COMMISSION STAFF WORKING DOCUMENT Country Report Belgium 2018 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2018 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011
Date: 2018-03-07
Institutions: European Commission, Secretariat-General
Subjects: Belgium, economic situation, education, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 7.3.2018 SWD(2018) 200 final  COMMISSION STAFF WORKING DOCUMENT Country Report Belgium 2018 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2018 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2018) 120 final}  
 
 
CONTENTS 

Executive summary 

1.  Economic situation and outlook 

2.  Progress with country-specific recommendations 

3.  Reform priorities 

3.1.  Public finances and taxation 

3.2.  Financial sector 

3.3.  Labour market, education and social policies 

3.4.   Investment and Competitiveness 

3.5.   Sectoral policies 

Annex A: Overview Table 

Annex B: Macroeconomic Imbalance Procedure Scoreboard 

Annex C: Standard Tables 

References 

LIST OF TABLES 

Table 1.1: 

Key economic and financial  indicators – Belgium 

Table 2.1: 

CSRs progress 

Table 3.2.1: 

Financial soundness indicators, all banks in Belgium 

Table B.1: 

The MIP scoreboard for Belgium (AMR 2018) 

Table C.1: 

Financial market indicators 

Table C.2: 

Headline Social Scoreboard indicator 

Table C.3: 

Labour market and education indicators 

Table C.4: 

Social inclusion and health indicators 

Table C.5: 

Product market performance and policy indicators 

Table C.6: 

Green growth 

LIST OF GRAPHS 

Graph 1.1: 

Breakdown of GDP growth 

Graph 1.2:  GDP - comparison across countries, index 2009=100 

1 

4 

11 

15 

15 

20 

23 

34 

44 

48 

55 

56 

62 

10 

13 

21 

55 

56 

57 

58 

59 

60 

61 

4 

5 

 
 
 
 
 
Graph 1.3: 

Potential growth across time and countries 

Graph 1.4: 

Breakdown of households disposable income growth 

Graph 1.5: 

Harmonised consumer price inflation 

Graph 1.6: 

Employment growth (y/y % change); self-employed and employees) 

Graph 1.7: 

Breakdown of the current account balance 

Graph 1.8: 

NFC debt and benchmarks 

Graph 1.9: 

Valuation levels and latest housing price growth 

Graph 2.1:  Overall multiannual implementation of 2011-2017 CSRs to date 

Graph 3.1.1:  Government primary expenditure in 2016, % of GDP 

Graph 3.1.2:  Public debt medium-term projection and scenarios ( % of GDP) 

Graph 3.1.3: 

Tax burden on labour for a single person at the average wage (2016) 

Graph 3.2.1:  Overvaluation gap with respect to price/income, price/rent and fundamental model 

valuation gaps 

Graph 3.2.2:  Gap to the fundamental-based and prudential benchmarks 

Graph 3.3.1:  Key labour market indicators 

Graph 3.3.2:  Relative dispersion of employment rates by education level, 2005 and 2016 

Graph 3.3.3:  Change in average take-home pay after the tax-shift 

Graph 3.3.4:  Characteristics of the employed, unemployed and inactive (20-64), 2014 

Graph 3.3.5:  Pay gap between older (50+) and younger (30-39) workers , 2014 

Graph 3.3.6:  Likelihood of employment by origin, gender and educational attainment 

Graph 3.3.7:  Share of the population (25-54) living in very low work intensity households, 2005-2016 

Graph 3.3.8:  Between schools variation in performance explained by schools' and students' social-

economic status (PISA 2015- Science) 

Graph 3.4.1:  Developments in labour productivity growth (Gross value added per hours worked) 

Graph 3.4.2:  Distribution of labour productivity growth, Belgium, (average 2011-2013) 

Graph 3.4.3:  Federal fiscal measures in support of R&D (left scale in billion EUR) and business R&D 

(right scale in billion EUR), 2008-2015 

Graph 3.4.4:  Determinants of changes in unit labour cost 

Graph 3.4.5:  Contribution of the main product groups to the inflation differential with the EA 

LIST OF BOXES 

Box 2.1: Tangible results delivered through EU support to structural change in Belgium 

Box 3.3. 1: Monitoring performance in light of the European Pillar of Social Rights 

Box 3.3.2: Policy highlight: Reform of early childhood and compulsory education in the French 

Community (Pact for Excellence in Teaching, 2015-2030) 

Box 3.4.1: Investment challenges and reforms in Belgium 

5 

6 

6 

7 

7 

8 

9 

11 

15 

16 

18 

22 

22 

23 

23 

25 

26 

27 

28 

29 

31 

34 

36 

37 

38 

39 

14 

24 

33 

35 

 
 
 
 
 
EXECUTIVE SUMMARY 

and 

The favourable economic environment provides 
a  window  of  opportunity  to  boost  the  reform 
momentum tackling long-term challenges in the 
labour  market 
finances, 
area  of  public 
investment(1).  Recent 
participation 
structural  reforms  have  borne  fruit  in  terms  of  an 
improved competitiveness and a job-rich recovery. 
Potential  growth  is  trending  upward  since  it 
bottomed  out  in  2013.  Nevertheless,  it  remains 
below its pre-crisis estimates as remaining barriers 
to  competition  in  market  services  and  a  narrow 
innovation  base  weigh  on  productivity  growth. 
While  recent  government  measures  have  spurred 
employment  growth,  a  high 
rate 
combined with a high vacancy rate is suggesting a 
high level of skills mismatches. The quality of the 
transport network is low and reflects the low level 
of public investment. 

inactivity 

and 

expected 

investment 

is  expected 

Economic  growth 
to  have 
is 
accelerated  to  1.7 %  in  2017  underpinned  by 
robust  domestic  demand  for  both  private 
purposes. 
consumption 
Household  consumption 
to  gain 
momentum in 2017-2019 in line with the projected 
increase 
income.  Business 
investment is expected to continue expanding over 
the forecast period, supported by sizeable liquidity 
reserves  and  favourable  financing  conditions  with 
persistently low interest rates. The contribution of 
net  exports  is  estimated  to  have  improved  after 
being a drag on growth in the previous year.  

disposable 

in 

Recent  developments  suggest  that  the  inflation 
differential  with  the  euro  area  is  decreasing 
Between  2018  and  2019  Belgium's  economic 
growth is projected to accelerate, progressing to an 
average annual pace of 1.8 %. This compares with 
an  average  growth  of  1.4 %  between  2014  and 
2016.  

Though  falling  public  debt  is  still  high.  Since 
peaking  in  2014  at  106.8 %  of  GDP,  public  debt 
has  been  falling  very  gradually.  The  general 
government  deficit  is  expected  to  have  dropped 

(1)  This report assesses Belgium’s economy in the light of the 
European Commission’s Annual Growth Survey, published 
on 22 November 2017. In the survey, the Commission calls 
on  EU  Member  States  to  implement  reforms  to  make  the 
European  economy  more  productive, 
resilient  and 
inclusive.  In  so  doing,  Member  States  should  focus  their 
efforts  on  the  three  elements  of  the  virtuous  triangle  of 
economic  policy  —  boosting 
investment,  pursuing 
structural reforms and ensuring responsible fiscal policies. 

significantly  in  2017.  In  2018,  only  a  moderate 
progress  is  expected  unless  additional  budget 
measures  are  taken.  There  remains  a  wide  gap 
between  the  estimated  structural  deficit  in  2017 
and  the  country’s  medium-term  objective  of  a 
balanced budget in structural terms.  

