## Belgium: IMF Executive Board Concludes 2018 Article IV Consultation

_IMF News, March 8, 2018_

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## Bibliographic details
- Published: March 8, 2018

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### Economic growth and outlook
- Real GDP growth expected to approach 2 percent in 2018 after an estimated 1.7 percent in 2017.
- Recovery drivers: strong investment, solid consumption growth, favorable financial conditions, and a strengthening recovery throughout Europe.
- Medium-term outlook described as subdued in the absence of further structural reforms to raise potential growth; subject to external and domestic risks.

### Fiscal position
- Fiscal position improved in 2017 due to cyclical, structural, and one-off factors.
- Fiscal consolidation remains a priority given the high level of public debt that has only just started to decline.
- Achieving the government’s goal of structural balance will require significant efforts to make spending more efficient while safeguarding revenues.
- Selected fiscal figures (percent of GDP):
  - Revenue: 51.3 (2015), 50.7 (2016), 51.1 (2017), 50.4 (2018), 50.1 (2019)
  - Expenditure: 53.8 (2015), 53.2 (2016), 52.3 (2017), 51.7 (2018), 51.4 (2019)
  - General government balance: -2.5 (2015), -1.2 (2016), -1.3 (2017), (no explicit 2018/2019 entries in table)
  - Structural balance: -2.2 (2015), -1.1 (2016), -1.4 (2017), -1.5 (2018)
  - Structural primary balance: 0.8 (2015)
  - General government debt: 106 (2015), 105.7 (2016), 103.3 (2017), 101.1 (2018), 99.1 (2019)

### Tax and labor reforms
- Governing center-right coalition agreed on a new package of tax and labor market measures.
- Centerpiece: reform of the corporate income tax system to promote investment by lowering the comparatively high statutory rate while broadening the tax base to preserve revenue neutrality.
- Directors welcomed the corporate income tax reform and saw scope for additional reforms to address remaining distortions and safeguard revenues in the next phases of the tax shift.

### Productivity, investment, and competitiveness
- Belgium faces the challenge of raising productivity growth, which has lagged peers.
- Contributing factors: sectoral shifts, underinvestment in infrastructure, and lack of competition in some service sectors.
- Directors encouraged:
  - Increasing investment in transport infrastructure.
  - Enhancing competition in services.
  - Fostering innovation.

### Labor market
- Employment growth has picked up, partly due to past reform efforts.
- Labor market remains fragmented with entrenched high unemployment among certain groups and significant regional disparities.
- Directors highlighted the need to:
  - Address educational gaps.
  - Improve on-the-job training.
  - Reduce barriers to geographical mobility.
  - Ensure wage setting takes into account comparator country wages, productivity developments, and broader labor market conditions in Belgium.

### Financial sector and macroprudential considerations
- Soundness of the financial sector has improved considerably since the crisis, but cyclical vulnerabilities are rising.
- Identified risks: pockets of vulnerability in the housing market and rising corporate debt.
- Directors supported enhancing the central bank’s ability to deploy macroprudential measures in a timely manner when warranted by rising balance sheet risks.
- Emphasis on the financial sector adapting to economic, technological, and regulatory changes.
- Transition to a full European Banking Union highlighted as an important issue to be navigated by banks and supervisors; Directors encouraged continued close supervision of systemically important subsidiaries of euro area banks operating in Belgium.

### Executive Board Assessment (summary of Directors’ views)
- Commended Belgian authorities for reform efforts contributing to recovery, employment pickup, and a significant reduction of the fiscal deficit.
- Encouraged taking advantage of favorable economic conditions to push ahead with additional reforms to enhance resilience and long-term growth potential.
- Emphasized gradual fiscal consolidation and deeper reforms to make public spending more efficient, requiring coordination across all levels of government.
- Stressed raising productivity growth and addressing labor market fragmentation to realize full employment and growth potential.

### Selected economic indicators, 2015–19 (highlights)
- Real GDP: 1.4 (2015), 1.5 (2016), 1.7 (2017), 1.9 (2018 projection)
- Domestic demand: 2.1 (2015), 1.8 (2016)
- Private consumption: 0.9 (2015), 1.1 (2016), 1.6 (2017)
- Gross fixed investment: 2.7 (2015), 3.6 (2016), 3.7 (2017), 3.2 (2018)
- Exports, goods and services: 3.3 (2015), 7.5 (2016), 4.5 (2017), 4.7 (2018), 4 (2019)
- Imports, goods and services: 8.4 (2015), 4.3 (2016), 4.6 (2017), 4.1 (2018)
- Household saving ratio: 11.9 (2015), 11.2 (2016), 11.6 (2017), 12.3 (2018)
- Potential output growth: 1.2 (year not specified)
- Output gap (in percent): -0.8 (2015), -0.3 (2016)
- Unemployment rate (in percent): 8.5 (2015), 7.9 (2016), 7.3 (2017), 7 (2018), 6.8 (2019)
- Consumer prices: 2.2 (year not specified)
- GDP deflator: (value not specified in table)
- Goods and services balance: 1.3 (year not specified)
- Current account: -0.1 (year not specified)
- NEER, ULC-styled (2005=100): 97.9 (2015), 98.9 (2016), 101.3 (2017) — note: As of December 2017.
- REER, ULC-based (2005=100): 98.3 (2015), 98.5 (2016), 105 (2017)
- Gross national savings (in percent of GDP): 23.4 (2015), 24 (2016), 23.9 (2017), 24.5 (2018), 24.8 (2019)
- Gross national investment (in percent of GDP): 23.6 (2015), 23.8 (2016), 24.1 (2017)
- Nominal GDP (in billions of euros): 410.4 (2015), 423 (2016), 438.1 (2017), 453.5 (2018), 468.8 (2019)
- Population (in millions): 11.3 (2015), 11.4 (2016), 11.5 (2017)

*IMF Communications Department, March 8, 2018*

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## References

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- [Belgium and the IMF](http://www.imf.org/external/country/BEL/index.htm)
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_Source: https://www.imf.org/en/news/articles/2018/03/08/pr1879-belgium-imf-executive-board-concludes-2018-article-iv-consultation_