Transcript Projection 2000

An assessment of Belgian NRP macroeconomic objectives
in a medium term framework
Francis Bossier and Igor Lebrun
38th CMTEA, Kranjska Gora,14-15 June 2007
Federal
Planning Bureau
Economic analyses and forecasts
1
The economic outlook for the Belgian economy
•
Detailed macroeconomic projection
•
Forecast for current year based on a economic budget
•
Simulation with five year horizon using the HERMES model
•
Unchanged policy scenario with regard to fiscal and social policies
•
International scenario produced by international organizations
•
Exogenous variables generated outside the core model
Starting point for variants: impact of higher crude oil prices, effects of
various tax policies, effects of labour market reforms,…
2
Key macroeconomic results for the medium-term outlook
Demand-side
2001-2006
2007-2012
Potential export markets
5.4
6.9
GDP
1.7
2.1
Private consumption
1.3
1.8
Gross fixed capital formation
2.2
2.7
Net exports
(contribution to GDP)
0.2
0.2
Private consumption prices
2.1
1.9
Domestic employment
0.7
0.9
3
Key macroeconomic results for the medium-term outlook
Supply-side
2001-2006
2007-2012
Potential GDP
2.1
2.0
Labour productivity
1.1
1.4
Capital deepening
0.3
0.5
TFP
0.8
0.9
1.0
0.6
Labour supply
1.0
0.4
NAIRU
0.0
0.2
Potential employment
4
Output gap
in % of potential GDP
3
2
1
0
-1
-2
-3
-4
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
Are effects of structural reforms introduced in the baseline?
Yes, when data and methodology available (analysis of micro data,
survey, single-equation or satellite model).
Examples:
• Labour market reforms:


•
Impact of restrictive access conditions to early retirement
Impact of pension bonus on employment
Reforms of Network industries (telecom, energy):


Impact of liberalisation on production structures
Impact of increased competition on prices and trade
When considered too uncertain, no impact is introduced
6
Major quantitative objectives of the Belgian NRP
•
Objective 1: continue fiscal consolidation


•
Objective 2: reduce labour costs

•

participation rate of older workers increasing faster than the average
(EU15) by 2010
an employment rate verging on 70%
Objective 4: boost R&D and continue reforms in network industries

•
decrease tax wedge on wages by 2.2% of GDP between 2005 and 2010
Objective 3: reform labour market

•
debt ratio under 60% in 2014
budget surplus of at least 1.0% in 2010
3% GDP investment in R&D by 2010
Objective 5: reduce environmental nuisance

reducing CO2 emissions by 7.5% for the 2008-2012 period compared
with 1990
7
Some key results of the medium term
projection in relation with the NRP
objectives
8
General government financing capacity
1
1
-1
-1
-3
-3
-5
-5
-7
-7
-9
-9
-11
-11
-13
-13
-15
-15
2010
2005
2000
1995
1990
1985
1980
Billion of euros
% of GDP
Billion of euros
Billion of euros and % of GDP
% of GDP
9
Primary surplus and interest payments
in % of GDP
10
9
8
7
6
5
4
3
1994
1997
2000
2003
Primary surplus
2006
2009
2012
10
Primary surplus and interest payments
in % of GDP
10
9
8
7
6
5
4
3
1994
1997
2000
2003
Primary surplus
2006
Interest charges
2009
2012
11
Belgian Stability Programme
in % of GDP
2006
2007
2008
2009
2010
Belgian Stability Programme
0,0
0,3
0,5
0,7
0,9
Budget balance
0,2
0,1
-0,5
-0,3
-0,1
Deviation
0,2
-0,2
-1,0
-1,0
-1,0
12
Primary surplus required to stabilise the public debt
in % of GDP
8
7
6
5
4
3
2
1
0
-1
1995
Primary surplus
2000
2005
2010
Primary surplus required to stabilize the public debt
13
Public debt
350
In % of GDP
130
300
120
250
110
100
200
90
In billion of euros
140
150
80
100
70
60
50
2010
Euro area (% of GDP)
2005
2000
1995
1990
1985
1980
Billion of euros
% of GDP
14
Taxes on labour and total tax burden
in % of GDP
50
45
40
35
30
25
20
1995
1998
2001
2004
Fiscal and parafiscal pressure on labour
2007
2010
Total tax burden
15
Employment evolution and employment rate
100
66
75
64
62
50
60
25
58
0
56
-25
54
-50
52
-75
50
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
Employment evolution (thousands- LHS)
Employment rate (RHS)
16
Employment evolution and employment rate
100
66
75
64
62
50
60
25
58
0
56
-25
54
-50
52
-75
50
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
Employment evolution (thousands- LHS)
Employment rate (RHS)
17
Older worker labour market participation
70
65
60
55
50
45
40
35
30
Total population
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
25
18
Older worker labour market participation
70
65
60
55
50
45
40
35
30
Total population
People 55 and over
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
25
19
Registered and structural unemployment
16
15
14
13
12
11
10
9
8
7
6
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
Registered unemployment
20
Registered and structural unemployment
16
15
14
13
12
11
10
9
8
7
6
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
Registered unemployment
Structural unemployment
21
Energy intensity of GDP
index 2000 = 100
160
150
140
130
120
110
100
90
80
70
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
22
Greenhouse Gas emissions
in million of tons of CO2 equivalent
160
155
150
145
140
135
130
125
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
23
Greenhouse Gas emissions
in million of tons of CO2 equivalent
160
155
150
145
140
135
Kyoto objective
130
125
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
24
Easing the fiscal and parafiscal pressure on labour

NRP objective: reduction by 2.2 of GDP between 2005 and 2010

Projection 2007-2012: reduction by only 0.75% of GDP

Additional effort- equal to 1.45% of GDP- to be planned.

Consequences of this additional effort simulated with a
macroeconomic model

Actions simulated: a cut in indirect labour costs (reduction of
employers and employees social security contributions)
Option 1: General reduction;
Option 2: Employers’ social security contributions reductions
concentrated on low wages
25
Simulation results: effects of the variant on the main
macroeconomic indicators
differences, in %, w.r.t. the baseline
Option I
2007
2010
2012
GDP
0.02
0.36
0.53
Employment (%)
0.03
0.47
0.73
Employment (thousands)
1.34
20.58
32.65
of which: older workers
0.14
2.06
3.29
Employment rate
0.02
0.29
0.47
Employment rate (level)
62.5
64.1
65.2
- Billion of euros
-0.37
-3.53
-3.67
- % of GDP
-0.11
-0.96
-0.92
0.01
0.19
0.30
Public finances
GHG emissions
26
Simulation results: effects of the variant on the main
macroeconomic indicators
differences, in %, w.r.t. the baseline
Option II
2007
2010
2012
GDP
0.03
0.41
0.66
Employment (%)
0.04
0.63
1.11
Employment (thousands)
1.66
27.73
49.84
of which: older workers
0.11
1.96
3.09
Employment rate
0.02
0.40
0.71
Employment rate (level)
62.6
64.2
65.5
- Billion of euros
-0.38
-3.82
-4.19
- % of GDP
-0.12
-1.04
-1.05
0.01
0.16
0.29
Public finances
GHG emissions
27
Conclusions

Sizable efforts still to be made in order to comply with the Belgian
NRP objectives;

Contradictory objectives to be reconciled;

Targeted reductions in labour costs more efficient to meet labour
market objectives;

Further budgetary choices to be made;

But higher growth through structural reforms could ease the
process.
28
END
Federal
Planning Bureau
Economic analyses and forecasts
29