the 

2017 

limited  progress 

in 
Belgium  has  made 
country-specific 
addressing 
recommendations.  There  has  been 
limited 
progress with distributing fiscal targets among the 
various levels of government in a way that can be 
enforced  and  with  improving  the  composition  of 
public expenditure. Some progress has been made 
with eliminating tax breaks that causes distortions. 
There  are  no  plans  at  federal  level  to  introduce  a 
systematic  review  of  public  spending  as  a 
permanent  feature  of  budget  planning.  However, 
the National Plan for Strategic Investment provides 
for an increase in infrastructure investment.  Some 
regards  equal 
progress  has  been  made  as 
opportunities  to  participate  in  quality  education 
and  vocational 
training,  as  Communities  are 
phasing  in  major  school  reforms,  but  progress  on 
equal access to the labour market remains limited. 
There  has  been  some  progress  with  encouraging 
investment  in  knowledge-based  capital,  even  if 
measures vary in scope at the regional, community 
and  federal  levels.  Progress  on  sectoral  regulation 
has  been  overall  limited.  For  certain  professional 
services regulatory restrictions impact competition. 
Limited progress has been made in improving the 
functioning  of  the  retail  sector  for  the  benefit  of 
businesses  and  consumers  and 
improving 
market mechanisms in network industries. 

in 

the  Europe  2020  strategy, 

Regarding Belgium's progress towards its national 
the 
targets  under 
employment  rate  target  of  73.2 %  is  still  out  of 
reach, despite substantial job creation. It is at risk 
of  failing  to  meet  the  targets  for  greenhouse  gas 
emissions,  renewable  energy,  energy  efficiency 
and  reducing  the  risk  of  poverty.  By  contrast, 
Belgium reached its early school leaving target in 
2016  and  is  broadly  on  track  to  reach  the  targets 
tertiary 
for  R&D 
educational attainment.  

intensity  and 

increasing 

Belgium  performs  globally  well  on 
the 
indicators  of  the  Social  Scoreboard  supporting 
the  European  Pillar  of  Social  Rights,  whilst 
challenges remain. Participation in adult learning 
is  relatively  low  and  educational  outcomes  show 

1 

 
 
                                                           
Executive summary 

firms  and  the  rest.  The  share  of  firms  directly 
connected to foreign  markets,  which  appear  to 
have  higher  productivity,  is  small.  Public 
support  for  R&D  has  grown  much  faster  than 
business  R&D  spending.  This  raises  questions 
about  the  efficacy  of  the  schemes,  in  the 
absence of in-depth evaluations. 

in 

transport 

investment 

  Mobility in Belgium suffers from insufficient 
public 
infrastructure, 
distortive tax incentives, lack of competition 
in 
causing  major 
services, 
congestion  and  hindering  productivity 
growth. Shortfalls in infrastructure investment, 
especially  in  the  road,  waterways  and  rail 
networks,  reflect  the  persistently  low  level  of 
public investment. Combined with perverse tax 
incentives  (for  company  cars),  this  contributes 
to  aggravating  Belgium’s  traffic  congestion, 
which 
is  already  Europe’s  heaviest.  The 
environmental  gains  of  the  planned  change  in 
the  system  of  company  cars  may  be  very 
limited.  Belgium 
remains  Europe’s  most 
congested  country  in  terms  of hours wasted  in 
traffic and delays, in particular around Antwerp 
and Brussels. This is unlikely to change in the 
short  run,  partly  because  of  long  delays  in 
several  major  public  infrastructure  projects. 
Several transport services markets are also not 
open to competition.  

  Belgium 

the 

ranks 

among 

poorest 
performers  in  the  EU  on  entrepreneurship. 
A  still  heavy  administrative  burden  weighs  on 
businesses  and  digitisation  of  public  services, 
including  courts.  Although  several  policy 
measures have been adopted in recent years to 
foster  entrepreneurship,  there  is  evidence  that 
start-ups  or  businesses  without  a  mature 
balance 
accessing 
sheet  have  difficulty 
traditional bank financing. 

  High  restrictions 

in  some  professional 
services  and  the  construction  sector  hold 
back  competition,  and  the  retail  sector  still 
challenges.  Belgium's  productivity 
faces 
would  benefit 
in 
services. Low competitive pressures in services 
markets  are  also  harming  manufacturing 
increasingly  depend  on 
industries,  which 
services  inputs.  Retail  prices  remain  relatively 
high  despite  recent  measures  to  improve  the 

tackling  barriers 

from 

considerable  variations  linked  to  socio-economic 
status  and  migrant  background.  Some  population 
groups 
including  people  with  a  migration 
background could be better integrated in the labour 
market.  Belgium  has  one  of  the  largest  gaps 
between the risk of poverty or social exclusion for 
persons  with  disabilities  and 
those  without. 
Belgium  has  good  outcomes  in  terms  of  gender 
equality and childcare. 

Key structural issues analysed in this report, which 
point 
to  particular  challenges  for  Belgium's 
economy, are the following: 

and 

care. 

  Sustainability  of  public  finances  remains  a 
challenge.  The  pension  reforms  enacted  in 
2015  were  a  first  significant  step  to  address 
risks  related  to  the  long-term  cost  of  ageing. 
Nevertheless, recent projections point to a large 
increase  in  long-term  expenditure  for  both 
Fully 
long-term 
pensions 
implementing  the  different  steps  envisaged  by 
the  reform  would  help  reduce  these  risks.  In 
particular,  plans  to  introduce  a  credit  based 
public pension system  may  improve long-term 
fiscal sustainability, by providing for automatic 
adjustment  mechanisms 
to 
structural  demographic  or  economic  changes. 
Risks of fiscal stress appear to be contained in 
the  short  term.  Furthermore,  contributions  to 
the Belgian Deposit Guarantee Scheme are not 
invested  in  a  separate  portfolio  of  low-risk 
assets. 

response 

in 

  There  is  scope  to  give  spending  restraint  a 
larger  role  in  fiscal  consolidation.  Total 
public  expenditure  as  a  percentage  of  GDP  is 
above  the  euro  area  average.  At  present,  no 
level  of  government  in  Belgium  is  bound  by 
domestic expenditure rules, with the exception 
of  a  ceiling  for  healthcare  spending.  This 
prevents spending-based fiscal consolidation. 

  Low  productivity  growth 

remains  a 
challenge,  for  future  economic  prosperity.  
Investment  in  research  and  innovation  and 
other ‘intangibles’ assets, which have the most 
potential  for  innovation  output,  is  high  but 
rather  narrowly  focused.Innovation  must  be 
better diffused and the innovation base must be 
broadened.  There  is  a  wide  and  increasing 
productivity  gap  between  the  most  productive 

2 

 
 
the 

functioning  of 
retail  sector.  Recent 
legislatives  changes,  such  as  the  regulation  of 
night work, are welcome, but more flexibility is 
needed to fully exploit their potential.   

low  and  a  relatively 

  Employment  growth  has  recently  been 
sound,  but 
labour  market  participation 
remains  low.  Unemployment  has  declined  to 
pre-crisis levels. Nevertheless, the employment 
rate  remains 
large 
proportion  of  the  labour  force  is  inactive. 
Disincentives  to  work  remain  high  in  spite  of 
efforts  to  reduce  the  labour  tax  wedge  (the 
difference between the total employer’s labour 
cost  and  the  worker’s  take-home  pay).  At  the 
same  time,  the  vacancy  rate  is  among  the 
highest  in  the  EU.  This  suggests  major  skills 
mismatches  related  to,  among  other  factors, 
historical  high  labour  costs  and  taxation,  low 
mobility and inadequate language skills. There 
are also persistent strong regional disparities in 
labour  market  performance.  Inactivity  and 
unemployment are largely concentrated among 
low-skilled,  young,  people  with  a  migrant 
background,  older  workers  and  people  with 
disabilities.  There  is  evidence  that  activation 
measures  are  not  equally  effective  for  all 
population groups. Some specific groups, such 
as  persons  in  quasi  jobless  households  with 
children,  show  higher  poverty  rates  than  the 
EU average.  

