Foundations for Growth and Competitiveness 2026

Belgium

GDP per capita continues to lag that of the upper half of OECD countries, owing to the substantial gap in employment rates. While labour productivity remains among the highest in the OECD, it has slowed significantly over the past decade. However, this negative trend has reversed since 2021, sustained by stronger investment.

Higher employment rates would contribute to improving living standards, wellbeing, and social inclusion, while helping to address challenges posed by demographic changes. This requires reducing the tax burden on labour, particularly for the low skilled, and strengthening adult education. Reducing skills shortages as well as regulatory and administrative overheads can foster business dynamism and help Belgium’s firms achieve their full potential.

Economic performance

Gaps to the average of the upper half of the OECD countries

Source: Panel A: OECD, Economic Outlook database; Panel B: OECD, Labour Force Statistics database; Panel C: OECD, Economic Outlook and Productivity databases; Panel D: OECD, Economic Outlook and Annual National accounts, GFCF by assets databases.

Selected policy gaps

Source: OECD calculations based on the Foundations for Growth and Competitiveness database.

Competition: Reduce complex regulatory, license and permit procedures

Weak business dynamism, reflected in comparatively few firms’ entry and exit and low growth among entrants, has held back productivity growth. Excessive regulatory burden, exacerbated by interregional regulatory differences, imposes significant costs on businesses. Overly restrictive entry requirements, particularly in professional services, impede international integration and competition. Complex and costly insolvency procedures are major obstacles for firms’ restructuring, effective reallocation of resources in the economy and entrepreneurship.

Recommendations

✓ Adopt a whole-of-government strategy to reduce administrative costs for businesses, including a regular review of licences and permits.

✓ Relax and streamline overly restrictive entry requirements in professional services, tailoring regulation to risks in these activities.

✓ Further facilitate insolvency, fasten initiation of procedures, and promote the use of available out of court options and early warning tools.

Employment: Raise financial incentives to work

The tax wedge on labour remains among the highest in the OECD and weighs on employment. Financial disincentives to work are large, particularly for low-income workers and second earners, reducing labour supply. Accepting a higher-paying job can lead to little or no net financial improvement for low-paid workers, due to the withdrawal of means-tested benefits and tax advantages. Relatively slow decline of the unemployment benefits with duration, in small steps and long duration of unemployment benefits can prolong unemployment spells, while relatively low gain in prolonging working lives can hinder older workers employment.

Recommendations

✓ Strengthen in-work benefits for low-paid workers with children, remove the partial splitting system for couples, and withdraw benefits targeted at low-income earners more gradually as earned income rises.

✓ Strenghen financial incentives to prolong working lives while addressing barriers to older workers’ retention in the labour market.

✓ Reduce unemployment benefits over the unemployment spell in fewer and larger steps.

Taxes: Improve efficiency of the tax system

The tax system is complex, with extensive use of special tax provisions. Reduced rates and tax base narrowing measures imply higher standard tax rates and compliance costs. They can be regressive and undermine environmental policy objectives. Indicators of tax compliance point to relatively large tax revenue losses. The tax system is also skewed toward labour taxation, weighing on employment. Simplifying the tax system, broadening the tax base and improving tax compliance could free up resources for more productive uses, including reducing taxes weighing on growth.

Recommendations

✓ Resume efforts for a comprehensive and revenue neutral tax reform that reduces the tax system complexity and the tax burden on labour income.

✓ Broaden the tax base by eliminating ineffective tax expenditures, including fossil fuel support.

✓ Reduce regulatory barriers to tax fraud investigations, notably by facilitating access to bank information.

Education: Raise outcomes and equity in education

Relatively low educational attainment in upper secondary education negatively affects labour market outcomes. Early school leaving is comparatively high and educational outcomes are strongly linked to socio-economic background. Participation in adult education remains relatively low, especially for people with low education and with a foreign background, further reducing their chances to thrive in the labour market.

Recommendations

✓ Increase incentives for experienced teachers to work in disadvantaged schools, and for schools to improve outcomes of disadvantaged students.

✓ Provide targeted guidance on lifelong learning programmes, develop short modular training programmes, including occupational language programmes, and facilitate access, for instance via mobile training units or online courses.

✓ Support on-the-job occupational training, notably by helping small firms develop a training strategy and replace employees in training.

Infrastructure: Reduce planning and regulatory obstacles to infrastructure projects

Infrastructure investment remains low, notably in renewable energy facilities that need to be scaled up faster to meet increasing demand. Highly regulated construction permits, and environmental procedures, are a barrier to implementation. Low public acceptance and delays in spatial planning are also slowing down investment. OECD indicators on infrastructure governance suggest large room for improvement in long term planning, regulatory framework, and public integrity safeguards.

Recommendations

✓ Accelerate the implementation of the construction and environmental permitting reforms outlined in the Recovery and Resilience Plan and ensure their effectiveness is subject to regular evaluation.

✓ Refine the regulatory framework to better support the expansion of renewable energy capacity, including by making provisions to override public interest in project approval.

✓ Strengthen transparency and accountability in infrastructure projects, including by creating a single accessible online platform providing comprehensive information on projects and integrating integrity risks in infrastructure management frameworks.

Recent progress on structural reforms

Work incentives have been strengthened with the increase in the minimum wage, the introduction of a wage premium for low-paid workers in Flanders (“Jobbonus”), a premium for unemployed training in shortage occupations in Wallonia, and a pension bonus for longer working lives. Entitlement to unemployment benefits has been capped at a maximum duration of 24 months. Further measures are planned to guarantee a minimum financial gain from working and reduce early retirement. The creation of individual learning accounts and an individual right of five training days per year aim at fostering adult education.