'*'; ~ £ ./3 ":/ jJ'- 4 I TEFllATIONAL BANK FOR RECONSTRUCTION AND DEVE LOPlJE N'.l.' ·,.r ,~ l._:\. 66856 ECONOMIC REPORT ON BELGIUM Economic Department D~te: January 25, 1949 Prepared by: A. Stevenson TABlli OF CONTENTS Sunrrnary and Conclusions I. Belgium! s Recovery ,~fter the Har I (a) Circurastances Aiding Recovery 1 (b) Government Policy 2 (c) Aspects of Economic Hecovery 4 II. Problems of Readjustment 11 (a) Foreign Trade and Balance of Payments 11 (0) Prices, Costs and Capital For::nation 20 Statistical Appendix BELGlliH Selected Sta.tistics Area: 11,775 square miles (30,497 sq. km.) Population: 8,512,195 persons (19Li1 census) Rate of exchange: BF 43.96 = ta lJational income in 1948 (current rices): B::!' 240-250 billion (,;:,5.5-507 billion 'lP646-670 per head SUMMARY aND CONCLUSIONS 1. Because of a combination of fortunate circumstances and Govern- ment policy, the pace of economic recovery in Belgium since the war w....s e::-~­ treme1y rapid. In November 1948 the index of industrial production stood at 124 (1936 through 1938 average,: 100). Progress has" hO'Never, been unElvelJ.. It has been most striking in steel production, metal manufactures the generation of electric power, least satisfactory in various consumers' goods industries such as the production of textiles, glass and leather goods, where the level of activity has recently fallen substantially and unemployment has become serious. Heconstruction has been slQ1,ver in agriculture than in in- dustry but is on the Whole satisfactory. 2. The inflation of the first postwar years has nmv been completely absorbed and the money supply has renained at about the same level for over a year. This has been achieved by a progressive reduction of the deficit on the general budget (dovm to BF 4.8 billion in the 1949 estimates), and by the tight credit policy of the Central Bank. Partly as a consequence of the liberal economic policy of the Government, hovrever, the general price level is relatively high, standing at about four times the prewar f:Lgure. 3 •. Progress has also been made t~Nard the achievement of the Benelux Lconomic Union but substantial differences still exist between the economic positions and policies of the two major partners, Belgium and the Nether- lands. A strenuous effort will be required if economic union is to be attained as schedule, by January 1, 1950. 4. Although ~~e postwar increase and recent steadiness of its bold holdings is indicative of the comparative strength of Belgium's external financial position, the balance of payments shows certain weaknesses. To a ii large extent Belgium has been covering its deficit vIi th the 'estern Hen:.isphere with gold and dollars obtained from other countries, notably in Europe, and maintaining its exports by substantial net credits on pa,Y1!lent agree:,lent ac- counts. It has become increasingly clear that equilibrium in iIltra-EurOIX)cm trade cannot be restored quickly, that other cO\L.'1tries cannot continue to finance Belgium's dollar deficit by payments frOll dv,indling monetary reservGs, and that Belgium is not in a position to grant large additional net credits 1,'·Iithout runnin~ the risk of further inflation. To cope 'with this problem the OEEC intra-European l-ayr.1ents Plan has been developed, linking dollar allocations with provisions for financing intra-European trade. If this system functions as is hoped and is continued in some suitable form for the remainder of the ERP period, it should allow a breathi.l1g space in which equilibrium in the Belgian balance of payments with other participating countries may be reached. Such an equilibrium does not necessarily mean that Bel[:.ian receipts from and payments to Europe will balance exactly. .c.ven allowing for in- creased exports to and perhaps reduced imports from the Western Hemisphere, Belgium will in the long-run probably still have a de£ici t with the Western Hemisphere and some - though reduced - surplus vrith i~urope. Thus its ability to meet its dollar payments will again depend on its ability to earn collars through surpluses with other areas including Europe. This is, of course, true of practically all European countries but the long-run outlook for the Belgian balance of paJ~ents is brighter than for most in several respects. Although its net income from trcIDsit trade is not likely to recover fully to the prewar level, Belgium has not, like iii the United Kingdom or the lJetherlands, been forced to liquidate a large f1or- tion of its foreign investments. Neither has it accumulated large foreign debts like the United Kingdom, the Netherlands or France. In particulcr its U.S: and Canadian dollar payments on account of interest and tion are not very heavy. ,H.ssuming that EGA loans continue, though on a 2'e- duced sCGl.le, it is estimated that these payments 'V'!ill average less tha:1 million in the 10 years following the end of ERP compared, for eJ~ample, v'!ith well over ~~40 million for the Netherlands. Belgium will, like other European countries, suffer from the loss of Germany both as a market and a supplier, but it will not be so severaly affected as the Netherlands. Finally, its position in the Congo is secure, unlike that of the 0utch in the Indios. Thus the structural adjustments required in the I3el€,ian balance of payments are smaller than in the case of many countries in~estern Lurope while Belgium is in a stronger position to make them than most. 5. Though Belgium1s foreign trade problem is not all of its o~m making, it can contribute to the solution of it by lowering costs and :r::rices and thus improving its competitive position against the approaching day when the worldwide shortage of goods comes to an end. For the present, tha most promising method of reducing costs by modernizing equipnent" in other words, by increased investment. Available data, a~ilittedly not entirely satisfactory, indicate that actual investment in 19u7 fell below inves~ment required by about BF 8 billion, the greatest shortfall being in the coal, steel, tar distillation and electric power industries, and in agriculture, housing and public works. The domestic capital market is unable to meet the demand for funds on the scale required to fill such a gap. The Belgian Treasury is still iv chronically short of cash, and since the overall budget for 1949 provides for a deficit of alrilost BF 5 billion, savings of the eta te cannot be expected to contribute. On the other hand, some of the projects included in be re- quired investments might be omitted, but on balance it would appear that some further calls on foreign capital and perhaps a limited amount Cteficit financing will be necessary if a satisfactory rate of capital formation to be maintained. I. BELGIUM'S ru;COVERY AF'l'BR TEe JAR Because of a combination of fortill1ate circumstances and govern- ment policy, the pace of economic recovery in Belgium since the war was ex- tremely rapid. (a) Circumstances Aiding RecoverJ Belgian material war losses 1 officially estimated at about BF 150 billion in terms of 1939 prices, were light compared, for example 1 'with those of the Netherlands. Besides, more than half was composed of clearing balances with other enemy-held areas, occupation costs, requisitioning of stocks and similar charges. There had also been damage to persons and prop- erty, but little dislocation had occurred in the labor force, the trans- portation system~/ or the tools of production. The task of reconverting Belgium's industrial machine to peacetime production was therefore COffi- paratively easy. Equally important to the country's econof,1ic recovery was its strong gold and foreign exchange position. Belgium's gold stock was re- stored YIithout loss after the waro Substantial interest and dividend re- ceipts had been built up during the war from investments abroad and in the Congo and, in addition, the latter possessed reserves of forei~n currency accumulated from its profitable wartime trade. Furthermore, the early liberation of the country , with the important seaport of ltntwerp in vfOrking order, made Belgium a vital supply base for the allied armies during the closing months of the war, and, as a result, the countr.y built up a Mutual Aid credit equivalent to over $340 million in supplying goods, services !I It may be noted that considerable reconstruction work on the trans- portation system was undertaken