing ;
the down-payment was fixed at the legal minimum of 15 per
cent and longer repayment periods were allowed. Royal
Decree of 14th April, 1972 ("Moniteur Belge" of 3rd May,
1972).
The Belgo-Luxembourg Foreign Exchange Institute defined
the scope of the measures taken on 9th March 1972, to
curb inflows of funds through the banks. The latter must,
inter alia, constantly pursue a foreign exchange policy
designed to maintain their overall foreign currency position
(spot and forward combined) at a moderate level.
July
Publication of the Act approving the de facto change in
the parity of the Belgian franc (+2.75 per cent) since 1 8th De¬
cember, 1971, and instituting a new monetary regime.
Agreement concluded on 26th July, 1972, by the National
Bank and the Banking Commission with the Belgian commer¬
cial banks for the establishment of a monetary reserve
through the deposit in non-interest bearing blocked accounts
at the National Bank of part of the bank's deposits in conver¬
tible Belgian francs. This measure was designed to wipe
out part of the excessive liquidity created in recent weeks
by massive inflows of foreign exchange. The amount neu¬
tralised would total Frs. 10 billion, representing about
25 per cent of bank deposits in convertible Belgian
francs. The agreement included a provision designed to
avoid any reduction in the facilities granted by the banks
to the public sector. In addition, the National Bank
reduced the ceiling for the banks' rediscounts and visas
from 9 per cent to 8 per cent of their resources, with
effect from 28th July, 1972.
September
Submission to the Government of a Bill to standardise
the status of the banks and savings banks. This Bill provides
for extending the National Bank's monetary policy respon¬
sibilities, and for more precise demarcation of responsibilities
between the Government, the National Bank and the author¬
ities responsible for supervision of the banks.
65
OECD Economic Surveys
November
The agreement concluded on 26th July, 1972, between the
National Bank and the banks for the establishment of non-
interest-bearing deposits, which was due to expire on 31st Oc¬
tober the same year, was extended until the end of February
1973. The maximum amount of deposits at the National
Bank was raised from Frs.
with
effect
from
20th
10 billion to Frs.
November.
Of
17.5 billion
this
addition,
Frs. 2.5 billion would be provided by the banks; the private
banks savings and public credit institutions, which previously
were not subject to these requirements, would provide the
remaining Frs. 5 billion. The obligation to place a specified
percentage varying according to institutionsof the growth
in deposits in Government paper was maintained.
The National Bank increased its discount and interest rates
by 0.50 per cent from 23rd November,
1972; the base
rate was thus increased from 4 to 4.5 per cent.
December
The National Bank increased its discount and interest rates
by 0.50 per cent from 21st December; the base rate thus
moved up from 4.5 to 5 per cent.
1973
February
The agreement for the establishment of a monetary reserve,
concluded in November between the National Bank and
the banks, savings banks and public credit institutions,
which was due to expire at the end of February, was extended
until 31st May. As a consequence, the maximum amount
to be neutralised in the non-interest bearing account with
the National Bank would increase in two stages from Frs.
17.5 billion to about 22.5 billion. The arrangement designed
to neutralise the effects on bank liquidity of capital inflows
was extended to the increase in the banks' spot debtor
position on the controlled foreign exchange market.
In parallel with the provisions concerning the monetary
reserve, the banks' rediscount and visa ceilings were reduced
from 8 per cent to 7.5 per cent; as a result the aggregate
ceilings stood at Frs. 45 billion, i.e. a reduction of Frs. 3 bil¬
lion (1st March, 1973).
Amendment with effect from 19th February of the regulations
relating to hire purchase and personal loans. The conditions
in force before the reflationary plan of April 1972 were
restored (" Moniteur Belge " of 23rd February, 1973).
March
At the beginning of March the Belgo-Luxembourg Foreign
Exchange Institute decided that sales by non-residents of
foreign currency on the controlled market for the purpose
of opening Belgian franc accounts would be recorded in
66
BLEU
special accounts which could no longer either be reconverted
into foreign currency or be transferred between banks.
The banks established in Belgium undertook to charge a
special commission at the rate of 0.25 per cent per week,
to be debited monthly and calculated daily, on all sums
standing to the credit of convertible foreign accounts exceed¬
ing the daily average of the sums standing to the credit
of such accounts during the fourth quarter of 1972 (agree¬
ment concluded for the period 26th March to 30th June,
1973).
Budgetary and fiscal policy
1972
April
Entry into force of improved salary scales for the Civil
Service; budget cost for 1972 estimated at about Frs. 14.5 bil¬
lion.
Subsidies for construction and purchase of low-cost housing
and for improvement of dwellings were increased by a
" cyclical " supplement; thus the construction subsidy was
uniformly increased by Frs. 40,000 for applications made
between 1st April and 31st December, 1972. Royal Decree
of 17th April, 1972 (" Moniteur Beige " of 28th April, 1972).
August
The Government took a series of measures of control aimed
at stricter collection of receipts on account ofVAT in several
sectors of activity (Royal Decree of 11th August, 1972).
(" Moniteur Belge " of 19th August, 1972).
September
To finance part of the expenditure of the Road Fund, the
Government decided to increase the excise duties on petrol
with effect from 25th September. This measure, which was
accompanied by the fixing of maximum prices for petrol,
should bring in about Frs. 4.5 billion on an annual basis
(Royal Decree of 20th September, 1972) (" Moniteur Belge "
of 22nd, September 1972).
The Government's draft Budget for 1973 was introduced
in the Chamber of Deputies. Total Expenditure (including
extra-budgetary expenditure) was up by 11 per cent (as
against 21.3 per cent in the draft Budget for 1972), ordinary
expenditure by 12.5 per cent (as against 20.9 per cent) and
extraordinary expenditure by 8.2 per cent (as against 12.5 per
cent). The Government considered it possible to dispense
altogether with measures to stimulate the economy and the
budget was based on the assumption of a strenghtening
of economic activity.
A 15.4 per cent increase in revenue
was budgeted for (as against 14.6 per cent in the draft
67
OECD Economic Surveys
Budget for 1972).
The net balance to be financed was
about Frs. 5 billion less.
December
Publication
authorising,
expenditure
December,
1972).
of the Finance Act for the 1973 budget year,
in particular, the allocation of revenue and
to provisional appropriations. Act of 10th
1972 (" Moniteur Belge " of 29th December,
1973
January
Retirement and survivorship pensions for wage earners were
increased by 7.96 per cent with effect from 1st January.
The application of the VAT rate of 6 per cent (instead of
14 per cent) to solid fuels was extended until 31st December,
1973). The Minister for Economic Affairs authorised an
increase in retail prices for petrol. Ministerial Decree of
21st September, 1972 (" Moniteur Belge " of 23rd Septem¬
ber, 1972) and Ministerial Decree of 27th December, 1972
(" Moniteur Belge " of 30th December, 1972).
In its statement to Parliament, the new Government express¬
ed the following intentions with regard to dealing with
inflation:
greater vigilance regarding the trend of prices, within
the limits of existing legal and contractural possibilities;
strict budget management and stricter selectivity in
government investment, this policy to form part of the
general Unes of the 1971-1975 Plan;
fiscal policy to be so conducted as not to influence the
trend of costs in the field of goods and services;
selective aid by the public authorities for investment
(" Moniteur Belge " of 1st January, 1973).
February
Following a similar decision taken in January, the Committee
of the Budget decided to release a further portion of 12.5 per
cent under the extraordinary budget for the period MarchApril, which, if this rate should be maintained, would
correspond to a freezing of 25 per cent of the extraordinary
expenditure estimated for 1973.
Price policy
1972
April
The regulations relating to the notification of price increases
were eased and simplified. Thus, firms with a turnover
of less than Frs. 5 million were exempted from the require-
68
BLEU
ment of prior notification of price increases. Ministerial
Decree of 20th April, 1972 (" Moniteur Belge " of 25th April,
1972).
June
Postal and telephone rates and the price of bread were raised
with effect from 1st June.
July
An increase in some railway rates came into force on 1st July :
ordinary season tickets went up by per 10 cent and passenger
fares by 14.75 per cent.
September
Various measures were taken with regard to prices policy:
maximum retail prices were fixed for mineral waters and
prices of cigarettes were increased. (Ministerial Decree of
31st August, 1972) (" Moniteur Belge " of 5th September,
1972).