in 

high 

science, 

technology 

  Belgium  combines  good  overall  education 
performance  with 
educational 
inequalities.  Children  with  a  disadvantaged 
background  including  those  with  a  migrant 
background do not have equal opportunities to 
access  quality  education.  The  proportion  of 
graduates 
and 
mathematics  is  one  of  the  lowest  in  the  EU. 
Top  performance  is  declining,  particularly  in 
mathematics. There are wide performance gaps 
between schools and major differences between 
the  Communities.  Growth 
the  school 
population is one of the highest in the EU. The 
share  of  disadvantaged  groups  will  increase, 
making  challenges  in  education  more  difficult 
to  address.  Both  the  Flemish  and  the  French 
Communities have embarked on major reforms 
Their 
of 
implementation is planned over the next decade 
and beyond.  

education 

systems. 

their 

in 

Executive summary 

  In  spite  of  recent  reforms,  the  Belgian  tax 
system  remains  complex.  The  reform  of  the 
corporate income tax will lower statutory rates 
and  help  simplify  the  system.  Nevertheless, 
many  exemptions  and  distortionary  incentives 
remain,  as  the  rising  trend  in  the  total  amount 
of  tax  breaks  shows.  The  opportunity  to  shift 
taxes  to  more  growth-friendly  bases  could  be 
further  used.  Revenues  from  environment 
related  taxes  are  still  among  the  lowest  in  the 
EU.  Finally,  some  features  of  the  Belgian 
taxation  system,  in  particular  the  lack  of 
the  notional 
specific  anti-abuse  rules  for 
interest  deduction 
facilitate 
aggressive tax planning via ‘cascading’. 

regime  may 

despite 

reveals 

some  pockets 
their 

  The  distribution  of  debt  and  assets  across 
of 
households 
vulnerability, 
overall 
favourable  wealth  position.  A  prolonged 
period  of  house  prices  increasing  faster  than 
households'  disposable  income  has  made  the 
financial  situation  of  households  more  fragile 
through an almost mechanical increase in their 
debt. Although measures have been announced, 
the 
national  macro-prudential 
decision-making  process  may  leave  financial 
stability 
risks  unaddressed.  House  prices 
appear currently to be slightly overvalued. 

complex 

  Belgium’s environment and climate policies, 
although performing well in some areas, are 
still  not  doing  enough  to  reduce  local  air 
pollution  and  greenhouse  gas  emissions. 
Belgium  is  not  fully  exploiting  its  potential  to 
become  a  low-carbon  innovation  leader.  Plans 
to decarbonise the economy while guaranteeing 
the  security  of  supply  will  require  significant 
investment 
in 
innovation.  The  EU’s  investment  instruments 
could be deployed to support these efforts. 

the  energy  system  and 

in 

3 

 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

Economic growth 

Graph 1.1: 

Breakdown of GDP growth 

expected 

Economic  growth 
to  have 
is 
accelerated  to  1.7 %  in  2017,  underpinned  by 
robust  domestic  demand,  both  in  terms  of 
consumption  and  investment.  The  contribution 
of  net  exports  is  expected  to  become  flat  after 
being a drag on growth in 2016. In the absence of a 
positive  contribution  from  net  exports,  growth  in 
economic 
remain 
comparable  in  2018  at  1.8 %  and  2019  at  1.7 % 
(see Graph 1.1). Between 2017 and 2019 economic 
growth  in  Belgium  is  projected  to  accelerate, 
progressing  at  an  average  annual  pace  of  1¾ %. 
This  compares  with  an  average  growth  of  1½ % 
over the previous three years. 

is  projected 

activity 

to 

Source: European Commission 

Belgium  has  done  better  on  average  than  the 
euro area as a whole, even though it has lagged 
behind  Germany,  since  the  global  economic 
recession  broke  (see  Graph  1.2).  Nevertheless, 
Belgium's  economic  performance,  though  robust, 
has recently underperformed compared to the euro 
area where growth has averaged 2 % between 2015 
and 2017 (compared to 1.5 % in Belgium). In this 
regard,  it  is  important  to  recall  that  the  euro  area 
aggregate 
have 
experienced 
their  economic 
performance during and after the recent economic 
crisis.  By  contrast  Belgium's  growth  has  been 
much  more  resilient  with  a  fairly  stable  pace  of 
growth in recent year. This is a sign of an economy 
with  broadly  based  fundamentals.  Moreover,  the 
recent  consolidation  measures  imposed  by  the 
government  (see  the  section  on  public  finances) 
are  likely  to  have  depressed  domestic  demand  to 
some extent, at least in the short term.  

countries,  which 

large  swings 

includes 

in 

The  Belgian  economy  proved  fairly  resilient  in 
the  wake  of  the  global  economic  recession  in 
2009.  GDP  quickly  regained  pre-crisis  levels, 
thanks  to  strong  economic  growth  in  2010  and 
2011.  That  recovery  period  was  followed  by  near 
stagnation,  in  2012  and  2013.  Economic  activity 
rebounded  over  the  next  two  years,  with  growth 
reaching  1.4 %  both  in  2014  and  2015.  In  2016 
GDP  grew  by  1.5 %,  despite  the  drag  from  the 
March  terrorist  attacks  and  their  aftermath,  which 
is nevertheless assessed as limited and transient. 

Economic growth is expected to rise to 1.7 % in 
2017  and  1.8 %  in  2018.  As  in  the  recent  years, 
domestic demand is expected to be the main driver 
is 
of  growth.  Households'  purchasing  power 
projected  to  pick  up  as  a  new  collective  wage 
agreement  comes  into  effect  and  the  job  market 
continues  to  develop  favourably.  Investment  by 
both  business  and  households  is  also  expected  to 
contribute  significantly 
local 
investment  cycle,  the  start  of  major  infrastructure 
works  and  defence  investments  are  expected  to 
drive  public  investment  growth  in  2018.  Public 
investment is projected to slightly edge up to 2.3 % 
of GDP in 2018. The contribution of net exports to 
growth  is  expected  to  remain  broadly  neutral,  as 
stronger  domestic  demand  will  raise  the  demand 
for  imports,  with  exporters  making  only  modest 
market share gains.  

to  growth.  The 

4 

-3.0-2.0-1.00.01.02.03.0091011121314151617e18f19fpps.net exportschanges in inventoriesinvestmentgovernment consumptionprivate consumptionGDP growth (%) 
 
 
1. Economic situation and outlook 

Graph 1.2:  GDP - comparison across countries, index 

2009=100 

potential growth.  This means that potential growth 
is  rather  unlikely  to  return  to  the  pre-crisis  level 
(see section 3.4.1). 

Graph 1.3: 

Potential growth across time and countries 

Source: European Commission 

Actual  economic  output  already  exceeds 
potential  growth,  estimated  at  around  1.5 % 
over 2017-2019. Potential growth bottomed out at 
around 0.8 % in 2013 and has since been trending 
upward.  Nevertheless  it  remains  below  the  pre-
2009  estimates  for  potential  growth.  This  is  a 
feature Belgium shares with several member states 
and, in general, the euro area as whole. The major 
exception  is  Germany,  where  potential  growth  is 
predicted  to  accelerate  in  the  near  future  (see 
Graph 1.3).  