by the Allied Armies. - 2 - and pay for allied troops. The corrparative strength of the franc also en- couraged the inflow of funds from abroad. The high degree of social stability in postwar BelGium £l.nd of ~}O­ litical stability in the past year have also aided economic revival. Both in voting strength and influence the Communist Party is rather small. Al- though differences - notably concerning the royal question and the grantii1g of subsidies to Catholic schools - exist between the Christian Social Party and the Socialist Party, the coalition which has governed Belgium since Uarch 1941, these have not been sufficiently serious to threaten stable Government and thus hinder agricultural or industrial production. IIarmonious industrial relations have also pl~ed an important part. Strikes have occurred (for example, in the metal industry in June 1948), but on the whole the machinery for reconciling differences arising between labor and management has up till now proved effective in reducing labor unrest. The Government's policy of ..;ranting cash increasing the coverl\ge of social security legislation and of . subsidies to lIeconomically weak!! members of the cQmnunity has also contrib- uted to the achievement of a high degree of social peace. (b) Government Policy This favorable situation has made it much easier for the Belgian Government to carry through the liberal economic policies which were adopted. These policies were directed to restoring the standard of consumption as rapidly as possible on the theor,y that maximum production could be achieved by relying on the incentive of the individual to produce and ensuring that money incomes could be oonverted into real goods. lrlith the prima!".! emphasis on satisfying the demand for consumers' goods, public works expenditures - 3 - were reduced to a r~nimum and a stringent credit policy pursued. This high level of consumption was not satisfied by dOl~;stic f1ro- duct ion alone. The Government foUm'red a bold policy of encoura.::~ine: imports and a large volume of consumers' goods as lilell as of foodstuffs ~lnd in(~u,s­ trial raw materials, was permitted to enter the country. Monetary stability livas a necessary precondition for the success of such a policy, however, and the war had left a le:;acy of surplus !'loney in Belgium, for the money supply had expanded to over three times the pre'war level while the volume of goods availa.ble was considerably smaller. Besides keeping a tight control over credit it was necessaI"lJ to deal yrith the conse- quences of the wartime inflationary process. In September 1944, two-thirds of the currency in circulation and bank deposits were vdthdravm or blocked. Of the deposits blocked, 60% were frozen indefinitely and converted into a forced longterm loan, the other 40;& being blocked temporarily and gradually unfrozen. In order to amortize this forced loan, a single 5% tax was :Un- posed on capital values and special taxes 'were levied on wartime profits. Subsequently, control of monetary expansion was exercised by tbe traditional means of raising the discount rate (from in 1945 to Jtt& in i.U-.;ust 1947), by requiring banks to hold from 50 to 65% of their assets in the forn of Treasury obligations, and by trying, though not always SUCCE:ssfully, to re- duce Government expenditures in oreer to minimize the need for irl.t'lationary financing. To combat undue price rises, wages were frozen, some price con- trols and subsidies instituted - though these were always considered as a short-run measure - and imports of consumers' goods deliberately encouraged. - 4- (c) ASEects of Economic RecoverJ The considerable measure of success achieved in Belgium recon- struction is evident from available indices of industrial production. the middle of 1946 the general index of industrial output,!/ although still well belovl" the level reached in the boom year 1937, had practically recoy(:red to the level of the base period (1936-38 average), and by the end of' 19L~7 it was almost 20% higher" Although the rate of eX,Jansion has slol'IeC( in 1943, the index of industrial production has, on the whole, continued to develop satisfactorily, the November figure of 124.0 (provisional) comparing favorably with the level of 113.0 which vvas reached in the corresponding month of the previous year. Progress has, however, been uneven, and in some sectors output has actually decreased. The recover'J has been especially :mD.rked in the heavy industries and in the generation of electrical power. In November the pro- visional indices of steel production, metal manufactures and electric pO'H'er production stood at 135.9, 143.6 and 162.8 (1936-38 averages =100) and were all well above the levels achieved in the corresponding month of 1947.3/ Coal production is still handicapped by an inadequate labor force and low productivity but the provisional figure for November '''las 2,338,000 Y;!etric tons or almost 97% of the 1936-38 average compared with 1,jlO,OClO t.ons in November 1947. Construction has also lat;::;;ec sClj}e"hat, as l.li,;ht be ox; The index used is that published by J1.gence ;.:;cononi c1ue et finu!:ciBre, which gives a significantly hibher fi~ure than that the index pub- lished by the Institute of Economic a.nd Social Research of the Univer- sity of Louvain. I~ the metal-working industry, however, new orders showed signs of declining. - 5- in view of the shortage of skilled workers and of Belgium IS oiterall economic policy of encouraging consumption rather than investment. The wea.kest spot is in the textile industry where the combination of a saturr:.ted domeEtic market and export difficulties has caused considerable contraction in recent months. In November 1948 the index of textile production (natural fibers) stood at 90.9% of the 1936-38 average or about 25% lower tpan the corres- ponding month in 1947. As in most other countries, reconstruction in agriculture has been slower than in industry. In the food year 1946/47, it received a sharp set- back from the severe 'irrinter and the subsequent summer drought. However, prospects for 1947/48 are much brighter. Sugar beet and wheat harvests ap- pear to be close to prewar levels. The wartime trend toward the production of food crops and aw~ from fodder crops is now being reversed and the pro- duction of rreat, for example, is increasing. Further progress is dependent, to a significant degree, on the supply of imported foodstuffs. The diet of the population in the year 1947/48, however, still appears to have been some- what belcwi the prewar level in terms of calor,y, protein and iat content. Corroborative evidence of the country's economic revival is furnishec by statistics of railroad and shipping activity, but here too some recent signs of weakness are visible. Freight traffic on the state railroads has reached prewar levels. The recovery has been 810\'1er on inland W'ate:tways where the volume of traffic in June 1948 was still about 20% below that of prewar, mainly because of the low level of international traffic. T1.e ab- normal situation in antvferp, which profited from the greater destruction at Rotterdam but was hindered by the low level of economic activity in Ger- maI\V and the Anglo-American policy of routing traffic through Hamburg and - 6 - Bremen, is now passing. However, Belgium1s growing trade difficulties have brought new problems. In the course of 1948, the volume of merchm1dise un- loaded from ocean-going vessels has dropped steadily 'while that of ncrC~"8n­ dise loaded has shovm a slightly rising trend. In October the total volmue of merchandise handled from ocean-going vessels was down from the postvlar peak to around three-quarters of the prewar level, and about 40-50% of the city1s dock workers are now idle. The recent agreement with the Bizone au- thorities to route an increased volune of traffic through the ports of the Low Countries should, however, alleviate this situation at least in part. The high rate of production and importc..tion has filleo. the shops With goods. At least through the SUJnmer of 1948 the voluue of retail sales appears to have been approximately at prewar levels when allo'lirance is laade for the intervening rise in prices. The general price level, however, is very high, and this rerrains one of the most difficult problems vdth which the Belgian Government has to deal. Although, as has been