{ "title": "Belgium: Staff Concluding Statement of the 2021 Article IV Mission", "publication": "IMF News, June 29, 2021", "sourceUrl": "https://www.imf.org/en/news/articles/2021/06/29/mcs062921-belgium-staff-concluding-statement-of-the-2021-article-iv-mission", "canonical": "https://www.imf.org/en/news/articles/2021/06/29/mcs062921-belgium-staff-concluding-statement-of-the-2021-article-iv-mission", "overlayPath": "/en/news/articles/2021/06/29/mcs062921-belgium-staff-concluding-statement-of-the-2021-article-iv-mission/index.md", "summary": "Pandemic impacts mitigated by a strong, sustained public health and economic policy response and an impressive vaccination campaign; confidence recovering to historic highs, though uncertainty and risks remain.", "publishDate": "2021-06-29", "sections": [ { "heading": "Mission summary and priorities", "content": "- Pandemic impacts mitigated by a strong, sustained public health and economic policy response and an impressive vaccination campaign; confidence recovering to historic highs, though uncertainty and risks remain.\n- Authorities appropriately prioritized containing the pandemic and supporting the economy and households, extending broad support measures to 2021 and planning to phase them out from October with targeted support continuing.\n- Policy priority shift recommended: from crisis support to addressing long-standing fiscal and structural challenges aggravated by the pandemic, with emphasis on expenditure-led, medium-term consolidation to rebuild buffers.\n- Key cross-cutting needs: tax reform and anti-fraud actions, labor and social-benefit reforms to facilitate reallocation and participation, enhanced insolvency/restructuring frameworks, reduced regulatory barriers, and promotion of business dynamism.\n- Next Generation EU / Recovery and Resilience Program (NGEU/RRP) should be used to boost reforms and the green-digital transformation." }, { "heading": "Economic outlook and risks", "content": "- 2020 contraction: 6.3 percent (Belgian economy strongly affected, in line with EU average); contact-intensive activities most affected.\n- Growth forecasts: 5 percent in 2021 and 3½ percent in 2022, led by private consumption and investment and an improving global environment.\n- Near-term risks balanced and dominated by COVID dynamics, especially new strains; upside risks from faster reopening could exacerbate supply bottlenecks and price hikes.\n- Potential downside scenarios: rising unemployment and bankruptcies after public support phased out; weaker global recovery; tighter financing conditions; geopolitical strains; delays in domestic reforms due to political consensus challenges." }, { "heading": "Fiscal support, adjustment plans, and recommended stance", "content": "- Maintain fiscal support while health crisis continues and until recovery firms; phase out broad support and increasingly target measures across government levels.\n- Solvency support: should leverage private-sector resources and expertise and target firms affected by the pandemic that are without market access but viable.\n- Federal adjustment plan specifics: fixed annual effort of 0.2 percent of GDP from 2021 and a variable effort of up to 0.4 percent from 2022, contingent on GDP level and growth.\n- Assessment of plan: many measures not well-specified; planned adjustment does not stabilize debt, which will remain 20 ppts. of GDP above pre-COVID levels in 2026, leaving public finances vulnerable.\n- Recommendation: a more ambitious adjustment to put debt on a downward path, allocated across federal and regional governments with clear, binding targets to restore buffers.\n- Consolidation approach: expenditure-led, given the high tax burden; focus on containing health costs, improving benefit targeting and labor-market incentives, bolstering pension sustainability, reducing public administration duplication and subsidies, and raising efficiencies supported by spending reviews.\n- Temporary vs structural spending: COVID-related expansion of health and social spending should be kept temporary; higher structural outlays on health, minimum pensions, and social assistance (totaling ½ percent of GDP) lack accompanying concrete reforms.\n- Risks of spending drift: higher cap on health-spending growth (+2.5 percent from 2022 in real terms) may lead to spending drift; need to contain drift from automatic indexation and the “welfare envelope”.\n- Timing of reforms: poverty-reduction and pension reforms will be presented in July and September, respectively; both rely heavily on employment increases." }, { "heading": "Tax reform and anti-fraud measures", "content": "- Anti-fraud/compliance potential: authorities see scope for yields of up to 0.2 percent of GDP by 2024 from anti-fraud actions and enhanced compliance; a multi-agency plan has been developed with coordination across fiscal, economy/employment, and legal/law enforcement authorities.