Economic surveys and country surveillance

Economic Survey of Belgium 2013

 

OECD Economic Surveys: Belgium 2013 | OECD Free preview | Powered by Keepeek Digital Asset Management Solution

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Overview

Belgium has weathered the global crisis quite well, notably with a relatively good unemployment performance. However, still-weak domestic demand, rapid fiscal consolidation and slow export market growth will weigh on the economic recovery. In this context, further structural reforms beyond the 2012 measures would boost competitiveness and growth, helping to secure fiscal sustainability in the face of large ageing-related spending pressures.

 

Fiscal consolidation is advancing well, but public debt is still high. Fiscal consolidation has already been sizeable and the government is committed to secure a structural budget balance by 2015. This is appropriate to avoid further consolidation measures in case the economy deteriorates further, which could pose a risk to growth. Looking ahead, maintaining (at least) a structural budget balance over the medium‑term would ensure rapid reduction in public debt, creating room to finance part of ageing-related spending increases. The recent reform of early retirement programmes will increase the internationally low effective retirement age – a key to contain pension spending ‑ but the system still gives insufficient work incentives to older workers. The recent reform of fiscal federalism arrangements is transferring more spending and tax responsibilities to the communities and regions. However, it does not clarify the medium‑term burden sharing of fiscal consolidation efforts between government levels.

Boosting labour supply is a key driver of growth. Reforms of the unemployment benefit system and special provisions for new graduates are expected to improve the efficiency of the labour market. However, other factors still hold back the labour market, including high sectoral minimum wages, labour market traps created by the high tax wedge and the decoupling of wages from productivity.

Population ageing is boosting cost pressures in the health system. The system delivers accessible care and broadly satisfactory health outcomes. Nevertheless, its performance is reduced by practice and efficiency variation across providers, high consumption of drugs and perhaps supplier induced demand. Health responsibilities are fragmented across government levels and sickness funds have too passive a role. The strict regulation of the supply of health services risks rendering the system too inflexible as ageing changes demand patterns. Long-term care has a high reliance on care in institutions.

Population ageing

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Transport infrastructure is well developed but close to saturation. Despite relatively dense networks of roads and railways, congestion is a significant problem around the major cities, generating costs to the economy, the environment and health. Looking forward, the system will have to change to meet new demands. Efficient selection of new projects is hampered by a lack of a national infrastructure plan and underuse of cost-benefit analyses. Subsidies for road use aggravate congestion and, in the case of diesel, contribute to air pollution. In addition, the implicit subsidies embodied in the providers’ public-service obligations generate important but opaque costs. The strategy of subsidising railway services has not resolved congestion, as there are no price signals to spread peaks in the use of roads and public transport.

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- Labour market
- Belgian export market losses have been larger than its competitors
- The loan-to-deposit ratio is low within the Euro area
- Environmental indicators
- Illustrative public debt paths
- Expected increases of ageing costs are relatively high
- Average effective age of retirement versus the official age
- Belgian employment rates are age dependent
- Tax wedges are high
- Health spending and life expectancy
- Employment and unemployment rates have large geographical variation
- Traffic outcomes are not promising

For further information please contact the belgium Desk at the OECD Economics Department.

The Secretariat’s draft report was prepared for the Committee by Jens Høj and Stéphane Sorbe under the supervision of Pierre Beynet. Research assistance was provided by Sylvie Foucher‑Hantala. The survey’s Chapter 2 also benefited from external consultancy work done by Stef Proost.

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