indicated above, the monetary purge dealt with the accumulated wartime inflation, the cost of maintaining allied troops set up a further inflationary process lasting through 1945. Subsequently, the trend of world prices and the Del:;ian policy of dropping price subsidies and rationing as quickly as possible and allowing prices to find their own level resulted in a further price rise. Since the spring of 1948, however, both wholesale and retail price indices have remained fairly stable at around four times the prevlar level. Rationing is now eliminated" ,ji th the end of sugar rationing on January 1, 19h9, all rationing at the retail level came to an end. The Belgian labor force has increased from 3,750,000 in 1936 to - 7- over 4,000,000 today_ There is still a shortage of skilled workers in the construction industry I and above all in the coal mines, where only the em- ployment of foreign workers - first prisoners of war and later Italians and displaced persons - avoided a serious situation. As has already been cated, however, non-seasonal unemployment has increased rat.her s;.arpl:y· in recent months, especially in the textile, ~;lass, leather and other non- durable consumers I goods industries and amonG the Antwerp dockers. Seaso~1al unemployment is also growing rapidly, for e.xample,in the construction in- dustry. In the last week of 1948, the number of totally unemployed (185,000) was three times as great as it vras a year a;:;o and the number of those vmolly and partially unemployed reached 317,000 or l4;:~ of the insured population and about 8% of the total labor force. Seasonal unemployment may increase furt,her in the coming months. The above total is also tenporarily inflated as a result of the recent dispute between the Belgian and French authorities - in view of Fra~cels shortage of Belgian francs - over the transfer to Bel- gium of earnings of Belgian frontier YlOrkers in France. A compromise settle- ment has si~cebeen reached. For various reasons, notably differences of the skills required and the nature of the work -many of the unemJ.Jloyec tex- tile workers, for example, are ifonen - and also because of t.ifliculties of housing and language , it is unlikely that many of the lli'1emplo:!e(~ can be ab- sorbed into the industries where labor shortages are prevalent.Y The gravity of the problem was recogni~ed in the Prime LIinister's policy state- D.ent of November ]0 and in the subsequent announcement that a 5uppler:1entary It is interesting to note that whereas Bel¢iurn intends to import 7,000 workers for the mining, metal and construction inQustries by the end of 1948, negotiations have been reported to be going on between the Eritish and Belgian Govermnents aiming at an agreement allowing Belgian textile workers to take up employment in the United Kingdom. - 8- budget will be introduced to alleviate the situation. Money waees have risen substantially though apparently rather less than retail prices. However, various benefits, such as family allovl'&nc€s, are now received by certain groups of w·orkers. Unfortunately the publi8hod index of money wages is not satisfactory and no index of the cost of livin~ is available so that it is difficult to reach a definite conclusion O!1 the level of real wages. In the opinion of competent observers, it is someTfhat below prewar. Price increases app:;: ar to have completely absorbed the inflation generated in the first postwar years. The tight credit policy of the Na- tional Bank and the improving budgetary position have )revented new pressures from arising. For well over a year now the total money supply has remained practically stationary. In September ],948 it amounted to BF 158.5 billion compared with 15h.) million in the correspondinr; month of the previous year. The progress tmvards equilibrium in the Government finances is clearly shown by the steady reduction of deficits ontha general budget, i.e., the ordinary. extraorBinary ruld special war budgets taken together: Deficit on the General Budget Billion Belgian Francs 1945 35.8 1946 37.1 1941 32.0 1948 13.5 1949, est. 4.8 The publio debt rose considerably during the war and its structure has recently been changed significantly as a result of the reform of the National Bank and the new convention between the state and the Ban](. Of state debt of BF 51 billion to the National Bank, BF 35 billion were - 9 - consolidated, the proceeds of the revaluation of the gold stock were used to reduce the Govern.llent debt to the Bank by BF 10.5 billion, and BF 4..5 billion were canoelled because notes to that value were not presented for exchange in cormection with the monetary reform leaving a balance of over BF 1 billion. I:Iainly as a result of these changes, the consolidated debt rose from BF 108 billion at the end of AUGust (including DF 40 billion of the monetary reform loan) to BF 143 billion at the end of September. ~;1ort­ term debt on the contrary fell from BF 123 billion to 77 billion, and the total public debt fron BF 26) billion to 252 billion. This figure should be compared to a national income estimate( at :at' 215 billion in 19h7 and 240 to 250 billion (~5,,5-5.7 billion) in 1948. It may be noted that the relationship between total public debt and national income in Pel:..;iu!'1 is rather similar to that existing in the United States where total Govern- ment debt at the end of December 1948 amounted to about ~;253 billion com- pared with a national income of ~'~224 billion for the year. There has been some rise in Belgian long....term external debt this year to reach BF 13 billion at:tre end of September, but it is still equal to less than 5% of the total public debt. Despite its liberal import policy, Belgium's external financial position has renained strong. The gold and foreign exchange holdings of the National Bank amounted to the equivalel1t of ~~931 million at the end of November 1948 and were almost exactly at the level of September 1947 just after the end of the period of ste:l:'ling convertibility. Gold holdinc:;s, which had dropped from $735 million at the end of 1)46 to '$70 uillion in February 1948, had risen again by the end of November to ',~634 nillion, or almost the level of mid sum~er 1947. - 10- Belgian recovery has not only been accomplisLeCi '.Titl1oat sllosta:'ltial liquidation of its gold and dollar reserves, but also IJ'ithout ver;/ heaVlJ ad- ditions to its foreign debt burden. This comparatively favorable sit~ation has been achieved by substantial exports - some of them products inported from the Congo and exported in processed form - and recently by some rec'uc- tion in imports from the dollar area,!! by favorable terms of trade, and also probably as a result of some influx of flight capital from other European countries. Provisional figures place Belgium1s trade deficit for 1948 at BF 13.1 billion 'i'lith exports covering 85% of imports. The trade deficit in December, when exports covered about 92~b of imports, was only BF 604 million (provisional) compared with a monthly average of BF 1,094 million for the year. It may be noted that vvl1ereas the volume of mports has recently been at about the 1937 level, that of e:::ports probablY now stands at over 80% of the 1937 figure. Ho official data, however, have been released since the first quarter of the year. Progress has also been made toward tLe achievement of tLe Benelux Economic Union. On January 1, 1948, the customs union between tho tl'.ree countries came into being. Quantitative restrictions 1irere maintained for the time being, but full economic union is scheduled to be achieved by January 1, 1950. Substantial differences still exist between the econor.ri.c positions and policies of the two najor partners, Belgimn and the Nether- lands, however, and a strenuous effort will be required if economic union is to be realized by that date. Total imports, however, have not fallen. The high figures for l\iovember and December 1947 were caused by the anticipation of the inauguration of the somewhat higher Benelux tariff at the beginning of 1948. -ll- II. PROBLEMS OF READJUSTlVIENT Yihile Belgium has recovered from the effects of the liar to an ex- tent at least equal to that of any other country formerly occu)ied by an enemy J there are two major problems which must be solved if tl.is recovDry is to continue. The first of these is concerned with foreign traCte and the balance of payments, the second with the level of prices and the rate of capital formation. (a) Foreign Trade and Balance of Payments The postwar increase &nd recent steadiness of Belgian gold and foreign exchange holdings is an indication of the comparative strength of the country's external financial position. Rowever, the balance of payments for 1947 summarized below shows certain \{eaknesses. - 12 - Belgium-Luxembourg Balance of Pa;,)'1llents, 1947 (In millions of Be16~an francs) Receipts P~'1llents Dalance Current transactions .0. 