October
The Government adopted various measures regarding prices:
increase in the price of bread (10th October, 1972), continua¬
tion of a programme relating to prices of electrical household
equipment; Ministerial Decree of 19th September, 1972
(" Moniteur Belge " of 7th October, 1972); tradesmen requir¬
ed to show prices conspicuously and unambiguously; Royal
Decree of 10th July, 1972 (" Moniteur Belge " of 13th Octo¬
ber, 1972).
November
Pork and beef prices were frozen for six months under an
agreement concluded on 31st October, 1972, between the
Ministry for Economic Affairs and the " Fédération Profes¬
sionnelle des Bouchers et Charcutiers ".
December
Maximum taxi fares fixed by the Ministry for Economic
Affairs. Ministerial Decree of 17th November, 1972 (" Mo¬
niteur Belge " of 29th November, 1972).
1973
March
The period of advance notice of price increases was fixed
transitionally, by Ministerial Decree of 1st March, 1973
("Moniteur Belge" of 6th March, 1973), at:
4 months from 1st March, 1973,
3 months from 1st July, 1973,
2 months from 1st August, 1973.
April
1st April, 1973: extension for six months of the agreement
on the stabilization of beef and pork prices between the
butchers and the Ministry for Economic Affairs.
Retail prices for beef and pork fixed by Royal Decree of
27th April, 1973 (" Moniteur Belge " of 4th May, 1973).
69
OECD Economic Surveys
Social Policy
1973
April
3rd April: second general meeting of the National Employ
ment Conference. With a view to providing more employ¬
ment for young workers, a " gilt-edged " pension for older
workers was proposed: from age 60, workers could claim
an advance pension and would receive an allowance over
and above the unemployment allowance of 60 per cent of
the normal wage, so that they would be guaranteed an income
of 70 per cent of the net wage.
increase in wage costs.
This would entail a further
It was also suggested that the public authorities should
themselves set up enterprises for the purpose of promoting
employment.
An Act of 10th April, 1973, instituted a system of time credits,
i.e. credits for time off with normal pay allowed to workers
(workmen and employees, with the exception of teachers
and public service personnel) who continue their training.
The purpose is also to make it for them to study. Half
the funds for time credits are provided by the State and
the other half out of a fund to which all employers contribute.
Regional Policy
1972
June
Publication of a Decree authorising the grant of supple
mentary regional aid under the Economic Expansion Act.
Royal Decree of 9th May, 1972 (" Moniteur Belge " of
20th June, 1972).
Plan
1972
August
Publication of the Act approving the " Broad lines of the
Plan " (1971-1975). The five-year public investment Plan
is binding on the public authorities and will be required
to be given effect annually in the budgets (Act of 18th July,
1972) (" Moniteur Belge " of 23rd August, 1972).
70
STATISTICAL
ANNEX
Table A
National Product and Expenditure
F billion
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
852.3
Current prices
Consumers' expenditure1
Government current expenditure
428.8
464.6
496.9
540.9
581.0
612.4
662.3
720.2
771.1
80.8
91.7
98.9
110.2
120.7
132.8
143.4
159.1
174.5
199.0
Gross domestic fixed asset formation2
134.6
141.9
170.5
185.3
204.2
218.3
218.4
240.5
289.7
307.2
Change in stocks
0.4
1.7
12.0
4.4
9.2
5.7
11.3
22.7
18.3
16.4
Domestic expenditure
644.7
699.9
778.3
840.8
915.1
969.2
1 035.4
1 142.5
1 253.6
1 374.9
Exports of goods and services
less: Imports of goods and services
218.7
238.8
278.0
306.0
327.8
352.6
402.1
483.2
562.7
617.6
220.7
247.6
282.9
304.7
337.0
351.2
400.6
473.9
533.2
Gross domestic product at market prices
642.7
691.1
773.4
842.1
905.9
970.6
1 036.9
1 151.8
Net income from the rest of the world
Gross national product at market prices
less: Net indirect taxes
to
Gross national product at factor cost
1 283.1
585.6
1046.9
5.4
4.9
4.9
6.8
6.8
7.4
8.1
8.2
10.5
12.1
648.1
696.0
778.3
848.9
912.7
978.0
1045.0
1 160.0
1 293.6
1 419.0
71.6
77.8
86.4
92.2
106.9
117.6
122.6
134.1
147.8
159.8
576.5
618.2
691.9
756.7
805.8
860.4
922.4
1 025.9
1 145.8
1 259.2
1963 prices
Consumers' expenditure1
Government current expenditure
443.0
464.6
480.0
501.1
517.1
531.2
561.3
595.9
621.8
650.4
82.2
91.7
95.4
100.7
104.7
110.9
115.1
122.3
126.2
132.3
Gross domestic fixed asset formation2
141.4
141.9
159.9
166.2
176.8
181.4
177.3
187.2
205.6
199.2
1.8
1.7
11.5
4.4
8.8
5.4
9.4
18.9
15.7
13.4
Domestic expenditure
668.5
699.9
746.9
772.4
807.4
828.9
863.1
924.3
969.3
995.3
Exports of goods and services
less: Imports of goods and services
222.2
238.8
266.1
286.1
296.8
317.0
361.0
415.2
456.0
493.5
229.8
247.6
274.0
292.7
315.7
326.6
370.8
425.4
455.0
483.0
Gross domestic product at market prices
660.9
691.1
739.0
765.8
788.5
819.3
853.3
914.1
970.3
1005.8
5.7
4.9
4.6
6.2
5.9
6.3
6.7
6.6
8.0
8.6
666.6
696.0
743.6
772.0
794.4
825.6
860.0
920.7
978.3
1 014.4
Change in stocks
Net income from the rest of the world
Gross national product at market prices
1
Changes in stocks at the retail level are included in private consumption expenditure.
2
Public sector gross fixed investment is on a payments' basis and not on an accrual basis.
Source: Belgium statistical submission to the OECD.
Table B
Origin of Gross Domestic Product at Factor Cost
F billion
1962
1963
1964
1965
1966
Current
1967
1968
1969
1970
1971
prices
Agriculture, forestry, and fishing
38.5
41.1
43.1
45.6
43.5
44.7
47.9
53.5
50.1
Mining and quarrying
14.2
15.7
16.3
16.1
15.6
15.7
15.6
15.6
15.2
16.4
172.1
186.9
213.2
227.5
245.9
256.9
281.7
332.4
370.5
412.5
Construction
36.2
38.7
50.0
52.8
56.0
61.4
59.2
63.8
78.7
86.9
Electricity, gas and water
Transportation and communication
13.2
14.4
16.0
17.6
19.7
22.0
24.2
27.8
30.0
36.9
41.6
45.2
51.2
56.3
61.6
65.6
73.0
80.0
89.5
101.0
Wholesale and retail trade
70.2
77.1
82.7
92.6
97.5
102.2
109.8
120.1
130.8
139.6
Banking, insurance and real estate
Ownership of dwellings
18.1
20.6
22.7
25.3
28.6
31.4
35.2
41.7
46.3
52.3
40.2
41.4
42.8
45.9
49.7
51.6
53.6
55.6
57.5
58.7
Public administration and defence1
38.3
41.6
44.5
51.1
55.5
60.6
64.5
70.8
77.9
88.7
Health and educational services1 *
31.5
35.8
39.5
48.6
53.9
59.0
64.3
71.3
81.3
90.3
Manufacturing
Miscellaneous services3
Gross domestic product at factor cost
56.9
54.9
64.8
70.7
71.8
82.9
88.3
94.8
104.8
118.6
571.1
613.3
687.0
749.9
803.1
854.0
917.3
1 027.4
1 132.6
1 254.7
1963 prices
Agriculture, forestry, and fishing
Mining and quarrying
Manufacturing
37.2
42.6
41.1
42.1
39.1
15.0
15.7
15.6
14.3
13.4
176.2
186.9
205.0
212.1
225.0
Construction
39.4
38.7
45.6
45.8
47.4
Electricity, gas and water
Transportation and communication
12.8
14.4
15.9
17.3
18.9
42.4
45.2
48.4
50.0
52.1
Wholesale and retail trade
72.3
77.1
80.7
85.5
87.8
Banking, insurance and real estate
Ownership of dwellings
19.1
20.6
21.8
23.0
24.6
40.6
41.4
42.3
43.3
44.1
Public administration and defence1
38.9
41.6
43.1
46.3
47.7
Health and educational services1 2
32.2
35.8
37.8
41.4
43.2
Miscellaneous services3
Gross domestic product at factor cost
1
2
3
56.5
54.9
56.8
59.0
55.1
587.8
613.3
654.9
677.1
696.4
Public health is included in public administration.
