IMF Executive Board Concludes 2023 Article IV Consultation with Belgium
IMF News, December 8, 2023
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- Published: December 8, 2023
Summary assessment and risks
- On December 6, 2023, the Executive Board of the International Monetary Fund (IMF) concluded the 2023 Article IV Consultation with Belgium.
- Though resilient to shocks, the Belgium economy and financial sector face significant cyclical and structural challenges and risks to the outlook.
- Strengths cited:
- Strong and timely policy response that helped the economy resist the covid and energy crises.
- Key risks identified:
- Slowing growth and persistently high core inflation.
- Increased public debt and structural fiscal deficits following the pandemic and energy crisis.
- Demographic pressure from an aging population and challenges from the climate transition.
- Low productivity and labor participation dampening potential growth.
- External risks from geopolitical fragmentation and global financing conditions.
- Domestic political cycle risks that could worsen the outlook.
Executive Board assessment and recommendations
- Directors agreed with the thrust of the staff appraisal and commended the authorities’ policy response over the past three years.
- Fiscal policy:
- An expenditure-led, sustained fiscal consolidation is needed to:
- Reduce debt vulnerabilities.
- Restore buffers to absorb future shocks.
- Support disinflation.
- Ensure the sustainability of the social model.
- Many Directors encouraged the authorities to consider a frontloaded adjustment.
- Fiscal consolidation should primarily focus on rationalizing spending and increasing its efficiency at all levels of government, while preserving high-return public investment to boost potential growth.
- Fiscal management would benefit from enhanced coordination among federal entities, within a consistent consolidation plan and strict spending limits applied at all levels of government.
- Tax and structural fiscal reforms:
- Tax reforms should proceed to help improve labor force participation and make the tax system fairer.
- Efforts to further strengthen tax administration will help improve tax collections.
- Given population aging, further reforms are needed to ensure pension sustainability and achieve efficiency gains in healthcare.
- Financial sector policy:
- Directors welcomed the findings that the financial sector remains resilient.
- Noting rising systemic risks from cooling real estate markets, higher interest rates, and weaker economic activity, Directors recommended that financial policies continue to focus on preserving resilience and building up buffers to absorb losses when needed.
- Directors welcomed the recent macroprudential policy tightening.
- They recommended further strengthening of:
- Supervision.
- Crisis management and resolution preparedness.
- The macroprudential framework.
- Systemic risk assessment.
- Structural reforms to lift potential growth:
- Continuing structural reforms is critical for lifting productivity and potential growth, advancing the green transition, and improving competitiveness.
- Recommended reforms include:
- Further reforms in tax policy, social benefits, and the labor market to increase flexibility, address disincentives to work, and promote greater inclusion in employment.
- Efforts to reduce skill mismatches.
- Deeper product-market reforms to raise productivity.
- Accelerated, coordinated efforts to advance the green transition among federal entities.
Outlook and next steps
- It is expected that the next Article IV Consultation with Belgium will be held on the standard 12-month cycle.
Key statistics — Table 1. Belgium: Selected Economic Indicators, 2022-24
- Real economy (annual percent change unless noted)
- Real GDP: 3.0 (2022), 1.4 (2023), 1.0 (2024)
- Domestic demand: 2.9 (2022), 2.4 (2023), 1.3 (2024)
- Foreign balance 1/: 0.1 (2022), -0.9 (2023), -0.3 (2024)
- Exports, goods and services: 4.9 (2022), -0.2 (2023), 1.5 (2024)
- Imports, goods and services: 0.8 (2022), 1.9 (2023), (2024 value not shown)
- Potential output growth: 1.8 (2022)
- Output gap (in percent): 1.2 (2022), 0.3 (2023)
- Employment
- Unemployment rate (in percent): 5.6 (2022)
- Employment growth: 2.0 (2022), 0.6 (2023)
- Prices
- Consumer prices: 10.3 (2022), 2.5 (2023), 4.4 (2024)
- GDP deflator: 5.9 (2022), 3.8 (2023), 3.3 (2024)
- Public finance (percent of GDP)
- Revenue: 49.6 (2022), 50.5 (2023), 51.3 (2024)
- Expenditure: 53.2 (2022), 55.0 (2023), 55.7 (2024)
- General government balance: -3.5 (2022), -4.5 (2023), -4.4 (2024)
- Structural balance: -4.1 (2022), -4.6 (2023)
- Primary balance: -2.0 (2022), -2.7 (2023), -2.4 (2024)
- General government debt: 104.3 (2022), 105.5 (2023), 104.7 (2024)
- Balance of payments
- Goods and services balance: -1.6 (2022), -1.4 (2023)
- Current account: -1.0 (2022)
- Exchange rates and competitiveness
- Euro per U.S. dollar, period average: 0.9 (2022)
- NEER, ULC-styled (2005=100): 96.3 (2022)
- REER, ULC-based (2005=100): 98.7 (2022)
- Memorandum items
- Nominal GDP (in billions of euros): 554.0 (2022), 583.7 (2023), 609.1 (2024)
- Population (in millions): 11.6 (2022), 11.7 (2023)
IMF Executive Board Concludes 2023 Article IV Consultation with Belgium, Press Release No. 23/429 (December 8, 2023).