11erchandise/ (f b.) 60,67°1/ 76,467 -17,797 ~ Invisib1es.! 16,426_ 121.057 -.-!.+, J~2 I ' Total 77,096 90,5 24 1? -..4. __ , 1.06 L~.L.. Financing the Deficit on Current Account Net balance on current account -13,428 Autonomous capital transactions --private capital lIlovements (mainly repatriation of capital and arrears) flO, 755 Gold subscription to HlP - 2,480 Amortization and other contractual repayments 98~ - 6,137 Errors and omissions f 377 Compensatory financing Financing of Belgian eAports Loans granted by Belgium - 2,230 Increase in Belgian holdings of inconvertible currencies - 1,463 - 9,h.')3 Financing of Belgian imports Loans granted to Belg'ium Decrease in Belgian holdings of convertible currencies f 1.483 IreIF' advance to Belgium f -L83 Decrense in Belgian gold holdings f 6,133 r 9,453 Y Including BE' 2,650 million of allied payments for militaI"J e :1'.penditures and BF 2,027 million of personal and institutional remittances. - 13 - Belgium's overall current account deficit ,'las moderate - BF 13.4 billion (~~306 million) compared with total current payments of BF 90.5 billion W2,065 million) - but this was achieved as a result of (a) exceptional and often non-recurring receipts (including dollar receipts) on both current and capital account. The repatriation of private long and short-term capital, for example, amounted to BF 10.8 billion, and Be1siwn received BF 2.7 billion of allied payments for military e~·)enditures. (b) the expenditure of considerable gold and hard currency re- sources (BF 8.1 billion including advances from the ILF) and the accumulation of substantial credit balances in soft currencies. It is also significant that Belgium actually lent more than she borrov;ed. However, this was not all a sign of strength since it involved lending through p~~ents agreements to support exports to countries short of Belgian francs and borrovdng hard currencies to finance imports especially from the -Jestern Hemisphere. The vulnerability of Belgiumts position arises chiefly from the geographical distribution of its trade in the postwar ;;rears. Before the war, Belgium's imrr.ediate neighbors and the United Kin:;dom tool.: 52/; of her exports and provided her with 45;~ of her import requirencnts. Gerr::any ac- counted for about 12% of Belgian imports and 6Xl)orts. In 191-1-7 these coun- tries were able to take only 37% of Belgium1s exports largely because they could furnish Belgium with only 29% of her ~nport needs. Imports from the United States, which had amounted to only 10% of the total in 1939, rose to 26% in 1947. Exports to the United States, however, fell from 9% of the - 14 - total in 1939 to only 4% in 1947. The significance of these changes can be seen from the fol101ving synoptic table of Belgian trade balances with various I;arts of the world: Geographical Distribution of Bel~ian Trade (In millions of Bel~ian francs) Annual Rate 1938 Jan.-Sept._19h8 Western Hemisphere -1,8;34.6 -24,083.0 -15,383.7 Sterling area I- 384.7 - ],578.1 /- 1 2,507.7 -2,013.1 U.K., Eire & Iceland 1-1,242.8 -1,875.8_/ Other sterling area - 8S8.l -1,70203£ 4Lr.6 other ECA cottntries "'1,213.2 ';'3,570.~. 1-3,749.7 Belgian Colonies -1,094.8 -4,789.5 I - 3,909.3 Other countries f. 118.3 ;. 4,960.721 .J. 2,019.9 -1,213.2 -23,919.5 -15,581.2 1/ U.K. only. 2/ Excluding ~ire, Iceland & U.K. colonies. Y Including Eire, Iceland & U.K. colonies. Before the war Belgium used its substantial export surplus with Lurope - and also its net income on account of invisible items - to meet its trade deficit with the i.iestern Hemisphere and other overseas areas. The delJtruction and impoverishment of war disturbed this balance. dlthough they stood in great need of Belgian supplies of steel, machinery and other industrial products, most countries of Lu:::'ope could no longer export as much to Belgium <:8 tl1e:/ had before the war nor earn surpluses in convertible currencies elSeV!llere - especially after the suspension of sterling convertibility in August 1947 - to meet trade deficits with Belgium. The loss of the German trade 19as es- pecially serious since Belgiwn had received a considerable volume of equip- ment from that source before the war. In the postwar years, the only large source has been the United States. In 1947 Belgium had an overall trade deficit of almost BF 24 billion. Its deficit with the i~estern Hemisphere - 15 - was even slightly larger. The trade surplus with Western Europe, however, was less than BF 2 billion mainly because the prewar s1.trplus with the United King- dom was replaced by a substantial deficit. In addition, however, Belgium must have obtained large net receipts from these countries arising out of current invisible items, repatriation of assets and the failure of exporterstoDelgium to repatriate the proceeds of their sales since it has had a substantial SUl'- plus of most European currencies including sterling. \~ith most of Belgium's best customers chronically short of Belgian francs, Belgian exports, espe- cially of so-called non-essential goods, have encountered increasing diffi- culty in finding markets although they have been sustained by substantial Belgian credits to most European countries. Obversely Belgium, unable to ob- tain needed supplies from its old sources and thus increasingly dependent on the ;;estern Hemisphere, has not been able to increase its eX'ports to that area enough, and has had to rely on other means of acquiring hard currencies. The import surplus with the Congo is a source of strength rather than of weak- ness since many of the imported products were processed and exch8.nged against hard currencies. An analysis of its exchange transactions carried out by the Interna- tional .llonetary Funct1l shows clearly the means by 1."Ihieh the deficit wit.h the ;~estern Hemisphere was financed. As has already been indicated, part of the Belgian dollar deficit was met by long-term borrowing, by short-term credits and International i:.~onetary FUnd advances, and by sales of gold from the re- serves of the Central Bank. The largest part, however, was paid Vii th net Y Note on Financing of 1947 Belgian Balance of l'aj1nents, prepared by Hobert Triffin, RD 742, November 8, 1948. It should be noted that the exchange control data refer not only to current account trans- actions but also to certain capital transactions and are not directly comparable to those presented in the balance of payments. - 16 - gold and dollar receipts from various European countries. These amounted to the equivalent of SF 16.5 billion (:~375 million), of which BF 12 billion L273 million) came from the United Kingdom, SF 2.4 billion U,S5 miD.ion) from France and BF 1.3 billion U~30 million) from the Netherlands. 