Public and private hospitals are included in miscellaneous.
Including statistical adjustment and correction for own account production of investment goods.
Source: National Statistics Institute, Monthly Bulletin.
52.8
Table C
Gross domestic Asset Formation
F billion
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
Current prices
Gross domestic fixed asset formation
134.6
141.9
170.5
185.3
204.2
218.3
218.4
240.5
289.7
Dwellings
32.3
33.3
52.2
58.7
56.5
59.3
58.2
62.4
75.0
72.2
Other construction
44.7
49.2
55.5
57.8
68.8
77.8
78.8
82.3
99.5
116.6
Machinery and transport equipment
57.6
59.4
62.8
68.8
78.9
81.2
81.4
95.8
115.2
118.4
3.9
4.2
4.9
5.3
6.0
5.7
6.3
6.8
7.4
6.3
1.5
2.0
2.0
2.0
1.7
1.6
1.9
2.1
2.2
2.7
37.6
38.9
40.7
46.3
54.3
54.0
49.3
57.7
73.5
69.6
Construction
5.7
5.6
5.1
5.5
6.5
6.9
6.5
6.6
8.5
6.8
Electricity, gas and water
Transportation and communication1
Dwellings
7.6
6.7
7.8
9.4
11.4
15.0
13.4
13.5
15.7
17.6
307.2
Breakdown by products:
Breakdown by industry of origin:
Agriculture, forestry and fishing
Mining and quarrying
Manufacturing
13.6
14.6
15.4
18.6
20.5
23.4
23.5
24.4
26.8
31.1
32.3
33.3
52.2
58.7
56.5
59.3
58.2
62.4
75.0
72.2
Public administration3
12.1
14.4
19.5
16.1
19.8
24.5
29.6
32.7
39.4
51.2
Other services
20.2
22.1
23.0
23.4
27.5
27.9
29.7
34.3
41.2
49.7
Breakdown by sectors:
Government1
Enterprises
14.8
17.5
23.1
21.2
25.5
30.2
35.7
37.4
44.3
57.4
119.8
124.4
147.5
164.2
178.7
188.1
182.7
203.1
245.4
249.8
1963 prices
Gross domestic fixed asset formation
141.3
141.9
159.9
166.2
176.8
181.4
177.3
187.2
205.6
199.2
Dwellings
34.7
33.3
47.9
50.3
45.5
44.7
42.3
43.0
48.0
41.8
Other construction
47.9
49.2
51.4
50.5
58.1
62.0
60.9
60.2
66.2
69.0
Machinery and transport equipment
58.7
59.4
60.6
65.5
73.2
74.7
74.1
84.0
91.4
88.4
4.1
4.2
4.6
4.9
5.3
4.8
5.2
5.4
5.5
4.3
1.6
2.0
1.9
1.8
1.5
1.4
1.6
1.8
1.7
2.0
39.1
38.9
38.7
42.8
49.1
47.9
43.4
49.0
56.5
50.0
Construction
5.9
5.6
5.0
5.2
6.1
6.5
6.0
5.8
7.0
5.3
Electricity, gas and water
Transportation and communication1
Dwellings
8.0
6.7
7.3
8.5
10.0
12.6
11.2
11.0
11.5
11.8
Breakdown by products:
Breakdown by industry of origin:
Agriculture, forestry and fishing
Mining and quarrying
Manufacturing
14.0
14.6
14.7
17.3
18.3
20.1
19.6
19.7
19.6
20.9
34.7
33.3
47.9
50.3
45.5
44.7
42.3
43.0
48.0
41.8
Public administration1
12.8
14.4
18.3
14.3
16.8
19.4
22.8
23.6
25.7
29.5
Other services
21.2
22.1
21.5
21.1
24.3
24.0
25.2
27.9
30.1
33.6
Breakdown by sectors:
Government1
Enterprises
Note
17.5
21.7
19.0
21.7
24.1
27.6
26.9
28.8
33.2
124.4
138.2
147.3
155.1
157.3
149.7
160.3
176.8
166.0
Data relating to government gross fixed investment are on a payments' basis and not on an accrual basis.
1
Including goverment investment in water ways.
2
3
Including public sector education and excluding investment in water ways.
Including statistical adjustment made to investment.
Source: Belgium statistical submission to the OECD.
tyi
15.5
125.8
Table D
Income and Expenditure of Households and Private Non-profit Institutions
F billion, current prices
Compensation of employees
Wages and salaries
Pay and allowances of armed forces
Employers' contributions to social security
Income from property and entrepreneurship
Income of independent traders1
Interest, rents, dividends and corporate grants
1962
1963
1964
1965
1966
301.0
331.1
372.5
412.3
450.6
481.7
511.0
566.9
637.9
726.3
256.3
280.6
313.4
345.0
377.1
403.4
428.2
474.8
530.5
602.8
1967
1968
1969
1970
1971
11.7
12.1
12.6
14.2
15.6
16.7
17.1
18.2
19.6
22.2
32.9
38.4
46.4
53.1
57.9
61.6
65.7
73.9
87.8
101.3
202.9
210.3
230.0
249.4
260.3
272.4
293.6
326.4
352.8
369.5
130.3
137.5
154.0
166.9
169.5
176.1
188.1
206.0
213.5
222.6
72.6
72.8
76.0
82.5
90.8
96.3
105.5
120.4
139.3
146.9
72.8
79.1
84.2
104.5
115.1
125.6
145.0
156.9
178.8
200.1
5.3
5.8
6.4
6.8
7.0
7.7
8.7
8.7
10.7
13.2
581.9
626.3
693.1
773.0
833.0
887.4
958.3
1 058.9
1 180.2
1309.1
less: Interest on consumers' debt
Current transfers from Government
Current transfers from the rest of the world
Income of households and non-profit institutions
less: Direct taxes on households and non-profit insti9>
tutions
Disposable income
91.0
101.9
116.7
133.8
149.7
162.5
181.5
205.3
241.0
276.7
490.9
524.4
576.4
639.2
683.3
724.9
776.8
853.6
939.2
1 032.4
3.0
3.5
3.6
4.5
5.5
6.3
6.6
8.4
8.8
10.0
less: Current transfers to the rest of the world
Saving of households and private non-profit ins
59.1
56.3
75.9
93.7
96.8
106.2
107.9
125.0
159.3
170.1
428.8
464.6
496.9
540.9
581.0
612.4
662.3
720.2
771.1
852.3
titutions
Consumers' expenditure on goods and services
Food
117.9
122.8
127.7
138.2
147.0
154.4
161.1
172.9
185.4
196.5
Clothing
41.4
44.9
47.6
51.1
53.1
53.4
57.7
63.3
67.7
72.9
Rent
48.8
50.8
53.3
57.0
61.7
67.4
67.0
69.8
73.3
77.4
Durable goods
47.9
53.7
61.2
66.5
72.5
75.4
83.1
92.3
100.7
117.4
172.9
192.3
207.0
228.0
246.7
264.8
293.4
321.9
344.0
388.1
Other"
1
2
Including company current transfers.
Including statistical adjustment to the private consumption.
Source: Belgium statistical submission to the OCED.