\n- Implementation requirements: clear responsibilities and accountability, secured full-time resources, strong program management, risk identification and mitigation, large-scale automated data matching, tax administration access to third-party information (including financial institutions). Compliance risks of high-wealth individuals (HWI) are a particular concern.\n- Comprehensive tax-policy reform objectives:\n - Lower effective tax rates on labor income, offset by base broadening.\n - Curtail and ideally eliminate preferential treatment of in-kind labor benefits.\n - Reduce tax expenditures on consumption taxes to rebalance the tax mix and decrease reliance on labor taxes.\n - Address tight personal income tax bracket structure; provide incentives for labor-market participation, especially for low-to-medium income and second earners.\n - Simplify to reduce compliance and administration costs.\n - Restore neutrality across forms of investment, income, or savings; modernize/update real estate taxes.\n - Phase-out of fossil-fuel subsidies and stronger carbon taxation to meet greater EU climate ambition; address impacts on vulnerable consumers and external competitiveness via transfers or offsetting mechanisms.\n- Specific policy point: decision to apply tax advantages for company cars only to zero-emissions vehicles from 2026 noted as a first step; reducing or eliminating this costly and regressive benefit should be part of tax reform.\n- International context: full implementation of international tax changes (e.g., global minimum corporate income tax) could boost revenues." }, { "heading": "Financial sector resilience and risks", "content": "- Banking sector: appears to have adequate buffers, including under stress; timely loan-loss recognition crucial to support intermediation and recovery.\n- Role for banks: partner with government to channel and leverage solvency support to viable enterprises amid narrowing fiscal space and substantial accumulated savings.\n- Real estate exposures:\n - Commercial real estate (CRE): COVID heightened risks from lower occupancy, rental expectations, and structural changes amid elevated valuations.\n - Residential real estate (RRE): prices continued to increase as mortgage rates fell to historic lows and households channeled additional savings into residential properties, raising valuation concerns.\n - Sector vulnerabilities could emerge as income support is scaled back or if interest rates rise sharply—buffers should be strengthened if valuations rise further.\n- Other financial risks to monitor: home-host issues and adequacy of risk-absorbing capital in Belgian subsidiaries given large foreign presence; accelerating digitalization (operating costs, competition, cyber-crime); exposure to climate risks; persistently-low interest rates weighing on profitability and encouraging search-for-yield behavior." }, { "heading": "Labor market, structural reforms, and insolvency frameworks", "content": "- Labor-market scarring and fragmentation: women, younger, lower-skilled, lower-income, and foreign-born workers disproportionately affected.\n- Transition of policy focus: from preserving jobs to facilitating retraining, reallocation, and participation; targeted extension of support where needed; lift temporary freeze on phased reduction of unemployment benefits (degressivity) as recovery progresses.\n- Employment target: government aims to raise employment rate from 70 to 80 percent by 2030; this requires strong improvements among young, old, low-skilled, non-EU-born, and female workers.\n- Planned labor measures: review disincentives for cross-sectoral mobility (e.g., seniority pay), improve working conditions to reduce flow into sickness/disability, keep older workers active longer, combat discrimination—many initiatives still early-stage.\n- Recommendation: consider more fundamental reform of social benefits, wage-setting, and employment-protection to boost productivity and competitiveness.\n- Insolvency and restructuring:\n - Pre-COVID reforms eased insolvency resolution; recent temporary measures improve access to judicial reorganization for SMEs and encourage early-stage restructuring with limited court involvement.\n - Introduction of a “pre-pack” procedure anticipated to save time and costs and improve restructuring prospects for smaller firms.\n - Risks remain of system congestion and excessive liquidation if bankruptcies mount after support withdrawal.\n - Recommended acceleration of plans to strengthen early warning mechanisms, introduce special out-of-court procedures for SMEs, boost resources, and allow creditors to initiate procedures in the EU Directive on Restructuring and Insolvency transposition next year.\n - Government could incentivize restructuring through tax relief or haircuts on its claims." }, { "heading": "Product-market reform, NGEU/RRP, and climate agenda", "content": "- Product-market reforms needed: reduce red-tape for start-ups, address entry barriers, support innovation (improve risk-capital availability, R&D tax incentive efficiency), and remove pre-existing rigidities that favored foreign providers in e-commerce and logistics.