'rhese sums, supplemented by smaller payments by Belgium in sterling to Brazil Uruguay, were applied to payments to the l~estern Hemisphere. Provisional figures for 1948 show an overall trade deficit of SF 13.13 billion. It may be noted, hO','rever, that the data for the latest months show only a small trade deficit so that, if a small surplus on invisible items is assumed, the overall current account position is now approximately in equi- librium. This year no large net receipts are to be expected on Government account. Assuming personal and institutional remittances and other invisible items on which no information is available to be running at the saTIe rate as in 1947, one might expect an overall deficit on curr'ent aCCOUJlt for the :full year ot about BF5-6 billion. The decline in the overall trade deficit results mainly from the decreased deficit with the rjestern Hemisphere partly because imports were abnormally high in 1947 and partly as a consequence of Balgian restrictions (through licenses) on imports from that area. The tr~de deficit with the '"estern Hemisphere for the first ten months of the year amounts to BF 11-12 billion. However, various extraordinary receipts of hard currencies, for example payments in U.S. and Canadian dollars for allied military ex- penditures in Belgium, will also not be available in any volume this j'ear. The Belgian dollar deficit for the first ten months of 1948 has been met substantially from the same sources as in 1947. Borrm~ing from the United States amounted to the equivalent of BF 2.192 billion and advances from the International i,Ionetary I'-und to BF 0.964 billion. ;'s a result of the - 17 - lag in :C;CA financing, reimbursements on that account were very sn:all. (In the last months of the year, however, they have risen considerably). l'Tet gol~ and dollar payments to Belgium by countries outside the Western He;ilisp;l€:ce and the Bizone were again by far the most important source of hard currency. IJost of these payments were made by ECA cOlmtries to which Belgium also ex- tended substantial additional net credits. It may be noted that t;-i8 gold and dollars received by Belgium 'frere more than sufficient to fill the dollar §;ap. In the first ten months of the year the country's gold reserves rose by BF 2.1 billion. It has become increasingly clear that equilibrium in intra-European trade could not be restored quickly, that other countries could not continue to finance Belgium's dollar deficit by payments from dwindling monetary re- serves, and that Belgium was not in a position to grant large additional net credits without substantial risk of further inflation. To cope with this problem, the mEC intra-:c..uropean Payments Plan was developed linking doJ..lar allocations 'If.rith provisions for financing intra-European trade. For the period April through June 1948, Belgium-Lu~wmbourg recei'Ved an EHP allocation of ~,,20 million (011 million in loans and $.3 million in grants), Under t:ie OEEC 1948/49 Annual Program, dollar aid for the period July 191J8 throug,..1. June 1949 amounts to ~;250 million. Thus Belgium vdll receive for the 15 months ;;p270 million, of which p)59.5 million is to be in loans. Of the ;250 million for the period from July 19L.8 through June 1949, hO'Never, onlYl~L.2.5 million is unconditionally available to finance a Belgian net impo'rt surplus. The remaining :;$207.5 million is only available as Belgium makes equivalent grants (drawing rights) to other participating countries, notably the Netherlands, France, the United Kingdom, Norway and the Bizone. Up to the end of October, - 18 - ECA reimbursements were less thanplO million although procurement authoriza- tions were much larger.Y Furthermore, other ECA countries expect to make gold and dollar payments to Belgium substantially larger than the go16 and dollar receipts shown by Belgium, and Belgium may also receive some gold and dollar payments from countries outside the Western Hemisphere and not par- ticipating in the European Recovery Program. Since the country's gold and dollar deficit for the period July 1948 through June 1949 is expected to run at a rate of abouti>33 million per month,Y Belgium might well reach the end of the fiscal year with a loss of monetary reserves considerably lower than the '147.6 million anticipated in the DEEC 1948-49 annual program.V 'I'he burden on Belgium, namely the Belgian franc bTants to other ECA countries, is, of course, not inconsiderable, but the fact that it is offset by equiv- alent dollar grants should prevent its having serious effects on the monetary system. If the OEEC Payments Plan functions as is hoped and is continued in some suitable form for the reI'lainder of the ERP period, it should allow a breathing space jn which equilibrium in the Belgian balance of payments vli th the other participating countries may be reached. Such an equilibrium does not of course necessarily mean that Belgian receipts from and payments to Europe should balance exactly. The strncture of intra-European trade after the ERP period cannot be foretold. ~hat it 1ilill be different from prewar, however, is clearly foreshadowed by the , -y In the last months of the year, reimburser;;ents vrere ,.. ~--- apIJarently sub- stantial. The Eximbank credit is exhausted and although ,~32 million of the Canadian credit is undisbursed, it is unlikely that it will be used. Thus Belgium has no other source of hard currency to tap. The Belgian current account deficit in gold and dollars is estimated in the Belgian submission to DEEC at :)v346.8 n:illion, and there are expected to be other transactions involving net gold &nd dollar pay- ments amounting to :))0.8 million. - 3/ The United Kingdom used two-thirds of its drawing rights on Belf.>ium within two months. - 19 - realization in the United Kingdom longterm plan that the United Kingdom, c.:.t least for a time, cannot afford its large prew·ar surplus with continental £urope, including Belgium. Thus Belgiumfs foreign trade problems are not merely transitory but involve important structural adjustments in its t~ace, for example, increased exports to the 11estern Hemisphere and perhaps red'.:ced imports from that area. Lven allmving for such chariges, however, Selgim;l will probably still have a defioit with the Vlestern Hemisphere and some - though reduced - surplus with Europe. Thus, its ability to meet its dollar payments will again depend to an important extent on its ability to earn dollars through surpluses with other areas including :Curope, in other vtords on the achieve~ent of a substantial degree of convertibility of European currencies. This is, of course, true of praotically all :C~lropean countries and the long-run outlook for the Belgian balance of paYMents bri~hter than for many in several respects. Although its net income from transit. trade is not likely to recover fully to the prewar level, Belgium has not, like the Uni ted :Kingdom or the Netherlands) been forced to liquidate a large portion of its foreign investments but has probably' continued to increase its ea:td.ng assets abroad. Neither has it accumula.ted larg3 foreiis"U debts li}~e t~le U::J.itec Kingdom, the Netherlands or France. In particular its U.S. &nd Canadian dollar payments on account of interest and amortization are not very heavy. Assuming that ECA loans continue, though on a reduced scale, it is estimated that these paJ~ents vdll average less thaD $20 million in the 10 years fol- lowing the end of ERP compared, for example, with well over ~~ho mill ion for the Netherlands. Belgium 'will, like other European countries, st:ffer from the loss of Germany both as a market and a supplier, but it will not be so - 20 - severely affected as the Netherlands. Finally, its position in the Congo is secure unlike that of the Dutch in the Indies. Thus the structural adjust- ments re<.{uired in the Belgian balance of payments, though painful, are s:1aller than in the case of many countries in ,iestern Europe, and Belgium is in a stronger position to make them than most. To a great extent Belgium's foreign trade problem is not of its own making. However, this does not mean that it cannot contribute to its solu- tion. In some fields, as the :.t'rime idnister indicated in his policy state- ment of November 30 1 belgian exports are already hindered by hir;h prices. Belgiu:;J. must soon face the fact that prices and costs are out of line with the realities of a competitive market. It h,,~s been possible to postpone corrective action in this area only because of the worlQ'wide shortat;e of goods. When the supply of COIlli.lOdities catches up with the denand, hOYfever, Belgian producers may well find themselves at a disadvantCJ..oe in vwrld rm.rkots unless costs are reduced. (b) Prices, Costs and Capital Formation An attack on the high level of prices and costs might be pursued along two Dain lines, either by reducing money wages or by cutting costs through the introduction of better machinery and other means of usinb labor more efficiently. Not JJuch can be expected of a policy of reduction. In a lllodern industrial economy, wages are fairly rigid in a dOi'mward direc- tion. Furthermore, in the peculiar Belgian situation, where important sec- tors of industry, notably the production of durabl~ goods, are working at full capacity and all the adjustment would be throi'm on the other parts of the economy, mainly that producing non-durable goods, the cut in employment -21- in these sectors required to induce a sufficient degree of deflation '."oulcl be very large. That it is larger than the Belgian Government is prepared to face is indicated by the Finance Hinister IS recent announcement that a SJ.