Table E
Government Revenue and Expenditure1
F billion
1962
1963
1964
1965
1966
1967
Current revenue
187.6
202.9
231.9
258.3
292.0
319.6
Direct taxes
102.5
113.2
130.9
150.8
167.8
180.7
Households
42.6
46.3
49.6
56.3
64.2
71.3
Social security contributions
Corporations
48.4
55.6
67.1
77.5
85.5
11.5
11.3
14.2
17.0
78.8
84.4
94.1
1968
1969
1970
1971
348.6
392.2
449.0
499.2
202.1
231.0
272.9
313.9
82.8
95.2
110.0
127.2
91.2
98.7
110.1
131.0
149.5
18.1
18.2
20.6
25.7
31.9
37.2
101.9
119.2
130.3
138.6
152.9
164.8
177.6
7.0
General Government
Indirect taxes
Income from property and entrepreneurship
6.1
5.2
6.8
5.3
4.7
8.3
7.5
7.8
10.6
Current transfers from the rest of the world
0.1
0.1
0.1
0.2
0.3
0.3
0.4
0.5
0.7
0.7
81.3
200.0
215.3
250.6
276.3
303.2
340.0
377.1
420.6
473.9
80.8
91.7
98.9
110.2
120.7
132.8
143.4
159.1
174.5
199.0
7.2
6.6
7.8
9.7
12.3
12.7
16.0
18.8
17.0
17.8
Interest on public debt
18.6
20.5
22.5
24.3
26.2
28.9
31.7
37.6
43.1
47.4
Current transfers to domestic sectors
72.8
79.1
84.2
104.5
115.1
125.6
145.0
156.9
178.8
200.1
1.9
2.1
1.9
1.9
2.0
3.2
3.9
4.7
7.2
9.6
6.2
2.9
16.6
7.7
15.7
16.4
8.6
15.1
28.4
25.3
Current expenditure
Goods and services
Subsidies
Current transfers to the rest of the world
Net saving
Depreciation and other operating provisions
1.2
1.3
1.5
1.7
1.9
2.1
2.2
2.5
2.8
3.2
Gross saving
7.4
4.2
18.1
9.4
17.6
18.5
10.8
17.6
31.2
28.5
124.1
131.1
147.7
161.7
183.9
203.8
220.4
250.7
283.4
311.4
48.3
51.0
56.8
65.5
73.0
80.4
90.9
107.7
127.0
147.7
Households
37.6
41.0
44.4
50.3
56.9
64.1
72.9
85.1
98.8
114.7
Corporations
10.7
10.0
12.4
15.2
16.1
16.3
18.0
22.6
28.2
33.0
Indirect taxes
76.2
81.6
91.3
98.9
115.7
126.2
134.1
147.9
159.4
171.7
Income from property and entrepreneurship
-0.5
-1.7
-0.6
-2.9
-5.1
-3.1
-5.0
-5.4
-3.7
-8.7
0.1
0.1
0.1
0.2
0.3
0.3
0.4
0.5
0.7
0.7
123.0
133.8
145.2
163.3
180.1
199.3
220.5
243.1
270.3
303.8
62.6
71.8
76.5
85.4
93.9
103.0
111.4
123.7
135.7
154.6
7.1
6.5
7.6
9.6
12.2
12.5
15.8
18.6
16.8
17.6
15.8
17.4
18.8
20.1
21.6
23.7
25.8
30.4
34.6
37.4
35.6
36.0
40.4
46.3
50.4
56.9
63.6
65.7
76.0
84.6
1.9
2.1
1.9
1.9
2.0
3.2
3.9
4.7
7.2
9.6
1.0
-2.7
2.5
-1.6
3.8
4.5
-O.l
7.6
13.1
7.6
0.8
0.9
1.0
1.1
1.3
1.5
1.6
1.8
2.0
2.3
1.8
-1.8
3.5
-0.5
5.1
6.0
1.5
9.4
15.1
9.9
Central Government
Current revenue
Direct taxes
Current transfers from the rest of the world
Current expenditure
Goods and services
Subsidies
Interest on the public debt
Current transfers (to domestic sector)
Current transfers to the rest of the world
Net saving
Depreciation and other operating provisions
Gross saving
1
Government subsidies to railways have been recorded as negative receipts and have therefore, been deducted both from current revenue and from current expenditure.
Source: Belgian memorandum to the OECD.
Table F
Unit
Industrial Production
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
147
93
100
107
109
111
113
119
131
135
139
98
100
104
96
86
83
76
69
63
62
60
92
100
107
110
114
116
123
137
142
146
154
Basic metals
96
100
112
116
116
129
134
148
148
143
159
Metal products
88
100
104
109
113
114
116
135
144
143
145
Non-electrical machinery
Transport equipment
Food, drinks, tobacco
90
100
105
115
129
122
133
154
162
157
160
84
100
99
108
108
115
116
142
150
161
178
97
100
106
107
112
119
121
127
134
140
146
Textiles, clothing and footwear
91
100
103
104
109
102
108
116
116
123
126
94
100
108
113
115
121
139
161
169
183
198
92
100
109
114
120
125
138
150
158
171
191
100
119
115
118
125
118
122
141
142
139
1963 = 100
Industrial production
Mining
Manufacturing
Chemicals, petroleum
Electricity and gas
Construction
Sources: OECD,
Main Economic Indicators,
Industrial
Production
(quarterly supplement); National
Statistics Institute,
Monthly Bulletin.
Table G
Employment, wages and labour market
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
Employment
Civilian labour force
Thousand
3 609
3 622
3 663
3684
3 703
3 710
3 725
3 771
3 823
3 863
3 8791
Civilian Employment"
Wage earners and salaried employees
Thousand
3 533
3 558
3 607
3 619
3 634
3 616
3 614
3 682
3 746
3 786
3 7851
Thousand
2 655
2 704
2 780
2 814
2 837
2 821
2 822
2 895
2 972
3 030
3 0381
Hours worked (by wage earners), in industry,
excluding public utilities
Weekly work hours in manufacturing and building
1963 = 100
98
100
102
99
96
92
90
93
93
90
87
Hours
41.1
41.3
41.3
41.1
40.6
39.9
39.6
39.7
38.7
38.0
37.5
Insured fully unemployed
Insured partly unemployed
Thousand
70.9
59.1
50.4
55.4
61.5
85.3
102.7
85.3
71.3
70.9
86.8
Thousand
38.5
50.2
26.7
36.8
35.7
45.9
40.0
35.3
31.5
37.0
34.2
Unfilled vacancies
Thousand
15.7
17.1
13.1
8.4
7.5
4.4
4.9
11.6
23.9
13.4
8.5
All activities
94
100
110
119
131
139
146
158
174
195
218
of which : Manufacturing
93
100
111
120
131
140
147
158
171
190
217
Labour marhet
Wages
Hourly wage rates
1963 = 100
Hourly earnings
Total industries
92
100
111
120
132
139
146
159
180
204
225»
Mining and quarrying
95
100
110
118
127
134
141
147
182
206
227»
Manufacturing
92
100
112
121
133
141
149
164
181
206
228s
Construction
95
100
114
123
137
144
151
162
186
209
226»
1
Secretariat estimates.
2
Excluding insured unemployed, unemployed put to work by the public sector and those in professional training.
3
Provisional.
Sources» National Statistics Institute, Monthly Bulletin; National Bank of Belgium, Monthly Bulletin; Ministry of Labour and Employment, Labour Review.
Table H
Indices
1962
Implicit GDP price deflator
Private consumption
Gross fixed asset formation
General Government current expenditure
Consumer prices1 Total
Wholesale prices2
oo
:
Prices
1963 = 100
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
97.3
100.0
104.7
110.0
115.1
118.6
121.4
125.7
131.1
138.7
148.1
96.8
100.0
103.6
108.4
112.9
115.7
118.2
121.5
125.4
132.1
139.4
95.2
100.0
106.6
111.5
115.5
120.4
123.4
128.7
141.2
154.4
164.3
100.0
103.7
109.4
115.3
119.8
124.6
130.1
138.3
150.4
164.4
97.9
100.0
104.2
108.4
112.9
116.2
119.3
123.8
128.6
134.2
141.5
Food
98.5
100.0
104.9
109.9
115.3
118.2
120.2
125.8
130.2
132.7
141.4
Non-food products
98.5
100.0
102.9
105.7
109.0
111.0
113.2
115.3
118.4
123.8
127.2
Services
94.3
100.0
106.9
112.8
118.2
125.1
132.1
138.3
148.0
159.7
171.7
Total
97.7
100.0
104.6
105.8
108.2
107.0
107.3
112.6
118.0
117.3
122.1
Manufactures
98.1
100.0
104.4
105.9
108.3
109.5
110.0
113.4
120.4
121.7
125.9
Raw materials
98.6
100.0
106.0
105.4
104.9
99.8
99.4
102.3
109.1
110.8
114.7
Indices of average values
°
Exports
100
100
102
102
105
104
103
108
113
110
111
Imports
100
100
102
101
102
100
101
104
108
109
107
1
Excluding rent
2
New series from 1971
onwards.
