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Economic growth is projected to rise only slightly over the next two years. Sluggish real wage growth will hold back private consumption, although lower taxation of labour will support employment. Investment is moderate, despite high profit margins and favourable financial conditions. Consumer price inflation is projected to be stable at under 2%.
Productivity growth has been lower than in most other OECD countries in recent years. It would be boosted by structural reforms that remove barriers to entrepreneurship, strengthen innovation, reduce skill mismatches and foster labour mobility. Improving educational outcomes and labour force participation of vulnerable groups, including first and second-generation immigrants, would raise productivity and enhance inclusive growth. House prices and household mortgage debt have increased in recent years, although prudential measures and improvements in bank balance sheets have mitigated the associated risks to the real economy.
Low interest rates provide fiscal space that should be used to support growth. Public investment has fallen to the point where the stock of public capital is estimated to be declining. The ongoing plans to improve public transport infrastructure and build schools are a start to reversing this development, but more investments should be considered. Taxation could be further shifted from labour towards non-distortionary taxes to strengthen employment.
Economic Survey of Belgium (survey page)