>I;l"- mentary budge0 i"Jill be introduced to combat the growing unemployment vh:Lch may be expected to become heavier in the winter months. With the possibility of any substantial reduction in money wages excluded, the Belgian priceprob- lem, therefore, resolves itself mainly into an investment problem. A future currency devaluation can also, of course, not be left out of account and !!litJ1t becor.re desirable in the future. For the present, how- ever, the Belgian franc is strong in relation to all European currencies e2:- cept the Swiss franc. It 11'lould be naturally preferable if any such ncasure were taken within the frame 1vork of a general readjustment of European cur- rencies. The advantage of the Belgian postwar policy of encouraging consump- tion and curbing monetary expansion has already been stressed. It :1as, how- ever, had the obvious disadvantaE;e in that effort was channelled into t!1e production of consumption f:,oods and exports at the price of neglecting :cecon- stru.ction of war da;,1age and re-equipment of industry and necessary public works such as the improvement of roads, ports, etc. Bel&~llin has thus carrier out its reLlarkable recovery with industrial equipment which is, on tIle 'Nhole, rather old. About 50% of Belgian machine tools, for example, and 35/~ of its coking ovens are more than 20 years old, while railway engines have an average age of 26 years. Besides, productive equipment was inade~uately maintained during the war and often suffered attrition from accele:::,ated war Little provision was made in the ordinary budget for public works. "Whether or not the supplemen wry budget will be financed by borro"fJing or out of taxation, the Finance hinister did not say. - 22 - use. The recovery has also, as for example in the case of electric pO're1" production, been accomplished by runninG the available equipment at a rate of utilization far above normal. It should, however, be noted that althOJ.gb the average age of Belgian equipment seems high by American standards, it is by no means unique in Europe. In order to determine the magnitude of the country's investment ~)i'ob­ lem and to aid in its execution, the llinistry of bconomic Coordination National Re-equipment has collected the individual investment requirements in each industry tooether with the necessary public works prograr.1s. It should be made clear that this is not an overall plan involving priorities or allocations but merely a collection of data. Indeed, Belgium has perhaps suffered some disadvantage recently because of an inadequate coordination of investment and certain projects have been built which could not be considered of the highest degree of urgency_ In the Third Report on Investr~nts re- cently issued by the hinistry of Lconomic Coordination and National Re-equip- ment, the annual cost of the total ten-year public and private investment program has been put at almost BF 40 billion compared with actual invest- ments by BF 34 billion in 1947. In the first few years of recovery, the annual cost of required investment is put at BF 42 billion. Although the available Belgian data on national income and capital formation are far from satisfactory, it is interestinb to set them alongside the figures for the United Kingdom. - 23 - Natio:)al Income and CaEital Formation in 19h7 Bel~ium United Kin;;Qom (BF billion) ~milli~ (1) National income 215 8,770 ( 2) Gross capital formation at home 3h.o 1,941t (3) Net borrowing abroad and sale of assets to foreigners 13.4 675 (4) Total ca~i~~l formation (2)-(3) 20.6 / 1,269 (5) Net capital formation at home 15.0! 1,169 (6) Total capital fonaation as a per- centage of national income 9.6 1!~.5 (7) Net capital formation at home as a percentage of national income 7.0 13.3 11 No information is available on depreciation allowances in Belgium. It has been assumed that they bore the same relationship to nationa.l income as was the case in the United Kingdom (9%). It would thus appear that in 1947 the rate of capital fonnation in Belgium was significantly lO1'V"er than it was in the United Kingdom. Figures such as ttese should of course be used ~~th great caution and merely to illustrate the nature of the problem. 'TIle data, especially the Belgian, are far from satisfactory and a small error, for example in depreciation allowances" could change the figure for net capital formation significantly. The esti- mates of depreciation allmvances in the United Kingdom are obtained from tax data based on original rather than replacement costs and are thus low. Finally, such calculations cannot distinguish between investments that are directly connected with the industrial or agricultural apparatus of the coun- try and those that are not. The ratio of 1947 investment to the required average for the ten- year period varies considerably between different sectors. In a large part of the private sector the rate of investrrtent in 1947 appears to have been fairly satisfactory. In coal mininl;; and electric pmIer production, how- ever, and to a less extent in the steel and IIcoal chemistryll industries, this - 24 - was not the case. Investment in coal mines anJ electric po'xer amountul to BF 1300 and 14S1 Elillion in 1947, compared vd.th yearly require)'len~S during first few years of recovery of BF 2100 and 2700 million respecti vel;/. In-vestment in the steel industry and in "coal chel:J.istry" amounted to 7 le to meet the demand for funds on the scale required to fill a gap as large as that bet'ween realized and required :i,nvestment in 1947 which amounted to BF 8 billion. The Belgian Treasury is still chronically short of cas:1, and since the overall budget for 1949 provides for a deficit of almost BF 5 billion, savings of the state cannot be expected to fill such a gap either. So:ne additional funds will be available from abroad. The proceeds of ECa loans and unconditional grants for which Belgium has not yet been reimbursed will amount to about BF 2.3 billion in the current fiscal ye3.r, and the proposed IBRD loan would give an additional BF 0 .. 7 billion. ~iO in- formation is available on the vol~~e of industrial self~financing in 1948. Unless it is substantially greater than in 1947 or unless tax receipts are increased either by heavier taxes or improved collection, it, is hard to see how investments as large as the requirements of the Third Report of the J.":inistry of :'conomic Coordination and National I!e-equipment can be met in full without resort to some deficit financing on the part of the Government. i'erhaps this is the meaning of the recently announced supplmnentary budget. As a result of the recent Central Bank reform, net new borrowing facilities of about BF 4 billion were made available to the state. lTp to the end of October about BF 1.5 billion of this appears to have been used up. Despite the existence of groll'1ing unemployment in Belgium, such deficit financing - 26 - would have inflationary effects on the price level since resources in the investment goods industries - l'fhich would be affected most - are still fully employed. On the other hand, the Third Report on Investments is in no sense an investment plan so that some projects might be omitted and the inflationary impact thus minimized. On balance it would appear that with moderate calls on foreign capital and perhaps a limited volume of deficit financingj a fairly satisfactory rate of capital formation can be achieved. STaTISTICAL APPENDIX Table I Index of Industrial Production Table II Inland Watervfays Traffic, Rail Traffic and Antwerp Port Traffic Table III Index of Department Store Sales Table IV Unemployment Table V Prices and vVages Table VI L.loney Supply Table VII Government Dud 6ets 1945-1949 Table VIII Evolution of the Public Debt Table U Belgium-Luxembourg Foreign Trade by Categories According to the Brussels Classification Table X Exports and Imports of the Belgo-Luxembourg Economic Union by groups of products Table XI Gold and Foreign Exchange Heserves Table All Total Interest and Amortization Payments on Ex- ternal Debt of Belgium Table XIII Belgium-Luxembourg Balance of PaJ~nents, 1947 Table XIV Belgian Investment Program TABLE I Index of Indu~t)"in1 Production (Average 