Sources: National Statistics Institute, Monthly Bulletin; National Bank of Belgium, Monthly Bulletin; Ministry of Labour and Employment, Labour Review; OECD; Main
Economic Indicators.,
"rVSU«t»--"J_«ÏJ. !*
Table I
Money and Banking
End of period, F billion
1965
1966
1967
1968
1969
1970
1971
1972
318.6
339.7
350.5
376.5
386.3
418.5
465.0
530.2
173.4
178.7
180.1
185.4
185.2
190.7
204.5
225.2
145.2
161.0
170.4
191.1
201.1
227.8
260.5
305.0
81.8
94.7
116.3
134.6
164.0
177.1
208.4
251.8
400.4
434.4
466.8
511.1
550.3
595.6
673.4
782.0
94.8
89.2
97.2
86.1
93.6
104.8
132.5
148.7
200.5
215.9
220.9
248.3
271.5
283.2
296.1
342.7
191.9
203.9
207.9
231.5
252.0
254.4
263.6
298.7*
8.6
12.0
13.0
16.8
19.5
28.8
32.5
44.0
112.5
134.9
156.9
182.5
197.2
219.7
255.7
307.4
-7.4
-5.6
-8.2
-5.8
-12.0
-12.1
-10.9
-16.8
Discount rate
4.75
5.25
4.00
4.50
7.50
6.50
5.50
5.00
Call money rate*
Treasury bills (3 months)
Bonds quoted at Brussels' stock exchange3
3.17
3.88
3.19
2.84
5.40
6.25
3.70
2.48
4.75
5.85
4.40
5.00
8.50
6.95
4.80
4.50
6.47
6.49
6.80
6.64
6.69
7.93
7.78
7.14
Money supply
Money
Currency in circulation
Demand deposits
Quasi-money
Money and quasi-money
Net foreign assets
Claims on the public sector
Government
Other
Claims on households and enterprises1
Other
Interest rates
1
2
3
Including public enterprises.
Dally average.
Average weighted rate, beginning of period.
4
Provisional.
Source: National Bank of Belgium, Monthly Bulletin.
Table J
Area Breakdown of Foreign Trade
Million US S
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
4 344
3 732
4 853
4 267
5 618
4 922
6 381
7 037
6157
7 216
10069
9 006
11595
5 589
6 833
6 004
8 161
OECD
10 301
12 301
10 953
15 995
14 291
EEC
Exports, fob
World
2 779
3 311
3 895
4 363
4 713
4 864
5 701
7 339
8 506
9 009
11839
France
537
705
846
935
1104
1245
1515
2113
2 299
2 499
3 254
Netherlands
986
1093
1282
1411
1519
1509
1720
1947
2 251
2 333
2 989
Germany
Italy
United Kingdom
764
896
1 158
1 394
1 440
1 395
1 709
2 303
2 854
3 070
3 992
172
243
212
217
227
283
305
432
546
538
729
216
278
276
308
321
333
356
402
419
443
699
USA
414
411
450
533
591
588
770
695
696
834
962
Other
539
545
577
693
700
705
745
972
1099
1 110
1486
585
555
659
744
782
836
893
998
1234
1286
1623
Sino-Soviet area
95
84
85
111
141
178
166
164
194
190
Other developed
Developing
Unspecified
27
30
39
40
32
36
42
42
60
62
464
440
533
586
614
622
686
791
981
1034
27
31
37
48
47
44
52
65
60
62
81
15 499
Non-OECD
oo
61
Imports, cif
World
4 472
5126
5 953
6 373
7171
7165
8 304
9 984
11353
12 675
OECD
3 592
4113
4 782
5 164
5 802
5 795
6 637
8133
9 374
10 723
13 203
EEC
2 677
3138
3 661
3 996
4 596
4 552
5 226
6 500
7 409
8 839
11059
France
665
769
876
992
1115
1062
1259
1589
1945
2 289
3 005
Netherlands
673
754
880
958
1049
1081
1212
1425
1661
2 038
2 555
Germany
Italy
851
984
1 174
1 262
1 552
1 518
1 726
2 316
2 649
3 159
3 760
134
177
225
252
293
323
356
402
428
507
644
United Kingdom
367
421
454
485
531
502
602
694
657
785
988
USA
451
472
525
549
569
589
687
764
998
818
854
Other
464
503
596
619
637
654
724
869
967
1066
1290
877
1010
1 167
1207
1365
1363
1661
1848
1977
1937
2 291
Sino-Soviet area
107
123
132
136
152
150
164
170
189
237
292
Other developed
Developing
Unspecified
80
79
92
96
112
94
107
123
110
128
170
725
805
937
975
1 106
1121
1390
1554
1678
1571
1829
3
3
4
2
4
7
6
Non-OECD
Source: OECD, Foreign Trade Statistics, Series A.
3
2
15
5
Table K
Commodity Breakdown of Foreign Trade
Million
US $
1961
1962
1963
1964
1965
1966
1967
1968
171
224
581
1969
1970
1971
Exports, fob
SITC
sections
1041
290
295
388
420
505
723
875
18
22
28
34
43
46
49
59
56
58
61
Crude materials, inedible, except fuels
306
329
361
372
399
418
394
414
481
500
442
158
166
218
221
207
189
195
255
332
310
333
14
14
12
13
16
18
21
24
27
37
47
249
252
288
318
394
422
477
636
809
985
1179
2 098
2 250
2 377
2 779
3 048
3 300
3 330
3 839
4 629
5 225
5 235
596
709
839
1042
1285
1333
1370
1577
2 047
2467
2 754
0
Food and live animals
1
Beverages and tobacco
2
3
Mineral fuels, lubricants and related materials
4
Animal and vegetable oils and fats
5
Chemicals
6
7
Manufactured goods classified chiefly by material
Machinery and transport equipment
8
Miscellaneous manufactured articles
230
277
325
418
477
551
568
647
796
930
1117
3 935
4 344
4 853
5 618
6 382
6 829
7 032
8 164
10 065
11609
12416
1384
oo
Total
Imports, cif
SITC
sections
0
Food and live animals
441
496
534
626
718
785
862
892
1036
1218
1
Beverages and tobacco
68
69
81
94
108
108
120
117
123
139
170
2
3
4
Crude materials, inedible, except fuels
Mineral fuels, lubricants and related materials
Animal and vegetable oils and fats
827
815
817
990
998
1042
952
1 136
1248
1336
1266
410
452
559
585
586
560
615
793
893
1035
1226
27
24
28
34
41
38
39
43
54
80
93
5
Chemicals
264
280
320
374
429
467
517
609
725
827
983
6
7
Manufactured goods classified chiefly by material
Machinery and transport equipment
1012
1079
1215
1437
1534
1910
1846
2 234
2 694
2 886
3148
929
1078
1236
1411
1507
1750
1697
1886
2451
2 974
3 528
8
Miscellaneous manufactured articles
242
269
314
379
430
519
600
752
851
1074
4 231
4 577
5126
5 952
6 374
7176
8 333
9 989
11362
12 887
Total
Source: OECD, Foreign Trade Statistics, Series B.
