Belgium: Selected Issues

IMF Staff Country Reports, March 2, 2023

Source details

Examines features of Belgium’s wage-formation process.
Identifies weaknesses and offers policy recommendations that "strive to strike a balance between maintaining benefits of wage indexation while attenuating drawbacks for the economy."
Assesses how "inflation at record levels is putting the sustainability of Belgium’s wage indexation system to the test by weighing on corporate and government finances."

Current price pressures in Belgium "show parallels to periods of elevated inflation in recent history yet also involve some important differences."
"Energy price inflation in Belgium is among the highest in the euro area, in part driven by the relatively low taxation of energy products."
"Compared to the median euro area country, Phillips curve estimates point toward some differences in the inflation-setting process and inflation persistence in Belgium."

Wage formation in Belgium is "characterized by the desire to shield households from purchasing-power losses while protecting the competitiveness of a highly open economy."
Despite "successfully maintaining wage competitiveness in recent years, the current run-up in inflation is prone to put the wage-setting framework under additional strain."

Aim to preserve benefits of wage indexation (household purchasing power protection) while mitigating economic drawbacks (corporate and government fiscal strain).
Address energy taxation as a contributor to elevated energy price inflation.
Consider implications from Phillips curve evidence for inflation persistence when designing wage- and inflation-related policies.

IMF Staff Country Reports — Belgium: Selected Issues

Belgium: Selected Issues; IMF Country Report No. 23/99; Febuary 10, 2023
- Belgium: Selected Issues; IMF Country Report No. 23/99; Febuary 10, 2023 (Markdown version)
- Belgium: Selected Issues; IMF Country Report No. 23/99; Febuary 10, 2023 (PDF)