1936-1938 = 100) Textiles Ivleta1 Construe- Natural Artificial Overall Coal Steel Products tion ]'ibers Fibers Cement Paper Electricity Index 'weight 20 10 20 10 16 4 10 5 5 Production Production Production Production Production Production (millions (1000 M.T.) Index (1000 MeT.) Index (1000 M.T.) Index Index Index Index: (1000 M:. T.) Index (I\!etric Ton) Index .f IG'fH) Index 1936-38 2,420 100 259 100 110 100 100 100 100 250 100 16,000 100 436 100 100 1946: January 1,944 80.3 154 59.4 85 77.3 60 80.6 209,,1 50 20 523 120.0 76.5 July 1,828 75.5 201 77.6 108 98.2 90 89 298.3 192 76.8 17.480 109.3 486 111.5 96.4 1947: January 2,140 88.4 228 88 125 113.6 65 119.2 417.1 181 72.4 17,460 109.1 646 148.2 111.4 February 1,934 79.9 209 80.7 117 106.4 65 106.2 370.5 123 49.2 16,330 102.1 580 133.1 100.) March 2.198 90.8 229 88.4 116 105.5 90 115.3 361.7 145 58.0 17.850 111.6 604 138.5 108.) April 2,184 90.2 234 90.3 127 115.5 95 122.7 376.4 215 86 18,880 118.0 550 126.1 115.2 May 2,081 86.0 228 88.0 130 118.2 95 106.4 353.9 236 94.4 18,500 115.6 560 128.4 112.1 June 2,010 83.0 232 8906 122 110.9 97 110.9 348.8 197 78.8 18,900 118.1 550 126.1 109.) July 1.860 76.9 243 93.8 130 118.2 90 104.7 274.6 250 100 17.600 110 559 128.2 107 August 1,826 75.5 227 87 .. 7 125 113.6 87 97.5 158.8 233 93.2 17.000 106.3 559 128.2 98.3 September 2,004 82.8 209 80.7 130 118.2 97 110.6 287.5 222 88.8 19,600 122.5 574 1)1.7 108.7 October 2,143 88.6 279 107.7 135 122.7 97 129.2 266.6 275 110 21,300 133.1 649 148.9 119.1 N()vember 1,910 78.9 266 102.7 135 122.7 95 115.5 245 264 105.6 21,200 132·5 646 148.2 113 December 2.061 85.4 296 114.3 140 127.3 85 116 275.7 263 105.2 2),090 144.3 698 160.1 117 •.6 - contimed ~:AJLE I - page 2 Production Production Production ?roduction Production Production (millions Overall (lOOQ_}l. T.J Index tl0QO f'1.T~) Index (1000 ~.T.) Index I nd~lC _ .L~dex Index (1000 i.'~ .. T.) Index, ___tHetric Ton) Index _QL KNlI) Index Index 1948: Janua.ry 2,293 94.8 312 120·5 147 133.6 80 1)1.7 274.5 272 108.8 20,032 125.2 703 161.2 122.9 February 1,750 72.3 293 113.1 145 131.8 75 116.1 226.4 255 102 17,000 106.3 661 151.6 110.5 March 2,298 95.0 327 126 •.3 155 140.9 90 121.7 265.4 270 108 22,370 139.8 673 154.4 124.4 April 2t317 95.7 337 1)0.1 167 151.8 97 120.6 282.0 292 116.8 22,-050 137.8 651 149.3 128.8 May 2,069 85.5 306 118.1 171 155.5 97 97 308.6 301 120.4 19,·000 118 .. 8 614 luO.8 122.6 June 2,288 94.5 240 92.7 148 134.5 98 103.8 350.2 291 116.4 19.397 121.2 590 135.3 120 July 1,985 82.0 317 122.4 140 127.3 98 95.3 34'...l-.8 271 108.4 15,090 94.3 600 137.6 115.4 August 2,180 90.1 351 135 .. 5 130 118.2 98 86.6 )67.8 290 116 18~200 113.8 635 145.6 118.2 September 2,337 96.6 352 135.9 147 133.6 98 101 .. 6 359.5 325 130 19,000 118.8 648 148.8 126.4 October (rev.) 2,431 100.5 372 143.6 147 133.6 98 104.2 371.6 310 104 21.000 131.3 697 159.9 129.5 November (pro.) 2,338 96.6 352 135 .. 9 158 14).6 97 90.9 338.2 255 102 19,900 124·.4 710 162.8 12L~. 0 December (progr.)2 , 425 100.2 360 139 160 145.5 95 90 368.8 220 88 20,000 125 750 172 125.3 Source: Agence Economj,~.:.ue et Financiere. TABLE II Inland Waterways Traffic Rail Traffic and Antwerp Port Traffic (monthly averages or calendar months) Railway Inland Antwerp FreightJJ wateI'1"laysY Port '.rraffi cll Ton Kilometers Ton Kilometers Unloadings Loadings (000,00~ ( 000,000) ( 000 tons) (000 tons) 1937 519 244 1,193 1,177 1938 429 250 989 975 1946 391 146 7h3 242 1947 489 168 1,331 520 1948 - January 557 166 1,845 595 February 467 163 1,271". 629 March 532 213 1,6J.8 595 April 539 186 1,116 596 May 1".86 199 1,115 530 June 1".72 191 1,120 562 July 460 178 1,030 544 August 503 178 1,004 538 September 500 930 633 October 522 1/ Societe Nationale des Chemins de Fer Belges only. g; Inland waterways traffic is divided between internal and international traffic as follows: Internal International Traffic Traffic (thousand metric tons) - Total 1938* 1,125 2,1l0 3,235 1946 980 600 1,580 1947 1,:).06 827 1,933 1948 March 1,314 1,183 2,497 *Rough estimate of the IBRD Economic Department transportation section. 21 Ocean traffic. Only goods passing through customs. Since JanuaF.! 1948 the tonnage is gross weight. Source: Bulletin de Statistique. TABLE III Index of Department Store Sales Average Daily Sales 1936-1938 =100 1946 July 305f; December 413_ 1947 January 285 February 277 Farch 344 April 371 Lay 356 June 300 July 312 .l1.ugust 321 September 373 October 398 november 452 December 499 1948 January 350 February 357 Uarch 423 April 420 Iillay 417 Ju.'1e 346 July 397 11 Index of monthly sales. Source: Bulletin de Statistique, August 1948. TABU IV Unemploymen.J! Daily Average of Registered Unemployed Partially Vfuolly Unemployed Unemployed Total - - 1938 n.a. n.a. 173,913 1939 n.a, n.a. 195,211 1944 n.a. n.a, 241,296 1945 29,077 115,502 14Lt,579 1946 19,257 48,035 67,292 1947 31,921 35,639 67,560 1948 - January 36,962 68,328 105,290 February 63,870 71,854 135,724 March 31,338 64,113 95,451 April 33,117 61,562 94,679 May 34,439 59,606 94,045 June 42,903 61,814 104,717 July 59,703 69,571 129,274 AUgust 48,251 74,292 122,549 September 43,168 81,065 124,233 October 44,163 87,60L. 132,367 November 112,300 December (week end- ing December 11) 60,300 133,100 193,400 (week end- ing December 18) 60,000 183,800 243,800 (week end- ing December 25) 76,000 192,400 268,400 (week end- ing January 1, 1949) 132,000 185,000 317,000 !I Unemployed registered with the Unemployment Assistance Fund. Because the assistance fund has been expanded to cover a larger propor~ion of the total employed population, the statistics are not strictly com- parable throu;shout the series. Source: Revue du Travail. December figures from Agenee Economique et Financiere. TABLE V I~dices of Prices and Wages Wholesale Retail Prices Prices HagesY 1936-38 100 = = 1936-38 100 1936-38 =100 1937 108 104Y 1938 104 106~ 1939 103 111& 1946 301 333Y 339.1~ 1947 36h 36LY 36u.7 2 1948 - January uOO 366 February u2l 387 March ul9 393 373 April 428 396 May 428 398 June 422 397 330 July u26 396 August 426 400 September 425 uoh October 412 397 November 394 December 39.5 1/ Average hourly earnings. Y December. Sources: H'Dolesale prices: Insti tut de Recherches Lconomiques et Sociales Retail prices: hinistere des Affaires .cconomiques. November and December figures from Agence Lconomique et J?inanciere. 'Nages: National Bank of Belgium TABlE , VI Belgian Money Supply (Billions of Belgian Francs) DeEosit Money (Gross) Total Currency National Other Postal Check Money Blocked (Gross) Bank Banks System Supply .!':ione;r 1944 Septemby; 106.1 4.1 43.1 10.9 164.3 1944 October± 31.7 3.6 15.4 6.7 57.4 155.3 1945 December 76.9 3.L. 34.7 18.5 131.h 78.1 1946 December 77.8 4.5 43.8 25.2 147.9 66.0 1947 March 79 ..6 5.3 43.4 23.8 149.1 60.2 June 79.9 5.0 44.1 25.8 151.9 58.0 September 82.7 3.6 44.0 26.1 154.3 .55.7 December 82.8 4.9 43.3 27 .6 155.1 52.8 1948 14arch 81.8 5.2 44.9 22.8 151.3 50.6 June 82.7 .5.7 46.3 23.·1 155.7 44.3 September 86.7 5.0 44.4 24.6 158.5 October 86.1 4.6 26.1 November 85.7 26.0 11 October 6, 1944. Note: Figures for 1944 are taken from a different source than the subsequent figures and may not be comparable to the last digit. Sources: International Financial Statistics Ib~ Report RD 593, Belgian Monetary Reforms •. TABLE VII Government Budgets 19h5-1949 (Millions of Belgian Francs) 1945 1946 1947 1948 ~SI~9 Receipts Ordinary 21,202.0 42,242.0 46,395.0 56,650.0 -I, 1.:/,'7 ;) -;) 5° o..} Resulting from the war 46.0 4,184.0 541.0 2,060.0 951.1 Extraordinary 30.0 14 z229 4)0 -; 6,,89$,,0 6 l 910.0 6,3$3~7 Total 21,278.0 60,655 0 0 53,831.0 65,620.0 66,762.1 Expenditures Ordinary 28,366.0 31,928.8 36,055.1 41,566.2 47,692.1 Resulting from the war 26 1 24 2 .4 38,045 .. 2 25.,176.8 / , 84e::' 10 ./ . 'l .-'. 12 2426.1 Total ordinary and re- sulting from the war 54,608.4 69,974.0 61,230.9 61,411.5 60,118.2 Extraordinary 2,,482.1 27" 7!.~9 ,,1 24.609.1 17!7J66~ 11.!466.0 Total 57,090.5 97,723 .. 