501
7174
Table L
BLEU Balance of Payments
Billions of Francs
Trade balance
Non monetary gold
Net services
Transfers, net
a) private
b) public
Current balance
Long term capital: private
1965
1966
1967
1968
1969
1970
39.4
6.3
-4.2
8.5
-0.7
9.2
-2.0
-1.5
-2.4
-1.3
-0.4
3.8
2.8
7.2
7.0
1.2
-0.5
-1.7
-3.5
-3.6
2.5
1.8
1.7
3.8
-3.0
-3.5
-5.2
7.6
-4.6
1971
41.3
1972
45.7
0.1
0.3
4.9
8.1
13.0
-6.3
-8.1
-8.0
-9.3
5.8
6.6
6.8
6.1
-7.4
-12.1
-14.7
-14.8
-15.4
9.8
1.4
3.7
36.2
41.5
49.7
5.7
0.3
7.5
-4.3
14.5
-13.3
-9.3
-19.7
-4.5
-4.1
-5.1
-1.4
-1.9
-3.4
-5.8
-5.4
-1.5
3.1
-2.6
0.6
-1.2
-4.3
-1.0
-5.7
7.3
-5.3
9.6
-3.7
15.1
15.2
25.4
18.9
Private monetary institutions short term capital
0.7
7.0
2.8
-10.5
-9.7
-3.8
-7.9
7.4
Balance on official settlements
8.0
1.7
-14.2
5.4
11.4
17.5
26.3
3.5
3.5
3.5
-2.3
-0.9
-0.4
-5.8
4.1
8.2
-1.4
-12.5
public
Short term capital plus errors and omissions
Balance on non-monetary transactions
Allocation of SDRs
Other
Change in reserves
Gold
Convertible foreign exchange
Net IMF position
5.7
0.8
12.0
-20.0
9.5
23.1
19.6
17.3
5.4
-1.7
-2.2
2.2
-0.2
-2.5
3.7
-1.8
-5.1
-0.5
16.2
-20.9
17.0
3.6
-4.6
17.4
5.4
3.0
-2.0
-1.3
-7.3
11.8
10.4
-4.1
10.2
10.1
5.8
SDRs
Sources: National Bank of Belgium, Monthly Bulletin; and Belgian Memorandum to the OECD.
Table M
Luxembourg. -
Output and demand
Billions of Francs
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
29.8
Current prices
Private consumption
Public consumption
Gross fixed asset formation
Changes in stocks
National expenditure
Exports of goods and services
Imports of goods and services
Gross domestic product at market prices
14.6
15.4
16.6
18.7
20.2
21.2
21.6
23.1
24.8
27.4
2.6
2.9
3.5
3.5
3.7
4.0
4.2
4.6
4.9
5.4
6.1
6.3
7.1
8.8
11.3
9.8
10.5
13.3
15.8
9.8
8.9
9.0
0.3
0.3
0.1
-0.2
0.2
0.1
0
0.2
0.1
0
0.3
23.8
25.8
29.1
33.4
33.8
35.1
34.8
36.9
40.3
46.1
52.1
22.3
21.5
21.7
25.1
26.6
27.1
27.1
30.8
37.4
42.4
.
.
20.5
21.2
23.1
26.6
27.1
27.3
26.2
28.6
32.7
36.7
.
,
25.6
26.0
27.7
31.8
33.4
34.9
35.7
39.0
45.0
51.8
52.9
1963 prices
oo
15.1
15.9
16.6
17.9
18.5
18.7
18.7
19.4
20.3
21.5
22.3
3.4
3.4
3.5
3.5
3.5
3.7
3.8
4.0
4.1
4.2
4.3
Gross fixed asset formation
7.2
7.7
8.8
10.2
8.6
8.4
7.6
7.2
7.7
9.0
9.7
Changes in stocks
0.3
0.3
0.1
-0.2
0.2
0.1
0
0.2
0.1
0
0.3
26.0
27.3
29.1
31.4
30.8
30.9
30.2
30.8
32.3
34.7
36.6
21.7
21.4
21.7
24.4
25.7
26.0
25.6
29.1
32.6
33.0
,
.
21.0
21.5
23.1
26.1
26.1
26.2
25.0
27.4
30.0
31.6
,
.
26.8
27.2
27.7
29.7
30.3
30.8
30.8
32.5
34.9
36.1
Private consumption
Public consumption
National expenditure
Exports of goods and services
Imports of goods and services
Gross domestic product at market prices
Nan
Data may not add because of rounding.
Source: Luxembourg Submission to the OECD,
36.3
Table N
Luxembourg.
Main aggregates
Billions of Francs
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
52.9
Current prices
Gross domestic product at market prices
Factor income from the rest of the world
25.6
26.0
27.7
31.8
33.4
34.9
35.7
39.0
45.0
51.8
0.4
0.5
0.5
0.6
0.8
0.9
0.9
1.0
1.1
1.4
0.7
0.7
0.7
0.8
1.1
1.1
1.2
1.3
1.6
2.1
Gross national product at market prices
Depreciation
25.3
25.8
27.5
31.6
33.1
34.7
35.4
38.7
44.5
51.0
3.5
3.6
3.8
4.6
5.2
5.4
5.8
6.7
7.8
8.5
Net national product at market prices
Factor income to the rest of the world
52.2
21.8
22.2
23.7
27.0
27.9
29.3
29.6
32.0
36.8
42.5
Indirect taxes
2.5
2.6
2.7
3.0
3.5
3.9
4.0
4.3
4.7
5.3
Subsidies
0.7
0.7
0.7
1.1
1.3
1.4
1.4
1.4
1.2
1.2
20.0
20.3
21.7
25.0
25.6
26.8
27.0
29.2
33.3
38.4
39.2
36.3
Net national product at factor cost
(= National income)
oo
1963 prices
Gross domestic product at market prices
Factor income from the rest of the world
Factor income to the rest of the world
Gross national product at market prices
Depreciation
Net national product at market prices
Source: Luxembourg Submission to the OECD.
26.8
27.2
27.7
29.7
30.3
30.8
30.8
32.5
34.9
36.1
0.4
0.5
0.5
0.6
0.8
0.8
0.8
1.0
1.0
1.3
0.7
0.7
0.7
0.8
1.0
1.1
1.1
1.3
1.3
1.5
26.5
27.0
27.5
29.5
30.1
30.5
30.5
32.2
34.6
35.9
3.7
3.7
3.8
4.1
4.2
4.2
4.2
4.4
4.8
5.0
5.0
22.9
23.3
23.7
25.4
25.9
26.3
26.3
27.7
29.9
30.9
31.1
36.1
INTERNATIONAL
COMPARISONS
BASIC STATISTICS
Australia
Austria
Belgium
Canada
Denmark
Finland
France
Germany
Greece
Iceland
INTERNATIONAL COMPARISONS
Ireland
Italy
Japan
Luxem¬
Nether¬
bourg
lands
Switzer¬
Norway
Portugal
Spain
Sweden
land
Turkey
United
United
Yugo¬
Kingdom
States
slavia
1
2
Mid-1971
Thousands
1961 to 1971
%
1971
Thousands
Population
Net average annual increase
12 728
7 456
1.93
0.53
9 6733
0.52
21595
4 968
1.69
0.75
4 6281
0.35
51250
61284
1.05
0.87
Total civilian
Agriculture
Industry '
|% of total
Other
53 899
104 650
342
13194
3 905
8 870
34 003
8 105
6 324
36160
55 668
207 049
20 550
0.53
0.65
1.07
0.76
1.26
0.77
-0.07
1.06
0.75
1.41
2.51
0.50
1.21
1.00
6
7 According to the definition used in OECD Labour Force Statistics:
mining, manufacturing, construction and utilities (electricity, gas and
Production
GNP per head
GDP by sector: Agriculture
Industry
$
1971
1971
>%
of total
Other
GNP *» annual volume growth
1970
1965 to
1970
1
%
3 788
8 079
2 338
2 139
20 518
26 673
3 275
79"
1063
18 700
51 140
148
4604
1 497 »
3 033
12 442
3 860
3 063
(13 639) »
24 329
79120
17.3
4.4
7.5
10.9
21.2
13.4
8.4
37.3
18.8"
26.5
19.5
15.9
10.2
6.9
13.9»
31.1
28.6
7.3
7.2
2.7
4.3
38.8
41.9
44.2
31.0
37.2
35.2
38.6
50.1
24.6
36.8 »
30.9
44.1
36.0
47.3
38.0
37.3 »
36.3
37.5
37.6
47.5
(71.5)»
(11.8)»
(16.7)»
61.5
51.9
48.0
43.6
3 180
3 010
4 240
3500
2 430
7.2 '<i?