its 

determinants 

The  decline  in  Belgium's  potential  growth 
compared to the pre-2009 period is broad-based 
across 
(see  European 
Commission,  2017a).  The  low  potential  growth  is 
mainly  driven  by  declining  long-term  trend  in 
gains  in  total  factor  productivity,  which  are 
estimated to have stabilised at a low level in recent 
years. The contribution of labour has also fallen as 
result  of  slower  growth 
the  working-age 
population,  without  any  change  in  the  average 
hours  worked.  Finally,  capital  accumulation  has 
been somewhat lower than in the pre-crisis period. 
As  for  the  post-crisis  period  between  2015  and 
2019,  potential  growth  is  projected  to  make  a 
subdued  recovery,  mainly  because  total  factor 
productivity  (TFP)  growth  remains  relatively  low 
compared with the pre-crisis period. Demographic 
ageing  (see  section  3.1),  which  is  projected  to 
affect Belgium and almost all European countries, 
will  increasingly  depress  labour's  contribution  to 

in 

Source: European Commission 

Since 2014 domestic demand has been the main 
driver  of  growth,  with  the  contribution  of  net 
export  going  from  negative  to  neutral.  Within 
domestic  demand, 
the  contribution  of  public 
consumption  has  declined  over  time,  in  line  with 
the  authorities'  recent  consolidation  efforts.  Real 
current  public  consumption  growth  (deflated  by 
GDP  deflator)  slowed  from  an  average  of  2.4 % 
over  2000-2013  to  an  average  of  0.4 %  between 
2014  and  2017.  By  contrast,  private  consumption 
growth  has  proved  fairly  resilient  even  during  the 
recession years, and it has picked up recently.  

increase 

in  2017-2019 

in 
in  disposable 

Household  consumption  is  expected  to  gain 
line  with  the 
momentum 
projected 
income. 
Following  the  financial  crisis,  the  purchasing 
power  of  Belgian  households  abated,  growing  by 
an  average  of  1.4 %  between  2010  and  2014 
(compared  with  3.7 %  between  2000  and  2009). 
This  trend  mostly  reflects  a  sustained  effort  by 
successive governments to moderate wage growth 
in  cost 
in  order 
competitiveness. In response to the erosion of their 
purchasing  power,  households  cut  their  spending, 
but  not  enough  to  keep  pace  with  the  fall  in  their 
disposable income resulting in a gradual reduction 
in the savings ratio. Income growth has picked up 
since  2016.  Following  a  real  wage  freeze  and  a 

to  correct  for  past 

losses 

5 

100102104106108110112114116118120091011121314151617eBEDEFRNLEA-190.00.51.01.52.02.5BEDEFRNLEA-19%2000-20082009-20142015-2019 
 
 
1. Economic situation and outlook 

are 

assets 

investment 

alternative 
attracting 
mounting investment flows. At the same time, the 
local government investment cycle in the run-up to 
local  elections  in  2018  and  the  start  of  large 
infrastructure  works  are  forecast  to  drive  public 
investment  in  2017-2019.  However,  the  public 
investment-to-GDP  ratio  of  around  2.4 % 
is 
nevertheless expected to remain among the lowest 
in the EU (see section 3.4). 

Inflation 

After peaking in February 2017 at 3.3 % y-o-y, 
headline  inflation  growth  slowed  in  the  rest  of 
the year. Headline inflation rose to 2.2% in 2017, 
up  from  1.8%  in  2016,  mainly  due  to  higher 
energy prices. The inflation gap between Belgium 
and the euro area narrowed to 0.7 pps. in 2017 (see 
Graph 1.5). Comparatively high headline and core 
inflation  has  been  a  recurrent  feature  of  the 
Belgian  economy  in  the  recent  past.  However,  as 
the  impact  of  the  specific  government  measures 
contributing to the gap is fading out, the difference 
with  the  euro  area  inflation  is  expected  to  further 
narrow  over  the  forecast  period.  The  headline 
inflation  gap  with  the  euro  area  is  discussed  in 
Section 3.4. 

temporary suspension of nominal wage indexation 
schemes,  wages  are  again  being  adjusted  for  the 
cost of living. Some real wage increases are again 
being  allowed,  while  income  tax  reductions  have 
also  been  introduced  since  2016  as  part  of  a 
multiannual  tax  reform  (see  Section  3.1).  A 
relatively strong labour market performance is also 
contributing  to  growth  in  households’  purchasing 
power.  By  contrast,  the  recent  sharp  downturn  in 
nominal interest rates has substantially reduced net 
household  interest  income  (see  the  section  on 
household 
indebtedness).  Overall,  household 
consumption is estimated to have grown by 1.8 % 
in 2017 and to rise to 1.9 % in 2018 and 1.8 % in 
2019. 

low 

interest 

sizeable 

liquidity 

reserves  and 

Business investment is shored up by favourable 
financing  conditions,  and  more  specifically  by 
the 
the 
persistently 
rates.  Recent 
government  measures  to  rein  in  wage  growth  are 
expected 
cost 
competitiveness of Belgian companies, resulting in 
a  steady  increase  in  profit  margins.  Given  the 
projected  favourable  international  environment, 
business 
to  continue 
investment 
expanding in the forecast horizon. 

is  expected 

improved 

have 

the 

to 

Graph 1.4: 

Breakdown of households disposable income 
growth 

Graph 1.5:  Harmonised consumer price inflation 

Source: European Commission 

Source: European Commission 

in  construction  has  also  been 
Investment 
to  housing  and  public 
buoyant 
infrastructure 
low 
mortgage  interest  rates  and  low  yields  on 

projects.  Historically 

thanks 

6 

Labour market and social developments 

Employment  growth  has  recently  been  sound. 
In  2016,  robust  economic  growth,  supported  by 
sound 
competitiveness 

resulted 

gains, 

in 

-2-101234560102030405060708091011121314151617epps.Other incomesCurrent transfersProperty incomeLabour incomeGross disposable income-1.5-1-0.500.511.522.5-3-2-101234567Jan-05Jul-05Jan-06Jul-06Jan-07Jul-07Jan-08Jul-08Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11Jan-12Jul-12Jan-13Jul-13Jan-14Jul-14Jan-15Jul-15Jan-16Jul-16Jan-17Jul-17%%HICP: BE vs. EA (rhs)HICP BEHICP EA 
 
 
employment growth (1.3 % in 2016) and a drop in 
the  unemployment  rate  (7.2 %  in  2017Q3),  which 
is now close to the pre-crisis level (7.0 % in 2008). 
The employment is rate well below the EU average 
(68.5 % vs. 72.6 % in the EU in 2017Q3).  

High  inactivity  and  low  employment  rates  in 
some  population  groups  pose  risk  to  the 
sustainability  of  public  finances  in  the  context 
of an ageing population. Belgium combines a low 
employment  rate  with  a  high  inactivity  rate 
(26.7 %  in  Belgium  vs  22.5 %  in  the  EU).  The 
average  working  life  in  Belgium  is  one  of  the 
shortest in the EU: 32.6 years, versus 35.6 years in 
the  EU28  in  2016.  The  labour  market  remains 
highly 
regions  and 
population  groups.  Older  and  low-skilled  workers 
and  people  with  a  migrant  background  are 
labour  market 
particularly  affected  by  poor 
outcomes.  The  number  of  people 
in 
living 
households with very low work intensity is among 
the highest in the EU (see section 3.3).  

fragmented  across 

the 

Graph 1.6: 

Employment growth (y/y % change); self-
employed and employees) 

Source:  European Commission 

Though  income  and  wealth  inequality  remain 
stable and below the EU average, children from 
from 
backgrounds 
disadvantaged 
inequality  of  opportunity.  The  combination  of  a 
highly  progressive  personal 
tax  and 
generous  cash  benefits  reduces 
inequality  of 
household income to below the EU average, while 
the  Gini  coefficient  for  net  wealth  is  below  the 

income 

suffer 

1. Economic situation and outlook 

average  for  the  euro  area  countries (2).  However, 
the  variation  in  2015  PISA  science  score  by 
parental background remained much higher than in 
other  EU  countries,  indicating  a  lack  of  equal 
opportunities  to  quality  education  and  specific 
concerns  for  children  with  a  migrant  background 
(see  Section  3.3  on  Skills  and  Education).  This 
inequality  is  compounded  by  the  high  and  rising 
poverty  risk  facing  the  children  of  low-skilled 
parents (58.3 % in 2016, as compared with an EU 
average of 52.4 %).  