1 86,840.0 79,148.1 71,584.2 Balance Excess of expenditures over receipts 35,812.5 37,066.1 32,00900 13,526.1 4,522.1 Source: Budget des Recettes et des Depenses pour 1 'Excreiee 1949.E.xpose General. TABLE VIII Evolution of the Publig Debt (In millions of Belgian francs) Total debt - Internal Debt External excluding Currency Total including Consolidated ntrect Indirect ivledium term Short-t.erm 1 d-'t currency reform reform loan currency reform lo~m 1938 December 26,525 9.066 1,300 3,782 6.560 47,233 47,233 1939 December 26,240 8,948 700 7,887 5,936 49,711 L~9,711 1940 April 26,462 8,901 700 11,465 5,645 53,173 53,173 1944 August 33,649 8,122 37,438 61,922 4,082 145,213 145,213 1945 December 44,375 7,953 31,?A3 115,344 6,156 20.5.671 205.671 1946 December 43,489 7,854 27,869 110,210 11,717 201,139 58,822 254;461 1947 December 42,646 11,818 27,189 121,549 11,001 214,203 43,984 258,187 1948 January 42,608 12,020 27,751 122,625 10,908 215,912 43,617 2.59,529 February 42,551 12,062 27,584 124,725 10,744 217,666 43,136 260,802 March 42,491 12,055 27,062 126,553 13,377 221,538 42,573 264,051 April 42.441 12,045 27,318 126,726 1),392 221.922 42,005 263,927 May 42,399 12,069 27,101 126,461 13,511 221,541 41,527 2631'068 June 42,341 12,162 30,685 122,552 13,426 221,166 41,055 262,221 July 42,)05 12,219 30,806 124,294 13,389 22),013 40,560 263,573 August 42,246£1 12,219 31,496 123,299£1 13,410 222,670 40,084 262,754 September 78,881 12,277 31,406 76,896 1),187 212,647 39,636 252,283 lJ Not including the debt to foreign governments resulting from the 1914-1918 war. 2J On September 13,. 1948. accumulated profits of the National :Ban..U: ",ere surrendered to the Government. The proceeds were used by the Government partly to increase its subscription to the bankls capital an.d partly to reduce its debt to the Bank. At the same time 35 billion francs of short-term obliga- tions still owed to the Bank ''lare funded into a long-term debt of the state (part of which 1:1111 be $lowly amortized out of the Treasury share in future profits of the Bank) and the remaining 2,465 million short-term debt transformed into Treasury certificates in the Bank's portfolio. SOurce: Official figures. TABLE IX Belgium-Lmcp.mbourg F.Q...reiEn Trud.e b;.[ C.rteg;ories Accordin.o: to the Brussf:ls Classif.ication (Values in millions of Belgian francs) 1938 193~ 1248 Je.nuau-July ~ of total Value %of totl-ll V~lue ~ of~otB.l Im;gorts Live animals 28 0.12 13 0.12 563 0.66 182 0.36 Foodstuffs 4,677 20.27 4,006 20.22 19.740 23.07 12,497 24.52 Ra.,., materials and semi- manufactures 12;557 54.43 10,746 54.24 34,019 39.76 21,963 43.10 Manufactured goods 5.336 23.13 4,,630 23.37 30,621 35.79 16,030 31.46 Gold and silver 422 2.0S 406 2.0S 616 0.72 284 0.1:)6 Total 23,069 100.00 19,811 100.00' 85,559 100.00 50 ,953 100.00 Ex.:ggrts Live animals 67 0.31 53 .24 302 0.30 16 0.04 Foodstuffs 1.132 .5.22 798 3.64 1,784 .5.34 1,709 4.14 Raw materials and aemi- manufactures 9.781 4.5.13 9.787 44 •.59 20.322 44.71 11,427 27.67 Manufactured products 10,461 48.27 11,100 50.60 39,100 48 •.52 27,994 67.79 Gold and silver 211 1.0? .93 148 1.1) 148 0.'36 Total 21,670 100.00 21,934 100.00 61,655 100.00 41,295 100.00 Because of rounding, columns do not always add up to totals. Source; Ministere des Affaires Economi1ues et des Classes Moyennes Institut National de Statistique. TABLE X EXQorts of the Belgo-Luxembourg Economic Union (Values in millions of Belgian francs) 1948 1238 1246 1942 Jan.uary-September Value %of Total Value %of Total Value %of Total Value '% of Total I. Live animals and animal products 1,874 8.7 1,274 4 .. 3 3,294 5.3 427 0.8 II. Vegetable products 1,852 8.5 2J298 7.7 4.121 6.7 1,802 3.4 III. Fats and oils of all typesl/ 13 0.1 8 *' 36 0.1 189 0.4 IV. Food products, drinks. liquids vinegar and tobacco 467 2.2 356 1.2 436 0.7 329 0.6 V. i~tinera1 products. i.e. r iron ore 2,727 12.6 2,147 7.2 4,907 7.9 3,392 6.3 VI. Chemical and pharmaceutical pro- ducts 1,483 6.8 2,343 7.9 5,489 8.9 5,079 9 .. .5 VII. Leathers, furs and skins and pro- ducts thereof 412 1.9 129 0.4 293 0 •.5 390 0.7 VIII. Rubber and rubber goods 138 0.6 79 0.3 347 0.6 311 0.6 IX~ Wood and cork and wood and cork products 140 0.6 164 0.6 282 0.5 246 0.5 X. Paper and paper goods 347 1 .. 6 . 671 2.3 1,282 2.1 671 1.2 XI. Textiles and textile products 2,150 9.9 3,165 10.7 8,2.58 13.4 10,086 18.8 Ready made clothes 213 1.0 241 0.8 1,005 1.6 J./ XII. Shoes, hats and parasols and articles de mode y y gj 113 0.2 XIII. Works in stone and other minerals 1,289 5.9 2,68.5 9.1 2,706 4.4) 1,886 3 .. 5 Glass and glass"iare 498 2.3 941 3.2 2,147 3 • .5) XIV. Pearls, precious stones, precious m~tals and works of same, money !±} !±} !±} 1,7.51 3.3 XV. 14etals and metal ~oods 5,706 26.3 9,907 33.4 19,763 32.1 20,.580 38 .. 3 A.-VI~ IVlachines:rld apparatus, electrical material 1,280 5:.9 2,233 7 •.5 4,726 7.7 4,093 7.6 XVII. Transport materia1s5l 402 1.9 243 0.8 946 1.5 1,761 3.3 - continued TABLE X - Page 2 1948 1938 191 -1<6 1947 Janucry-September Value % of Total Value %of Total Value? of Total Value %of Total XVIII. (Clocks: scientific and precision instruments 10 0.1 21 0.1 45 0.1) 84 0.2 ( Hus1cal instl'UI!1eg1;;s 2 '" 9 * 26 *) XIX. Arms and munitions~ 256 1 .. 2 129 0.4 297 0.5 352 0.7 XX. IJIi scellaneous (not else",here men- tioned) 411 1.9 611 2.1 1,204 1,9 40 0.1 XXI. Objets dlart 13 * Totals 21,670 29,654 61,609 53,658 Totals do not add because of rounding. Note: The system of classification was changed slightly in 1948 after the :Benelux Customs Union VTent into effect. obvious incongruities in classification are noted below. lJ It is uncertain whether or not these classifications include precisely the same goods in 1948 and previous years. ~ Included under the heading rea~ made clothes. JV In 1948, ready made clothes are divided between textile goods and shoes, hats. etc. H) In 1938, 1946 and 1947 there is no classification similar to this. 51 Prior to 1948, railroad materials and trains were included in the classification machines and apparatus. In 1948 these have been included ~ith other transport materials. ~ Prior to 1948, this classification only includes arms. * Less than one-half of one-tenth percent. Sources: Annuaire Statisti~ue de 1a :Belgi~ue at du Congo Belge 1946 J :Bulletin de Statistl~ue. and :Bulletin Mensuel du Comilleree de l'Union Economi~ue :Belgo-Luxembourgeolse avec les Psya ~trangers, September 1948. TABL~ X (Continued) ImIlOl'ts of tho 3e1ro-Lu::enbourg ?":col'lomic Union (Values in mil1ions of Belgian fr-9ncs) 1248 1238 1946 12l~2 JBnuvry-Se~tember Value 7'; of Total Vslue %of Total Value %of Total Value ; of Tote1 I:•• Live animals and animal products 2,745 11.9 6,479 12.3 9,284 10.9 5,560 8.5 ~.Veeetable products 5,842 25.3 8,858 16.9 16,288 19.0 8,845 13.5 IIll.Fats and oils of all types1i 17 0.1 111 0.2 127 0.1 1.119 1.7 IY~.Food products, drinks, liquids, vinegar, tobecco 1,149 5.0 5,939 11.3 7.:363 8.6 3,744 5.7 V~.Minera1 products, i.e., iron ore, coal, etc. 4,952 21.5 7.939 15.1 13,436 15.7 10,443 16.0 VI •• Chemical and pharmaceutical pro- ducts 820 3.6 2,147 4.1 3,193 3.7 3,026 4.6 VII. Leathers, furs and skins and goods thereof 162 0.7 603 1.1 915 1.1 1,115 1.7 VIII. Rubber and rubber goods 72 0 .. 3 238 0.5 594 0.7 484 0.7 IX. Wood and cork and products of wood and cork. 781 3.4 1,270 2.4 2,172 2.5 1,780 2.7 x. Peper a~d paper goods 591 2 .. 5 1,836 3.5 2,596 3.0 1,648 2.5 Xl. Textiles and textile products 698 3.0 2,615 5.0 4,189 4.9 8,738 13.4 Ready made clothes 175 0.8 1,200 2.3 2,306 2.7 11 XII. Shoes, hats and parasols) gj gj gj 250 0.4 articles de mode ) XIII. iiorks in stone and other minere.ls, pottery 227 1.0 3Jl 0,6 514 0.6) 648 1.0 Glass and glassware 53 0.2 117 0.2 282 0.3) XlV. Pearls, precious stones, precious metals end works of same; moneys ':±J' !±I I}j XV. Metals and metal goods 2,402 10.4 4,225 8.0 7,564 8.8 5,788 8.9 - continued TABLE X (Continued) - page 2 1246 124'2 January-September Value of Total Value % of T0ta~ Value ~ of Totql fa of Total AVl. Ivlachines ~q.d apparatus. electrical materialS-=U 1.231 5.3 4,425 8.4 6,546 7 .. 7 5,:)07 8 .. 1 XVII. Transport materials5i 722 3.1 2,535 4.8 5,442 6.4 3,893 6.0 XVIII. (Clocks: scientific and precision instruments 120 0.5 534 100 773 0.9) 763 1.2 (Musical instnL~ent~ 20 0.1 55 0.1 85 0.1) XIX. Arms and munitions QJ 4 2u '" XX. l>iiscellaneous (not else1rrhere in- 19 0.1 2 II< '" cluded) 272 1.2 1.103 2.1 1.854 2.2 294 * 0 .. 4 XXI. Objets d'art 22 Totals 23,069 52.562 85,527 65.344 Totals do not add because of rounding. Note: The system of classification "laS changed slightly in 1948 after the Benelux Customs Union \'!ent into effect. Obvious incongruities in classification are noted below. ]J It is uncertain \