6.0 »
3.9
4.4
7.5
13.7
6.0 "»
38 j a 4 is
49.0 »
43.8
37.0
38.7
42.3
54.72415
45.0 "
52.3
58.6
53.8
44.0
3 080
2 210
41.5
3 550
7.9
5.8" "
5.1
4.6
4.6*
4.4
5.0
5.8
55.1
48.8»
32.6
33.9
54.6
3 310
770
1070
11.5
5.9 »
4.1»
6.2»
5.3
16.2
13.5
4.4 "
30.5
53.5 "
3.1
42.5
48.1
1880
43.7 »
3.2*
36.4
16.4
45.6 » »
6.1
42.6
1 550
48.4 1113
7.1
2 350 »
1220
19.5
4.3 * "
44.4 "
38.1
2.8 "
6.0
2150
3 050
2 820
4400
45.3
3 880
6.4 10
45.7
51.6
water).
7 651»
»
50.4
9
10
(31.0)
(64.7)
49.6
Doctors, per 1 000 inhabitants
Gross fixed investment "
Total
S
1971
1969
1970
% of GNP
Number
1969
1966-70 average
(% of GNP
Machinery and equipment
Other construction
Gross iaving
Public sector »°
Total current revenue
4.00»
11.2
>
Residential construction
1780
1 810
1 240
4.97 »
4.80
4.7"
6.1
1 1
12
13
1970.
561 a
14
Including slock appreciation.
30.2 »
2.9»
2.9"
19.3 »
15
Fiscal year-Beginning July 1st.
2460
360
5 160
35.6
40.5
44.3 »
56.9 13
42.0 13
37.8
44.3
34.4
39.3 »
49.6
25.7 «
43.5 »
33.1 »
41.1 »
16
1962-1967.
48.0
48.0
49.8 »
39.1 »
51.8 »
56.9
39.5
52.1
56.2 »
44.0 »
44.1 «
53.6 »
63.9 "
39.6 »
17
1965.
8.0
6.7
1.5
5.1
10.3
3.5
5.6
3.7
7.5
5.9
4.6*
4.4
5.5
2.0*
-0.6
4.6
7.0
1.8
4.0
6.0
12.1
3.6
5.2
4.6
6.0
6.5
3.9*
3.8
7.0
2.4*
3.2
2 080
1 280
1870
1 910
6.00
6.50
4.50
3.60
9.1
10.6
8.1
730"
1040
1860
4.60"
2.00
12.9
306
162
211
312
219
137
245
237
227
192
216
294-
266
221
201 a
272
312
193
211
452
339
249
172
225
120
1.18 i»
1.85
1.54
1.39
1.46 I8
1.04
1.23
1.54
1.49
17.4 * 15
27.8
21.2
23.5
23.2
24.6
25.8
25.4
27.2
22
10*
4.4
6.5
122
200
181
4.70 »
'
1
172
1200
1120
1790
4.30
4.00
5.00
9.3
13.7
187
85
267
194
193
47
71
279
203
78
135
537
.482
16
587
36
0.84
1.33
1.24
1.61
0.44
1.18»
1.65
1.10
29.0
21.6
36.6
24.1
27.4
28.9
18.6
24.8
24.0
27.2
25.6
18.6
16.6 »
7.0
12.9
14.7
7.6
13.0
8.2
9.2
7.1"
6.5
4.9
5.3
4.8
3.4
4.2
6.1
6.9
3.5
3.3
9.7
10.8
5.9
6.1
11.4
11.4
11.0
8.0
10.5
6.6
5.5
6.7
6.0
3.9
6.2
7.9
8.5»»
9.9
15.0
7.3
37.5»
38.0
37.2 »
38.4
27.2»
293
312
294
33.8 »
215
30.1 "
17
5.6
223»
208
9.2
12.2
220
9.4
174
38
7.7
7.6
9.5
5.3
267
412
19.8 V
23.4
38.7
28.1 »
26.8
28.5
22.7
23.1
28.4 *»
18.6*»
18.5
17.9
33.6
33.5
21.7
34.8"
44.1»
47.8
22.6
49.1 31
26.5»
19.5»
39.7»
30.3
18
1968.
19
1966.
20'
1964.
21
Including Luxembourg.
22
Dwellings started.
23
At constant (1963) prices.
24
Excluding transfer costs of land and existing assets.
25
1964-1968.
26 Government and government enterprise expenditure on machinery
and equipment is included in government current expenditure.
27 " Other construction " included under " machinery and equip¬
ment ". Work in progress on heavy equipment and ships for the domestic
35
1.39
5.6
36.3
1.3 s
432
260
8.8
35.2
213
6.2
1.25
10.2
35.9 13
4
7.0
328
7.0
28.9
221
6.5
1.06
4.4
V, of GNP
4.8
251
11.8
1971
10.5
275 «
4.59»
1.13
3.6
21.0"
6.30
171
181
9.5
26.9
3 230
4.97
1.79
10.4
26.5
1 510
3.40»
1.09
7.0
28.5
230»
4.10
1.34 1S
5.1
18.9
2 230
104
347
38
24.7
7.91 "
4.7
15.8 »»
23.5
2 390
2.20
9.4
12.0
28.3
720
580
1.44»
9.1
3.7
26.3
6.30
5.3
8.9
% of GNP
1 770
14.4
4.8
1966-70 average
6.50 »
6.6
861
7.9
9.1
1600
88
market are included in fixed asset formation.
28
" Other construction " included in " residential construction ".
:.
32.6 «
29
30
Including transfer costs of land.
General government.
31
Including depreciation.
32
Industry.
33
34
Monthly.
Manufacturing.
35
Including bonuses.
36
37
38
39
Hourly rates in manufacturing.
Hourly wages rales, unskilled workers.
Hourly rates in manufacturing, excluding family allowances.
Monthly earnings in manufacturing. Cash payments including
bonuses, regular workers.
40 Hourly rates in industry, males.
41
Wages /Prices
Hourly earnings"
Consumer prices
!
GNP deflator
Foreign trade
Imports *6
5.3 3t
Annual increase 1965 to 70 j
%
!
1970
) $ million »
j% of GNP
Current balance
7.4"
9.5 3*
13.5 «
10.8 «
8.2»
14.7 »
8.9 *°
8.8"
9.7"
12.8*»
8.9 *3
5.2"
6.7"
5.3"
3.2
3.5
3.9
6.4
4.7
4.3
2.7
2.5
12.9
5.3
2.9
5.5
3.0
4.9
4.9
6.4
5.1
4.4
3.5
8.1
4.6
4.2
3.6
3.3
3.4
4.1
6.3
5.6
4.8
3.4
2.6
12.4
5.8
3.4
4.7
4.9
4.8
5.0
4.8
5.1
4.3
4.0
5.5
4.6
4.0
4 350
11 680
5000
3 130
24580
40 270
230
1 730
18170
20 927
810
16 700
5000
1 910
5 500
6 080 «
6 280»
30.3
45.1
32.1
30.6
16.6
21.5
48.3
44.5
19.6
10.5
81.1
53.4
43.9
30.6
17.1
5 678 «
15.8
15 800 "
25.3
23.8
46
47
48
1 120
28 250
59 310
1 991 »
33.4
8.9
23.3
6.0
21.0»
7120*
940
30 520
62 900
1 875»
37.8
7.5
25.2
6.4
19.7»
1 530
18 790
23 073
880
16 310
4 830
1540
4940
23.1
12.9
50.0
39.3
20.2
11.7
88.0
52.2
42.4
24.6
15.3
23.1
-0.4
1.0
-3.6
-5.7
-2.9
2.5
0.8
-0.6
-0.5
2.5
-1.2
-0.6
1.6
-1.5
0.2
0.1
38.8
53.5
25.0
33.4
54.2
42.5
77.3
25.0
28.2
109.8
65.8
15.7
81.7
70.9
27.5
28.9
6.1
3 132
11 507
406
17
926
9S7
856
-1371
1004
596
1.02
0.88
0.69
[0.93]
1.14
0.67
10.1
10.6
11.4
10.8
7.2
11.9
10.6
10.9
11.6
11.5
10.3
10.6
9.6
10.8
11.5
8.5
10.9
10.1
11.1
10.2
10.6
10.6
10.5
11.1
10.8
9.8
9.8
-1.0
-7.9
3.8
2.8
-8.0
11.9
2.3
10.5
7.2
-6.3
2.0
11.2
-0.9
1.3
3.3
3.0
-8.7
-2.0
1.0
1.0
0.3
1.2
2.8
7.9
0.8
0.5
1.1
3.4
-0.1
-0.3
-4.2
-2.9
-2.1
4540
2900
25 140
43 270
24.8
29.1
28.3
17.0
-0.5
70.7
56.4
1.7 21
-0.3
-2.6
-1.2
27.4 ai
36.9
15.9
25.6
1 704
-468
1 525 »>
87
364
-162
1.00
0.56
1.03
0.82
0.80
»/
8.3
10.7
12.2
16.5
10.9
11.5
11.5
13.5
./
/o
1.2
-0.8
-6.1 "
-5.7
-1.5
0.5»
-2.0
-1.6
15 490 >»
23.0
]
-306
-165
0.85
0.96
1585
343
639
1.63
0.51
1.56
*»
1 703 »
5 920 1S
44
45
ia6
240
-3.3 '5
5 631 «
1930»
42
43
1 090»
48.2
million
9.2"
8.4
3.1
30.5
0/
/©
S
10.9 "
15.6
% of GNP
1966-70 average
Official reserves47, end-1971: per cent of imports of goods in 1971
Change
May 1972 - May 1973
7.3"
12 470
j % of GNP
Balance of payments
8.2
4 390
\ S million *
Exports *
8.2"
% of GNP
1971
51
5Ï
51
51
»i
5>
53
Males.