External position 

In 2016 the current account balance moved to a 
small  surplus  position  after  5  years  of  deficit. 
The  deficit  gradually  shrank  from  -1.1 %  of  GDP 
in 2011 to -0.1 % of GDP in 2015, and in 2016 it 
moved  to  a  surplus  of  0.1 %  of  GDP,  (see  Graph 
1.7). The main component of the improving trend 
has been the trade balance. By contrast, while the 
services  and  the  investment  income  balance  went 
through a gradual but steady decline, the surplus of 
the labour income has increased over time. 

Graph 1.7: 

Breakdown of the current account balance 

Source: European Commission 

After  seven  years  of  deficit,  the  goods  balance 
returned  to  surplus  in  2015  and  this  surplus 
remained broadly stable in 2016. Changes in the 

(2)  As  measured  by  the  headline  indicator  of  the  Social 
Scoreboard,  the  S80/S20,  which  for  Belgium  was  3.8  in 
2016, below the EU average of 5.2. Data on net wealth is 
calculated based on the households financing and consumer 
survey (HFCS) of the ECB (2015). 

7 

-1.0%-0.5%0.0%0.5%1.0%1.5%2.0%2.5%-6.0-4.0-2.00.02.04.06.0-6.0-4.0-2.00.02.04.06.0000204060810121416good exports, netservices exports, netlabour incomesecondary incomeinvestment incomecurrent account 
 
 
                                                           
oil price go a long way in explaining developments 
in the goods balance. Nevertheless there was also a 
marked volume effect in recent years. Following a 
steady  decline  in  global  export  market  shares  by 
volumes  since  2002  —  only  interrupted  in  2003, 
2007  and  2013  —  significant  gains  have  been 
measured 
the 
reorganisation  of  the  commercial  activity  of  one 
large enterprise).  

in  2016 

(mostly 

linked 

to 

Belgium's net international investment position 
(NIIP) maintains a solid net creditor position in 
relation  to  the  rest  of  the  world.  The  balance 
between  external  financial  assets  and  liabilities  is 
about  50 %  of  GDP,  one  of  the  highest  figures  in 
the  EU.  This  surplus  has  its  origin  in  the  private 
sector, more in particular Belgian households, who 
own  gross  assets  —  foreign  and  domestic  — 
representing about 240 % of GDP. 

Private indebtedness 

Private  debt  was  relatively  high  at  190.1 %  of 
GDP  in  2016.  The  bulk  of  it  is  constituted  by 
corporate debt. At 131 % of GDP in 2016 is much 
higher  than  fundamental  drivers  would  suggest.  It 
is  also  above  the  level  generally  associated  with 
higher  risks  of  a  banking  crisis.  A  closer  analysis 
shows  that  most  of  the  increase  since  2007  is 
actually linked to cross-border intra-group lending, 
which  is  included  in  the  consolidated  figures  in 
national  accounts.  The  increase  in  liabilities  as  a 
result  of  intra-group  lending  (estimated  at  around 
100 %  of  GDP)  pushes  up  the  debt-to-GDP  ratio, 
though  these  liabilities  are  matched  by  an  almost 
equivalent amount of assets and thus bear a lesser 
degree of risk (National Bank of Belgium, 2017a). 
Excluding  debt  from  other  companies,  be  they 
domestic  or  foreign,  the  debt  of  Belgian  non-
financial  corporations  is  actually  much  closer  or 
below  the  various  benchmarks  suggesting  that 
deleveraging  needs  are  actually  modest  (Graph 
1.8) (3).  The  practice  of  cross-border  intra-group 
lending  has  been  stimulated  by  the  notional 
interest  deduction,  an  allowance  for  corporate 

(3)  Fundamental-based 

are 

derived 

from 
benchmarks 
regressions  capturing  the  main  determinants  of  credit 
growth and taking into account a given initial stock of debt. 
Prudential  thresholds  represent  the  debt  threshold  beyond 
which 
is  high, 
minimising the probability of missed crisis and that of false 
alerts.  See 
(2017), 
"Benchmarks for the assessment of private debt", Note for 
the Economic Policy Committee. 

the  probability  of  a  banking  crisis 

also  European  Commission 

1. Economic situation and outlook 

corporate 

equity  within 
taxation. 
Nevertheless, the recent changes introduced by the 
government  in  the  notional  interest  scheme  are 
likely to make it less interesting for corporations.  

income 

Graph 1.8:  NFC debt and benchmarks 

Source: National Bank of Belgium, European Commission 

Household debt stood at 60 % of GDP in 2016. 
This represents an increase of about 20 percentage 
points  of  GDP  since  2000,  when  it  stood  at  40 % 
of GDP. One of the main reasons for the rise is the 
rapid  increase  in  lending  for  housing  purchases. 
This  lending  is  underpinned  by  the  recent  sharp 
drop  in  interest  rates,  although  mortgage  interest 
tax deductions have been made less beneficial.  

House  prices  rose  sharply  in  real  terms  before 
2008,  and  there  are  now  indications  of  price 
overvaluation  in  the  Belgian  real  estate  market 
(cfr. Section 3.2). They increased by around 70 % 
in  1997-2008  or  5 %  on  average  annually  (see 
Graph  1.9).  They  have  been  broadly  flat  since, 
increasing  by  an  average  of  0.5 %  annually.  A 
prolonged period of housing prices increasing at a 
quicker  pace  than  households'  disposable  income 
has  made  the  financial  situation  of  households 
more fragile and contributed to their indebtedness. 
Massive  refinancing  of  mortgage  loans  and  the 
closing  of  new  loans  at  lower  rates  have  brought 
down  interest  payments  from  around  3 %  of 
disposable  income  in  2007-2008  to  below  1 %  in 
recent 
financing 
conditions  thus  appear  to  have  prevented  a  house 
price  correction,  this  also  suggests  how  rising 
interest rates might put pressure on house prices. 

years.  While 

supportive 

8 

020406080100120140199920002001200220032004200520062007200820092010201120122013201420152016% of GDPNFC Cross-border intercompany loansNFC loans (excl. Cross-border intercomp.)Fundamental-based benchmarkPrudential threshold 
                                                           
 
1. Economic situation and outlook 

in  recent  years  appears  to  have  halted.  The 
financial  sector  is  covered  in  Section  3.2  of  the 
report. 

Public finances 

According  to  the  Commission's  2017  Autumn 
forecast,  the  general  government  deficit  is 
expected  to  have  dropped  to  1.5 %  of  GDP  in 
2017 (5), continuing the process of consolidation 
of  Belgium’s  public  finances  which  started  in 
2009,  when  the  fiscal  deficit  was  recorded  at 
5.4 % of GDP. This process halted in 2016 when 
the  deficit  stalled  at  2.5 %  of  GDP,  and  the 
terrorist attacks temporarily affected the economic 
environment,  with  generally  disappointing  tax 
collection  and  revenue  measures  that  fell  short  of 
expectations.  Conversely,  additional  spending  to 
improve  security  and  cope  with  the  influx  of 
government 
the 
asylum-seekers 
than-initially-
strategy.  Higher 
consolidation 
anticipated  inflation  led,  due  to  the  indexation 
mechanism,  to  higher  spending  for  public  wages 
and social benefits. The authorities have postponed 
their  originally  planned  objective  of  achieving  a 
balanced  budget  for  general  government  until 
2019. 

hampered 

Public debt peaked at 106.8 % of GDP in 2014, 
falling to 105.7 % in 2016 and 103.8% in 20176. 
The  Commission  2017  autumn  forecast  predicts  a 
continuation  of  this  trend,  with  the  debt-to-GDP 
ratio  falling  to  102.5 %  and  101.2 %  of  GDP  in 
2018  and  2019,  respectively.  The  authorities 
organised a partial sale of the Belgian state's share 
in  BNP  Paribas  in  May  2017,  a  transaction 
representing  0.45 %  of  GDP.  The  most  recent 
budget  made  no  mention  of  future  divestments  in 
the  financial  sector.  Public  finances  are  discussed 
in Section 3.1. 

