IMF Executive Board Concludes 2025 Article IV Consultation with Belgium
IMF News, March 20, 2025
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- Published: March 20, 2025
Executive Board assessment — key findings
- On March 18, 2025, the Executive Board concluded the Article IV consultation with Belgium and endorsed the staff appraisal without a meeting.
- The Belgian economy was resilient to a series of shocks, but:
- Growth has been slowing.
- Core inflation remains persistent.
- Labor productivity growth remained sluggish.
- Labor-cost competitiveness has declined.
- Successive shocks increased structural fiscal deficits and public debt.
- Risks: deepening geoeconomic fragmentation and intensification of regional conflicts affecting energy, trade and financial spillovers could worsen the outlook.
- The policy agenda of the new government, which includes significant structural reforms and fiscal consolidation, is an opportunity to make headway; steady and timely implementation of intended reforms will be key.
Fiscal policy: recommendations and quantitative targets
- Judgment: Sustained and significant fiscal consolidation is needed to bring the deficit durably below 3 percent of GDP and put debt on a downward path.
- Staff supports the government’s intention to pursue a seven-year adjustment under the EGF, accompanied by credible and front-loaded growth-enhancing reforms.
- Numerical guidance:
- An annual reduction in the structural primary balance of about 0.6 ppt of GDP until 2031 will be necessary.
- Design and composition of adjustment:
- Rationalize current spending and make room for more public investment.
- Preserve, or ideally increase, public investment to bolster potential growth and support the green transition.
- Rationalize social benefits and the public wage bill to achieve savings.
- Improve efficiency of spending, notably in infrastructure, healthcare, and education.
- Fiscal framework and reforms:
- Tax reforms should not result in lower revenue while reducing the tax burden on labor, introducing capital gains taxation, and reducing tax expenditure.
- Support planned reforms to raise effective retirement age and review eligibility to specific pension regimes to preserve pension sustainability.
- Strengthen the overall fiscal framework via a revitalized fiscal council and greater accountability of the federal and all federated entities in sharing the burden of fiscal adjustment.
- MTFSP guidance: The forthcoming MTFSP should be built on sufficiently conservative assumptions to lower the risk of deviating from the intended path of deficit reduction.
Financial sector: assessment and policy stance
- Overall systemic risks in the financial sector remain moderate.
- Recommendation: Maintain current capital buffer requirements and prudential limits on mortgage loans.
- Recent progress is welcome: strengthened systemic risk assessment, supervision, the macroprudential framework, and crisis management and resolution preparedness.
- With a new government, pending measures that required legislative action should now proceed.
Labor market, education, and wage-setting reforms
- Labor market and education reforms are essential to foster higher labor participation and better adequacy of skills.
- Supported reforms:
- Widen the income gap between work and nonwork.
- Limit the duration of unemployment benefits.
- Reduce the cost of hiring and dismissal.
- Inclusion priorities: foster a labor market more inclusive of low-skilled workers, older workers, women, and individuals with an immigration background, or disabilities.
- Policy tools: lifelong learning, reskilling, active labor-market policies.
- Education reforms: align curricula with skills companies need, better leverage teachers’ time, and strengthen support to students in difficulty.
- Wage-setting:
- Automatic wage and social benefit indexation protected household purchasing power during the inflation shock but increased fiscal deficits and undermined competitiveness.
- Consideration should be given to abolishing automatic indexation and the 1996 wage law; at a minimum, technical reforms to the existing system would benefit the labor market.
Product markets, EU coordination, and capital markets
- Further product market reforms and EU-level efforts would support firms’ productivity.
- Recommended actions:
- Reduce regulatory and administrative barriers.
- Improve the insolvency regime.
- Remove remaining barriers to trade within the EU and harmonize regulations and bankruptcy frameworks.
- Develop venture capital at the EU level to widen financing options for Belgian firms.
- These reforms would improve competition, provide buffers against geo-fragmentation risks, and expand market access for firms.
Climate policy
- Despite progress, much effort remains needed to achieve climate objectives.
- Policy recommendations:
- Complement planned expansion of the EU ETS with carbon taxation and the phasing out of fossil fuel subsidies, while ensuring support for vulnerable populations.
- Consolidate federal and regional climate efforts into a coherent and cohesive national strategy.