Manufacturing, including salaried employees.
Mining and manufacturing, males.
Hourly rates.
Hourly rates in manufacturing, males.
Goods and services, including factor income.
Including reserve position iq the IMF and special drawing rights.
April 1972 - April 1973.
49
1965-1969.
30
According to the DAC definition.
52 Considered as a developing country for purposes of DAC reporting.
53 ' Values, percentage change.
Figures are subject to many limiting
factors. For an explanation see OECD Economic Outlook, simple
definition, December 1970, pp. 65 and 69.
54 The growth which would have occurred in a country's exports if it
had exactly maintained its share in total OECD exports to each of 19 broad
geographical zones,
55 The difference between the growth rates of markets and exports.
March
Export performance «
Growth of markets "
1970 to 1971
}
1960-61 to 1970-71 (average))
Gains or losses
of market shares «
1970 to 19^1
)
1960-61 to 1970-71 (average))
14.6
1
12.4
13.8
11.9
r
1972 - March 1973.
si
Note
11.1
Including flows to multilateral
agencies and grants by voluntary agencies.
51
Not Development Assistance Committee member.
56
Net flow of resources to developing countries50
GDP by sector for Switzerland have been
GDP at market prices.
Net domestic product.
50.0
8.90
10.2
1967.
5.4
2 450
8.2
At current prices and exchange rates.
The estimates for
published in " La Vie économique ", November 1969.
Indicators of living standards
Private consumption per head
Expenditure on education
Dwellings completed, per 1 000 inhabitants
Passenger cars, per 1 000 inhabitants
Television sets, per 1 000 inhabitants
Telephones, per 1 000 inhabitants
Census results on 14.3.1971.
2 971
1.42
3 176
51.4
Private and socialised sector.
2.06
0.43
8.0
40.8
Adjusted data on the census taken on 31.12.1970.
GDP in purchasers' values.
8 769»
5 425
53.2
1969.
3
4
5
i
Employment
Does not include total net migration between Finland and the
other Nordic countries.
Figures within brackets are estimates by the OECD Secretariat.
Sources: Common to all subjects and countries, except Yugoslavia (for
Special national sources see above): OECD: Labour Force Statistics,
Main Economic Indicators, National Accounts, Balance of Payments,
Observer, DAC and Statistics of Foreign Trade (Scries A); Office Statis¬
tique des Communautés Européennes, Statistiques de base de la Commu¬
nauté; IMF, Internationa] Financial Statistics ; UN, Statistical Yearbook.
11.5
16]
il
I
?a
OCCASIONAL ECONOMIC STUDIES
Occasional studies, prepared under the auspices of the Department of Economics and
Statistics, are published as a supplement to the OECD Economic Outlook. The studies
are also available on direct order. The following titles have appeared in the series
to date : .
«yrl«y
Till*
AMttMT
OES1
Invisibles in the 1960'j;
Eduardo Merigo and Stephen Potter;
July 1970
OES2
Public Expenditure Trends ;
Mary Garin-Painter; July 1970
OES3
Analysis of Competition in Export and
Raoul Gross and Michael Keating;
Domestic Markets;
December 1970
OECD Trade Model: 1970
Version;
Frans Meyer-zu-Schlochtern and
AkiraYajima, December.1970
Techniques of Measuring the Effects
of Fiscal Policy;
JoergenLotz; July 1971
OES4
OES5
OES6
OES7
OES8
The Swiss Balance of Payments
in the 1960s;
Andrea Bohho; July 1971
Capital Movements in the OECD AreaAn Econometric Analysis ;
William H. Branson and
Raymond D. Hill, Jr. ; December 1971
Effects of Monetary Policy on the
Gordon Fisher
United States Economy A Survey of Econometric Evidence.
and David Sheppard ;
December 1972
Orders for single copies of these publications can be filled at most of the OECD Sales
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Please send me the OCCASIONAL ECONOMIC STUDIES indicated below:
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STATISTICAL PUBLICATIONS
of the department
of economics and statistics
MAIN ECONOMIC INDICATORS
This monthly publication, based on the most up-to-date techniques of tabular and graphical
presentation, is designed to provide at a glance a picture of the most recent changes in the
economy of the O.E.C.D. countries, and a collection of international statistics on the economic
developments affecting the O.E.C.D. area in the past few years.
The indicators selected cover national accounts, industrial production, deliveries, stocks and
orders,
construction,
retail
sales,
labour,
interest rates, trade and payments.
wages,
prices,
domestic
and
foreign
Quarterly supplements provide additional
finance,
material on
consumer prices and industrial production.
FOREIGN TRADE STATISTICS BULLETINS:
SERIES A, B, and C
Series A - Overall trade by countries (quarterly) provides an overall picture of the total
trade of O.E.C.D. countries (without commodity breakdown) analysed into flows with countries
and country groupings of origin and destination.
The analysis is in terms of a standard geographical classification, in tables covering the latest
available four years, twelve quarters and sixteen months. A monthly supplement brings the
tables up to date in between successive quarterly issues.
Series B - Trade by commodities. Analytical abstracts (quarterly) is designed for a
general analysis of the pattern of trade flows of O.E.C.D. countries, individually and in groups!
by main commodity categories and partner areas and countries. Both the commodity categories
and the partner countries and areas are defined in terms of standard nomenclatures, but for
each reporting country only those which are significant are shown.
The series is issued in
six booklets, each covering several countries, in the order of availability of the basic data.
Series C - Trade by commodities. Market summaries (half-yearly) provides detailed infor¬
mation on the trade of O.E.C.D. countries by main commodities and partner countries.
The
series appears in three volumes, respectively covering trade by major commodity categories
(values only) and by S.I.T.C. groups,
sub-groups and items (quantities and
values,
one
volume for exports and one for imports).
Data are arranged in synoptic tables, bringing together the countries comprising the market
for a given commodity, as outlets and/or sources of supply, both within the O.E.C.D. area
and in
trade between O.E.C.D. countries and the rest of the world.
STATISTICAL YEARBOOKS
Historical Statistics (every two years) bring together, in two volumes, quarterly and monthly
data over the last decade for all series shown in Main Economic Indicators and
its Industrial
Production supplement, respectively.
In addition, both volumes show annual data over a longer time-span, and a selection of cal¬
culated rates of change.
inserted into current
In between two issues they are kept
up to date by supplements
issues of Main Economic Indicators.
National Accounts of O.E.C.D. countries (annual) shows for each O.E.C.D. country and for
major groups of Member countries the main national accounting aggregates, in a standardized
form, over the last decade (occasionally, over a longer time-span).
In addition, special tables contain various analytical measurements, such as growth triangles,
price and volumes indices, and ratios of selected aggregates to totals.
Labour force statistics (annual) gives an overall view, on the basis of standardized data,
of the manpower and employment situation over the last decade in the O.E.C.D. countries.
Data are shown, in particular, for total population, components of population
changes,
structures, total and civilian manpower, unemployment, and employment (both in
age
total and
with a breakdown by activity and professional status and in the case of wage and salary
earners by industry).
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