(5)  Recent figures point to a lower general government deficit 

of around 1 % of GDP. 

(6) Recent figures point to a lower public debt of 103% of GDP 

in 2017 

Graph 1.9:  Valuation levels and latest housing price 

growth 

Source: European Commission 

real 

estate 

residential 

As  a  result  of  the  rapid  increase  in  household 
the 
indebtedness  and  price  developments, 
European  Systemic  Risk  Board  (ESRB)  has 
warned  of  medium-term  vulnerabilities  in  the 
sector (4). 
Belgian 
Although  household  debt  amounts  to  only  around 
20 %  of  total  assets  held  by  Belgian  households 
(up from 14 % in 2000), there are sizeable pockets 
of vulnerability. Specific groups of highly indebted 
households  (i)  hold  large  mortgage  loans  in 
relation  to  the  value  of  their  real  estate  property, 
(ii)  spend  a  large  proportion  of  income  on  debt 
service,  or  (iii)  have  a  low  level  of  net  financial 
wealth  compared  to  their  indebtedness  (ESRB, 
2016). Risk concentrations could materialise in the 
event  of  an  economic  downturn  with  knock-on 
effects  on  income.  Such  a  scenario  might  lead  to 
credit  losses  to  banks,  especially  if  accompanied 
by  a  decline  in  house  prices,  following  the 
depreciation  of  the  collateral  held  by  the  banks. 
The  National  Bank  of  Belgium  proposed  a  new 
macro-prudential  measure  in  November  2017, 
consisting  of  a  flat  5  percentage  points  add-on 
(prolongation  of  the  original  measure)  and  a 
multiplier  of  1.33  on  mortgage  risk  weights. 
However,  the  ESRB  has  pointed  out  that  no 
measures  have  been  taken  to  directly  address 
vulnerabilities due to highly indebted households,, 
and  that  the  tightening  of  credit  standards  applied 

(4)  The  ESRB  has  issued  warnings  for  eight  Member  States, 

see:  
https://www.esrb.europa.eu/pub/pdf/reports/161128_vulner
abilities_eu_residential_real_estate_sector.en.pdf. 

9 

BEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISEUK-4-2024681012-30-20-1001020304050Deflated house price y-o-y growth, latest (%)Estimated valuation gap, 2016 (%) 
 
                                                           
 
                                                           
1. Economic situation and outlook 

Table 1.1: 

Key economic and financial  indicators – Belgium 

(1) NIIP excluding direct investment and portfolio equity shares         
(2) domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches 
Source: European Commission for forecast figures (Winter forecast 2018 for real GDP and HICP, Autumn forecast 2017 
otherwise) 

10 

2004-072008-122013-1420152016201720182019Real GDP (y-o-y)2,90,60,81,41,51,71,81,7Potential growth (y-o-y)1,91,30,81,21,41,51,51,5Private consumption (y-o-y)1,51,20,70,91,7...Public consumption (y-o-y)1,31,50,50,50,5...Gross fixed capital formation (y-o-y)5,9-0,32,22,73,6...Exports of goods and services (y-o-y)5,61,73,03,37,5...Imports of goods and services (y-o-y) 5,72,13,23,38,4...Contribution to GDP growth:Domestic demand (y-o-y)2,30,91,01,21,8...Inventories (y-o-y)0,50,00,00,20,3...Net exports (y-o-y)0,1-0,2-0,20,0-0,6...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0,50,50,10,30,50,40,40,3Capital accumulation (y-o-y)0,60,50,40,50,60,60,70,7Total factor productivity (y-o-y)0,80,40,30,30,30,40,40,4Output gap1,4-0,1-1,0-0,6-0,5-0,30,10,3Unemployment rate8,27,68,58,57,87,37,06,8GDP deflator (y-o-y)2,11,70,91,11,61,81,61,7Harmonised index of consumer prices (HICP, y-o-y)2,12,50,90,61,82,21,51,6Nominal compensation per employee (y-o-y)2,72,51,70,00,11,31,92,2Labour productivity (real, person employed, y-o-y)1,6-0,20,70,50,2...Unit labour costs (ULC, whole economy, y-o-y)1,12,61,0-0,5-0,10,71,01,2Real unit labour costs (y-o-y)-1,00,90,1-1,6-1,7-1,1-0,6-0,5Real effective exchange rate (ULC, y-o-y)0,30,31,3-4,2-0,40,91,2-0,5Real effective exchange rate (HICP, y-o-y)0,3-0,20,9-2,92,81,21,5.Savings rate of households (net saving as percentage of net disposable income)9,08,35,04,43,7...Private credit flow, consolidated (% of GDP)9,312,82,712,212,4...Private sector debt, consolidated (% of GDP)124,6171,7165,7178,9189,2...of which household debt, consolidated (% of GDP)43,952,756,858,859,2...of which non-financial corporate debt, consolidated (% of GDP)80,7119,0108,9120,2130,1...Gross non-performing debt (% of total debt instruments and total loans and advances) (2)2,64,24,33,02,6...Corporations, net lending (+) or net borrowing (-) (% of GDP)1,92,52,31,62,51,41,41,6Corporations, gross operating surplus (% of GDP)24,824,724,525,726,427,227,628,0Households, net lending (+) or net borrowing (-) (% of GDP)2,52,81,10,50,2-0,7-0,9-0,9Deflated house price index (y-o-y)6,70,7-0,51,41,0...Residential investment (% of GDP)5,96,15,85,85,9...Current account balance (% of GDP), balance of payments2,3-0,3-0,6-0,10,1-1,0-1,1-0,9Trade balance (% of GDP), balance of payments2,5-0,10,01,71,3...Terms of trade of goods and services (y-o-y)-0,5-0,50,20,90,70,00,10,1Capital account balance (% of GDP)-0,2-0,1-0,20,00,1...Net international investment position (% of GDP)35,557,448,547,251,2...Net marketable external debt (% of GDP) (1).63,857,152,948,6...Gross marketable external debt (% of GDP) (1).232,4190,6199,8206,0...Export performance vs. advanced countries (% change over 5 years)0,4-2,2-6,8-10,6-5,0...Export market share, goods and services (y-o-y)-2,5-3,20,9-5,47,9...Net FDI flows (% of GDP)-2,0-3,51,23,5-1,7...General government balance (% of GDP)-0,7-3,8-3,1-2,5-2,5-1,5-1,4-1,5Structural budget balance (% of GDP).-3,8-3,0-2,2-2,1-1,5-1,5-1,7General government gross debt (% of GDP)92,399,7106,1106,0105,7103,8102,5101,2Tax-to-GDP ratio (%)45,345,747,847,346,546,646,245,9Tax rate for a single person earning the average wage (%)42,042,342,442,040,8...Tax rate for a single person earning 50% of the average wage (%)25,826,626,025,021,6...forecast 
 
 
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

the 

implementation  of 

Progress  with 
the 
recommendations addressed to Belgium in 2017 
has to be seen as part of a process which started 
with the introduction of the European Semester 
in 2011(7). Looking at the multi-annual assessment 
of  the  implementation  of  the  CSRs  since  these 
were first adopted, 64 % of all the CSRs addressed 
to Belgium have recorded at least 'some progress'. 
In particular, substantial progress has been made in 
the  country  competitiveness  by 
safeguarding 
ensureing 
line  with 
productivity.  First  steps  to  ensure  the  long-term 
sustainability of the public finances have also been 
adopted.  Nevertheless,  36 %  of 
these  CSRs 
recorded 'limited' or 'no progress' (see Graph 2.1).  