Selected economic indicators and projections (2022–30)
- Real economy (Percent change, unless otherwise indicated)
- Real GDP 1/: 2022: 4.2; 2023: 1.3; 2024: 1.0; 2025: 1.1
- Domestic demand: 2022: 1.8; 2023: 1.4; 2024: 1.5
- Private consumption: 2022: 3.6; 2023: 0.6; 2024: 1.2
- Public consumption: 2022: 3.3; 2023: 3.2; 2024: 1.9; 2025: 1.6; 2026: 1.7
- Gross fixed investment: 2022: 3.5; 2023: 0.9; 2024: 2.0
- Stockbuilding 2/ (contribution to GDP growth): 2022: -0.1; 2023: -1.0; 2024: 0.3; 2025: 0.0
- Foreign balance 2/: 2022: 0.1; 2023: -0.5; 2024: -0.3; 2025: -0.4; 2026: -0.2
- Exports, goods and services: 2022: 5.8; 2023: -7.1; 2024: -4.0; 2025: 2.6; 2026: 3.1
- Imports, goods and services: 2022: -6.8; 2023: -4.2; 2024: 0.4
- Household saving ratio: 2022: 12.7; 2023: 14.1; 2024: 13.6; 2025: 13.7; 2026: 13.8; 2027: 14.0; 2028: 14.3
- Potential output growth per working age person: (no numeric entries provided)
- Output gap (in percent): 2022: 0.5; 2023: 0.2
- Employment: (no numeric entries provided)
- Unemployment rate (in percent): 2022: 5.6; 2023: 5.5; 2024: 5.7
- Employment growth: 2022: 0.8
- Prices
- Consumer prices (HICP): 2022: 10.3; 2023: 2.3; 2024: 4.3; 2025: 2.2
- Core CPI (HICP): 2022: 4.0; 2023: 6.0; 2024: 3.4; 2025: 3.0; 2026: 2.1
- GDP deflator: 2022: 6.8; 2023: 4.5; 2024: 2.7; 2025: 2.5
- Public finance (Percent of GDP; unless otherwise indicated)
- Revenue: 2022: 48.6; 2023: 49.1; 2024: 49.6; 2025: 49.5; 2026: 49.7
- Expenditure: 2022: 52.2; 2023: 53.3; 2024: 54.0; 2025: 54.3; 2026: 55.0; 2027: 55.3; 2028: 55.7; 2029: 56.3; 2030: 56.9
- General government balance: 2022: -3.6; 2023: -4.4; 2024: -4.8; 2025: -5.5; 2026: -5.8; 2027: -6.2; 2028: -6.7; 2029: -7.2
- Structural balance: 2022: -4.3; 2023: -4.5; 2024: -6.1
- Structural balance (excl. Covid measures): 2022: -3.7
- Structural primary balance: 2022: -2.7; 2023: -2.4; 2024: -2.2; 2025: -2.5; 2026: -3.0; 2027: -3.2; 2028: -3.5
- Primary balance: 2022: -2.0; 2023: -3.3; 2024: -3.4
- General government debt: 2022: 102.6; 2023: 103.1; 2024: 104.1; 2025: 105.4; 2026: 108.6; 2027: 111.9; 2028: 115.2; 2029: 118.9; 2030: 123.0
- External sector
- Goods and services balance: 2022: -1.5; 2023: -0.6; 2024: 0.7
- Current account: 2022: -1.3; 2023: -0.7
- Exchange rates
- NEER, ULC-styled (2005=100): 2022: 96.3; 2023: 97.6; 2024: 97.8
- REER, ULC-based (2005=100): 2022: 99.7; 2023: 103.8; 2024: 105.5
- Euro per U.S. dollar, period average: …
- Memorandum items
- Gross national savings (in percent of GDP): 2022: 25.6; 2023: 24.6; 2024: 23.8; 2025: 23.9; 2026: 24.1; 2027: 24.3; 2028: 24.5
- Gross national investment: 2022: 26.9; 2023: 25.3; 2024: 24.2
- Nominal GDP (in billions of euros): 2022: 563.5; 2023: 596.3; 2024: 618.6; 2025: 640.9; 2026: 658.7; 2027: 677.3; 2028: 697.8; 2029: 718.4; 2030: 739.8
- Population (in millions): 2022: 11.6; 2023: 11.7; 2024: 11.8; 2025: 11.9; 2026: 12.0
Implementation priorities (policy sequencing)
- Front-load credible growth-enhancing reforms to accompany the seven-year fiscal adjustment.
- Prioritize rationalization of current spending, protection and possible expansion of public investment, and efficiency improvements in healthcare, education, and infrastructure investment.
- Proceed with pending legislative measures to strengthen supervision, macroprudential frameworks, and resolution preparedness.
- Advance labor-market reforms to increase participation and inclusiveness, and undertake education reforms to better match skills to labor market needs.
- Coordinate fiscal and climate policy: consolidate federal and regional climate efforts and complement EU ETS expansion with carbon taxation and subsidy phase-out while protecting vulnerable groups.
- Engage with EU partners to deepen the single market, harmonize regulations and bankruptcy frameworks, and advance the capital market union and venture capital development.
Source: IMF Executive Board conclusions from the 2025 Article IV consultation with Belgium (Executive Board endorsement of staff appraisal concluded March 18, 2025).
