BELGIAN CONFIDENCE ON THE RISE.

By December of last year, the level of confidence among Belgian business leaders had demonstrated a multi-month upward trend. There were also signs that consumer confidence is recovering, and that is partly attributed to a reduction in job-related concerns.

Both business leaders and consumers are increasingly confident that the economic situation in Belgium will improve during 2004. In spite of the increased optimism, it is unlikely that capital expenditure will show healthy gains until after midyear. Look for year-on-year capital spending growth in the range of 2 to 4 percent in the second quarter, rising above 5 percent during the second half.

Concerns related to the economic climate at home and throughout the European Union limited growth of private sector spending in 2003 to about 1 percent. Growth will remain anemic through much of this year, with an annual increase of about 2 percent. By midyear, recovery in industrial expenditure will easily outpace that of household spending. Most of that growth will be attributable to increased demand for industrial raw materials and orders for service sector infrastructure items.

Real household income did not suffer significantly from the economic downturn of 2002 and 2003. Modest growth in household income should prevail during 2004, and that will boost demand for imported consumer goods. Orders for foreign consumer goods should rise in excess of 5 percent per year in 2004 and 2005, with the biggest winners being China and the United States. Goods imports from those nations have gained a cost competitive advantage due to the euros appreciation against the dollar over the past 18 months.