that  wages  evolve 

in 

The  general  government  deficit  has  declined 
from 4.1 % to 1.5 % of GDP between 2011 and 
the end of 2017. However, the achievement of the 
target  of  a  structurally  balanced  budget  has  been 
postponed  to  2019,  with  only  limited  progress 
projected  in  2018.  The  public  debt-to-GDP  ratio 
has  entered  a  declining  trend  since  it  peaked  at 
106.8 % of GDP in 2014 and contributes to soften 
long-term 
to 
sustainability  concerns 
expected  rise  in  population  ageing  costs.  In  this 
regard,  the  full  implementation  of  the  different 
steps of the reform of the pension system decided 
towards 
in  2014  will  be  a  significant  step 
addressing 
ageing. 
cost  of 
long-term 
Legislation  already  passed  has  tightened  up  the 
minimum  age  and  career  requirements  for  early 
retirement  and  raise  the  legal  pension  age  for  the 
years  to  come.  The  more  favourable  pension 
scheme for civil servants underwent a reform as of 
2016.  

related 

the 

Measures have taken to reverse previous losses 
in  competitiveness.  Between  2013  and  2017, 
various  wage  moderation  policies  have  been 
implemented  to  improve  the  gradually  eroding 
cost-competitiveness, including a real wage freeze, 
parametric  changes  to  the  indexation  calculation 
mechanism  and  a  temporary  suspension  of  wage 
the 
indexation  agreements. 
framework  of  the  on-going  tax  reform  measures 
have been taken to reduce the tax wedge on labour 
through  gradual  decreases  in  personal  income 
security 
employers' 
taxation 

In  addition, 

social 

and 

in 

(7)  For  the  assessment  of  other  reforms  implemented  in  the 

past, see in particular section 3. 

contributions,  with  more 
than  proportional 
reductions for lower salaries. The targeting of low 
wages favours the young and the low-skilled, who 
tend  to  have  lower  wages,  but  also  the  lowest 
employment rates, and thus supports activation for 
some  of  the  most  vulnerable  groups.  Overall, 
estimates  by  the  Federal  Planning  Bureau and  the 
National  Bank  of  Belgium  suggest  an  additional 
job  creation  of  45,000–65,000  jobs  by  2021. 
Additional  positive  effects  are  expected  from 
reductions targeting SMEs and self-employed. 

the  cost-competitiveness  of 

The  recently  adopted  reform  of  the  corporate 
income tax system, once enacted, would further 
reinforce 
the 
Belgian  economy.  The  move  towards  a  system 
with lower statutory rates and fewer tax deductions 
and  exemptions  will  also  help  simplify  an  overall 
complex tax system and increase the attractiveness 
of  the  Belgian  economy  for  doing  business.  The 
extension  of  the  tax  shelter  scheme  to  SMEs  lifts 
one  of  constrains  to  the  development  of  dynamic 
fast  growing  firms,  providing  easier  access  to 
financing.  

Graph 2.1:  Overall multiannual implementation of 2011-

2017 CSRs to date 

* The overall assessment of the country-specific 
recommendations related to fiscal policy excludes 
compliance with the Stability and Growth Pact. 
** 2011-2012: Different CSR assessment categories. 
*** The multiannual CSR assessment looks at the 
implementation since the CSRs were first adopted until the 
2018 Country Report. 
Source: European Commission 

Investment  is  also  crucial  within  a  longer-term 
perspective.  Although  overall  investment  did  not 
experience  the  steep  decline  observed  in  other 
countries  in  the  wake  of  the  financial  crisis,  the 
situation  is  far  less  rosy  when  it  comes  to  public 
investment.  This  has  been  structurally  low  for 
several  decades,  as  a  result  of  policy  choices 
within a context of prolonged fiscal consolidation. 

11 

8%28%16%44%4%No ProgressLimited ProgressSome ProgressSubstantial ProgressFull Implementation 
 
                                                           
 
2. Progress with country-specific recommendations 

Sustained  cutbacks  in  investment  budgets  have 
resulted  in  net  public  investment,  averaging  zero 
since  the  1990s,  eroding  the  quality  of  public 
infrastructure  (cf.  section  3.4).  The  political 
agreement  for  a  national  pact  for  strategic 
investments,  the  announcement  of  an inter-federal 
energy pact in 2017 and calls for agreeing an inter-
federal  mobility  strategy  could  provide  renewed 
impetus  for  investment,  including  in  energy  and 
transport  infrastructure,  but  details  of  each  still 
need to be announced.  

the 

2017 

through 

limited  progress 

in 
Belgium  has  made 
addressing 
country-specific 
recommendations. There has been no progress on 
distributing  fiscal  targets  among  various  levels  of 
government  in  a  way  that  can  be  enforced.  The 
federal  government  has  announced  steps 
to 
reinforce  the  autonomy  of  the  High  Council  and 
the  independence  of  its  members.  Some  progress 
has  been  made  with  regard  to  the  removal  of 
distortive  tax  expenditure.  Limited  progress  has 
been made on improving the composition of public 
expenditure. There are no plans at federal level to 
introduce  a  systematic  review  of  public  spending 
as  a  permanent  feature  of  the  budget  planning. 
Nevertheless, 
the  National  Plan  for 
Strategic  Investment,  an  increase  in  infrastructure 
investment  is  projected.  There  is  also  some 
progress  on  vocational 
training,  quality  of 
education  reforms  and  labour  market  with  regard 
to  disadvantaged  groups,  as  communities  are 
phasing  in  major  school  reforms  (e.g.  French-
speaking  community's  Pacte  d'Excellence).  Some 
progress has been recorded to foster investment in 
knowledge based capital, even if measures vary in 
scope  at  regional,  community  and  federal  level. 
Progress  on  sector  regulation  has  been  overall 
limited.  For 
services 
regulatory 
to  hamper 
competition. Also, limited progress has been made 
in improving the functioning of the retail sector for 
the  benefit  of  businesses  and  consumers.  Finally, 
limited  progress  has  been  made  in  enhancing 
market mechanisms in network industries. 

professional 
continue 

certain 
restrictions 

12 

 
 
 
 
2. Progress with country-specific recommendations 

Table 2.1: 

CSRs progress 

(1) This does not include an assessment of compliance with the Stability and Growth Pact. 
Source: European Commission 

ESI  Funds  are  important  in  addressing  key 
challenges to inclusive growth and convergence 
in  Belgium,  notably  by  investing  in  research, 
development 
redressing 
educational  inequality,  fighting  early  school 
leaving and boosting the employment rate of the 

innovation, 

and 

young.  The  funds  are  instrumental  in  fighting 
poverty and social exclusion as well as helping the 
country  to  reach  its  Europe  2020  targets  for 
greenhouse gas emissions. 

13 

Belgium Overall assessment of progress with 2017 CSRs:  Limited progress CSR 1: Pursue a substantial fiscal effort in 2018 in line with the requirements of the preventive arm of the Stability and Growth Pact, taking into account the need to strengthen the ongoing recovery and to ensure the sustainability of Belgium's public finances. Use windfall gains, such as proceeds from asset sales, to accelerate the reduction of the general government debt ratio. Agree on an enforceable distribution of fiscal targets among government levels and ensure independent fiscal monitoring. Remove distortive tax expenditures. Improve the composition of public spending in order to create room for infrastructure investment, including on transport infrastructure. Belgium has made limited progress in addressing the fiscal-structural part of CSR1(1):  Limited progress in agreeing on an enforceable distribution of fiscal targets.  Some progress in removing distortive tax expenditure.  Limited progress in improving the composition of public spending.   CSR 2: Ensure that the most disadvantaged groups, including people with a migrant background, have equal opportunities to participate in quality education, vocational training, and the labour market.  Belgium has made some progress in addressing CSR2  Some progress in ensuring that most disadvantaged groups, including people with a migrant background, have equal opportunities to education and vocational training.  Limited progress in ensuring that most disadvantaged groups, including people with a migrant background, have equal opportunities to labour market.  CSR 3: Foster investment in knowledge-based capital, notably with measures to increase digital technologies adoption, and innovation diffusion. Increase competition in professional services markets and retail. Enhance market mechanisms in network industries.  Belgium has made limited progress in addressing CSR3  Some progress in fostering investment in knowledge-based capital  Limited progress in increasing competition in professional services market and retail  Limited progress in enhancing market mechanisms in network industries    
 
 
 
 
2. Progress with country-specific recommendations 

Box 2.1: Tangible results delivered through EU support to structural change in Belgium 

Belgium is a beneficiary of the European Structural and Investment Funds (ESI Funds) support and 
can receive up to EUR 2.7 billion until 2020. This represents around 3 % of annual public investment (1) 
over the period 2014-2018. By 31 December 2017, an estimated EUR 1.9 billion (2) (69 % of the total) was 
allocated to projects on the ground. This has paved the way for 15 669 enterprises to receive support with an 
increase of about additional 8 000 full time job equivalents created.  

