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Economic growth increased in 2017 and is projected to stabilise at 1.7% in 2018 and 2019. Private consumption will be an important driver of growth. Government investment will be strong in 2018 and private investment will support growth. Inflation will increase due to tightening labour markets and higher wages.
The fiscal stance will provide modest support for growth in 2018 and 2019, due to planned reductions in labour taxation. Raising skills and work opportunities for disadvantaged groups would make growth more inclusive. Re-orientating public spending towards education and physical infrastructure investment would enhance productivity growth and inclusiveness.
Public debt, at 105.7% of GDP in 2016, remains high. To ensure sustainability, it is important that the government sticks to its medium-term consolidation path. Financial sector vulnerabilities are limited, with stress tests indicating resilience in the banking sector. However, prolonged low interest rates could create risks. House prices and mortgage lending have already increased considerably. Further improving macro-prudential measures to mitigate risks related to the housing market would be welcome.
Economic Survey of Belgium (survey page)