\n- NGEU/RRP opportunity: contains federal and regional components and investment/reforms in decarbonization, mobility, digitalization, inclusion, and productivity; aims to lift public investment and crowd-in private capital. Labor- and product-market reforms identified need further specification.\n- Climate policy imperatives:\n - Expectation of new European climate targets later this summer requiring substantial, accelerated, coordinated federal-regional efforts.\n - Recommended actions: phase-out fossil-fuel subsidies (including preferential prices/tax rates); establish a credible long-term framework for carbon pricing; accompany transition with regulations and support for particularly-affected households and sectors.\n - Need for a clear, monitorable climate action plan with federal-regional coordination to enhance coherence and efficiency.\n\nBelgium: Staff Concluding Statement of the 2021 Article IV Mission\n\n---\n\n\n References\n\n- IMF COVID-19 Hub\n- Policy Tracker\n- Financial Assistance\n- Questions & Answers\n- Belgium and the IMF\n- IMF Policy Advice -- A Factsheet\n- Mission Concluding Statements\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/06/29/mcs062921-belgium-staff-concluding-statement-of-the-2021-article-iv-mission" } ], "bullets": [ "[Markdown version](/en/news/articles/2021/06/29/mcs062921-belgium-staff-concluding-statement-of-the-2021-article-iv-mission/index.md)", "[Structured JSON version](/en/news/articles/2021/06/29/mcs062921-belgium-staff-concluding-statement-of-the-2021-article-iv-mission/index.json)", "[Bundle manifest](/en/news/articles/2021/06/29/mcs062921-belgium-staff-concluding-statement-of-the-2021-article-iv-mission/bundle-manifest.json)", "Published: June 29, 2021", "Pandemic impacts mitigated by a strong, sustained public health and economic policy response and an impressive vaccination campaign; confidence recovering to historic highs, though uncertainty and risks remain.", "Authorities appropriately prioritized containing the pandemic and supporting the economy and households, extending broad support measures to 2021 and planning to phase them out from October with targeted support continuing.", "Policy priority shift recommended: from crisis support to addressing long-standing fiscal and structural challenges aggravated by the pandemic, with emphasis on expenditure-led, medium-term consolidation to rebuild buffers.", "Key cross-cutting needs: tax reform and anti-fraud actions, labor and social-benefit reforms to facilitate reallocation and participation, enhanced insolvency/restructuring frameworks, reduced regulatory barriers, and promotion of business dynamism.", "Next Generation EU / Recovery and Resilience Program (NGEU/RRP) should be used to boost reforms and the green-digital transformation.", "2020 contraction: 6.3 percent (Belgian economy strongly affected, in line with EU average); contact-intensive activities most affected.", "Growth forecasts: 5 percent in 2021 and 3½ percent in 2022, led by private consumption and investment and an improving global environment.", "Near-term risks balanced and dominated by COVID dynamics, especially new strains; upside risks from faster reopening could exacerbate supply bottlenecks and price hikes.", "Potential downside scenarios: rising unemployment and bankruptcies after public support phased out; weaker global recovery; tighter financing conditions; geopolitical strains; delays in domestic reforms due to political consensus challenges.", "Maintain fiscal support while health crisis continues and until recovery firms; phase out broad support and increasingly target measures across government levels.", "Solvency support: should leverage private-sector resources and expertise and target firms affected by the pandemic that are without market access but viable.", "Federal adjustment plan specifics: fixed annual effort of 0.2 percent of GDP from 2021 and a variable effort of up to 0.4 percent from 2022, contingent on GDP level and growth.", "Assessment of plan: many measures not well-specified; planned adjustment does not stabilize debt, which will remain 20 ppts. of GDP above pre-COVID levels in 2026, leaving public finances vulnerable.", "Recommendation: a more ambitious adjustment to put debt on a downward path, allocated across federal and regional governments with clear, binding targets to restore buffers.", "Consolidation approach: expenditure-led, given the high tax burden; focus on containing health costs, improving benefit targeting and labor-market incentives, bolstering pension sustainability, reducing public administration duplication and subsidies, and raising efficiencies supported by spending reviews.", "Temporary vs structural spending: COVID-related expansion of health and social spending should be kept temporary; higher structural outlays on health, minimum pensions, and social assistance (totaling ½ percent of GDP) lack accompanying concrete reforms.", "Risks of spending drift: higher cap on health-spending growth (+2.5 percent from 2022 in real terms) may lead to spending drift; need to contain drift from automatic indexation and the “welfare envelope”.", "Timing of reforms: poverty-reduction and pension reforms will be presented in July and September, respectively; both rely heavily on employment increases.", "Anti-fraud/compliance potential: authorities see scope for yields of up to 0.2 percent of GDP by 2024 from anti-fraud actions and enhanced compliance; a multi-agency plan has been developed with coordination across fiscal, economy/employment, and legal/law enforcement authorities.", "Implementation requirements: clear responsibilities and accountability, secured full-time resources, strong program management, risk identification and mitigation, large-scale automated data matching, tax administration access to third-party information (including financial institutions). Compliance risks of high-wealth individuals (HWI) are a particular concern.", "Comprehensive tax-policy reform objectives:", "Specific policy point: decision to apply tax advantages for company cars only to zero-emissions vehicles from 2026 noted as a first step; reducing or eliminating this costly and regressive benefit should be part of tax reform.", "International context: full implementation of international tax changes (e.g., global minimum corporate income tax) could boost revenues.", "Banking sector: appears to have adequate buffers, including under stress; timely loan-loss recognition crucial to support intermediation and recovery.", "Role for banks: partner with government to channel and leverage solvency support to viable enterprises amid narrowing fiscal space and substantial accumulated savings.", "Real estate exposures:", "Other financial risks to monitor: home-host issues and adequacy of risk-absorbing capital in Belgian subsidiaries given large foreign presence; accelerating digitalization (operating costs, competition, cyber-crime); exposure to climate risks; persistently-low interest rates weighing on profitability and encouraging search-for-yield behavior.", "Labor-market scarring and fragmentation: women, younger, lower-skilled, lower-income, and foreign-born workers disproportionately affected.", "Transition of policy focus: from preserving jobs to facilitating retraining, reallocation, and participation; targeted extension of support where needed; lift temporary freeze on phased reduction of unemployment benefits (degressivity) as recovery progresses.", "Employment target: government aims to raise employment rate from 70 to 80 percent by 2030; this requires strong improvements among young, old, low-skilled, non-EU-born, and female workers.", "Planned labor measures: review disincentives for cross-sectoral mobility (e.g., seniority pay), improve working conditions to reduce flow into sickness/disability, keep older workers active longer, combat discrimination—many initiatives still early-stage.", "Recommendation: consider more fundamental reform of social benefits, wage-setting, and employment-protection to boost productivity and competitiveness.", "Insolvency and restructuring:", "Product-market reforms needed: reduce red-tape for start-ups, address entry barriers, support innovation (improve risk-capital availability, R&D tax incentive efficiency), and remove pre-existing rigidities that favored foreign providers in e-commerce and logistics.", "NGEU/RRP opportunity: contains federal and regional components and investment/reforms in decarbonization, mobility, digitalization, inclusion, and productivity; aims to lift public investment and crowd-in private capital. Labor- and product-market reforms identified need further specification.", "Climate policy imperatives:", "[IMF COVID-19 Hub](https://www.imf.org/en/Topics/imf-and-covid19)", "[Policy Tracker](https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19)", "[Financial Assistance](https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker)", "[Questions & Answers](https://www.imf.org/en/About/FAQ/imf-response-to-covid-19)", "[Belgium and the IMF](http://www.imf.org/external/country/BEL/index.htm)", "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)", "[Mission Concluding Statements](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2021/06/29/mcs062921-belgium-staff-concluding-statement-of-the-2021-article-iv-mission/index.md", "json": "/en/news/articles/2021/06/29/mcs062921-belgium-staff-concluding-statement-of-the-2021-article-iv-mission/index.json", "bundleManifest": "/en/news/articles/2021/06/29/mcs062921-belgium-staff-concluding-statement-of-the-2021-article-iv-mission/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T00:30:37.842Z" }