ESI  Funds  help  address 
implement  country-specific 
structural  policy  challenges  and 
recommendations. In this way, the Funds contribute to reaching the 2020 targets for reducing greenhouse 
gas emissions from non-ETS activities especially as regards buildings and urban transport. About 38 % of 
the ESI Funds are devoted to supporting actions in the field of employment, social inclusion and education, 
helping  Belgium to  reach  its Europe  2020  targets  (reduction  of  poverty,  reduction  of  early  school  leaving 
and reaching an employment rate of 73.2 % by 2020). In this context, specific attention is devoted to young 
people,  in  particular  with  the  implementation  of  the  Youth  Employment  Initiative  in  Wallonia  and  in 
Brussels. 

Various reforms were undertaken already as precondition for ESI Funds support (3). ESI Funds helped 
implement  a  number  of  structural  reforms  in  2015  and  2016  via  ex-ante  conditionalities  and  targeted 
investment. These included establishing regional Smart Specialisation Strategies.  

Belgium  is  advancing  the  take  up  of  the  European  Fund  for  Strategic  Investments  (EFSI).  As  of 
December  2017,  overall  financing  volume  of  operations  approved  under  the  EFSI  amounted  to  EUR  1.9 
billion,  which  is  expected  to  trigger  total  private  and  public  investment  of  EUR  5.8  billion.  More 
specifically,  16  projects  have  been  approved  so  far  under  the  Infrastructure  and  Innovation  Window 
(including 10 multi-country projects), amounting to EUR 1 billion in EIB financing under the EFSI. This is 
expected  to  trigger  nearly  EUR  4.6  billion  in  investments.  Under  the  SME  Window,  8  agreements  with 
financial  intermediaries  have  been  approved  so  far.  European  Investment  Fund  financing  enabled  by  the 
EFSI  amounts  to  EUR  256  million,  which  is  expected  to  mobilise  more  than  EUR  1.1  billion  in  total 
investment. Over 4 400 smaller companies or start-ups will benefit from this support. Energy ranks first in 
terms of operations and volume approved, followed by RDI, SMEs and Digital. 

Funding under Horizon 2020, the Connecting Europe Facility and other directly managed EU funds is 
additional to the ESI Funds. By the end of 2017, Belgium has signed agreements for EUR 482 million for 
projects under the Connecting Europe Facility. Belgium also benefitted from EUR 341 million from Horizon 
2020 project grants signed in 2017. https://cohesiondata.ec.europa.eu/countries/BE 

(1)  Public investment is defined as gross fixed capital formation + investment grants + national expenditure on agriculture 

and fisheries. 

(2)  Update  financial  figures  are  available  at  beginning  February  2018  and  will  be  included  in  the  final  version  by  9 

February. 

(3)  Before  programmes  are  adopted,  Member  States  are  required  to  comply  with  a  number  of  so-called  ex-ante 

conditionalities, which aim at improving conditions for the majority of public investments areas. 

14 

 
 
 
3.  REFORM PRIORITIES 

3.1.  PUBLIC FINANCES AND TAXATION 

3.1.1.  FISCAL POLICIES 

to 

After  stalling  in  2016,  the  Belgian  general 
government deficit is expected to have dropped 
significantly 
in  2017  thanks  to  favourable 
cyclical  conditions  one-off  factors  as  well  as  a 
structural  adjustment.  According 
the 
Commission  2017  autumn  forecast,  the  deficit  is 
estimated to have decreased from 2.5 % of GDP in 
2016 to 1.5 % in 2017. Both revenue (+0.2 pps of 
GDP)  and  expenditure  (-0.8 pps)  are  expected  to 
have contributed to this improvement. In 2018, the 
to  decline  only 
is  forecast 
headline  deficit 
moderately,  to  1.4 %  of  GDP.  The  revenue-to-
GDP  ratio  is  projected  to  decline  by  0.6  pps.  The 
drop  mostly 
implementation  of 
additional  reductions  in  personal  income  taxation 
and  social  security  contributions  in  the  context  of 
the tax reform to lower the tax pressure on labour. 
This  decline  is  counterbalanced  by  a  comparable 
reduction  in  expenditure.  The  latter  stems  from 
lower  expenditure  on  social  benefits,  interest 
payments, public sector wages and subsidies.  

reflects 

the 

In structural terms, the budget consolidation is 
expected  to  halt  in  2018,  with  the  structural 
balance  remaining  broadly  unchanged.  Since 
2011,  when  it  peaked  at  4.0 %  of  GDP,  the 
structural balance improved by 2.5 % of GDP (up 
the  primary (8)  structural 
to  2017),  whereas 
balance  over  the  same  period  improved  by  only 
1.5 %  of  GDP.  It  means  that  almost  half  of  the 
structural improvement is due to interest windfalls. 
Belgium  thus  appears  to  have  partly  missed  the 
opportunity  to  use  the  accommodative  monetary 
policy  for  a  more  ambitious  and  timely  budget 
consolidation. 

Total  public  expenditure  remains  well  above 
the EA average; this is also true for the primary 
expenditure (see Graph 3.1.1). While in the early 
in 
2000s,  primary  government  expenditure 
Belgium  stood  at  a  level  fairly  similar  to  the  EA 
average,  since  then  a  gap  has  opened  up.  For 
instance,  primary  expenditure 
increased  from 
42.4 %  of  GDP  in  2000  to  50.3 %  in  2016.  This 
rise of 7.9 pps of GDP compares to a more modest 

(8)  Total expenditure net of interest expenditure. 

average  increase  in  the  EA  of  around  4  pps  of 
GDP.  Capital  expenditure,  commonly  considered 
key  in  boosting  the  economy's  long-term  growth 
potential,  was  one  of  the  few  declining  spending 
categories in the considered period (National Bank 
of Belgium, 2014).  

Graph 3.1.1:  Government primary expenditure in 2016, % of 

GDP 

Source: European Commission 

The  high  level  of  public  expenditures  offers 
scope  for  larger  spending  restraint  in  fiscal 
consolidation.  In  this  regard,  the  introduction  of 
expenditure  rules  setting  multi-year  ceilings  on 
broad  spending  aggregates  at  each 
level  of 
government  would  support  a  spending-based 
expenditure 
and  medium-term 
consolidation 
control 
(European  Commission,  2015a).  At 
present,  however,  with  the  exception  of  a  ceiling 
for health care spending, no level of government in 
Belgium  is  applying  domestic  expenditure  rules. 
At regional level, Flanders is planning to introduce 
a  spending  review  approach  in  its  budgetary 
increasing 
process.  This  contrasts  with 
the 
adoption  of 
the  EU. 
across 
largest  portion  of  public 
Nevertheless, 
spending  is  not  mandated  by  discretionary  annual 
budget  decisions  but  by  permanent  legislation, 
which  limits  legislatures’  ability  to  review  and 
change spending priorities in several ways.  

such 
the 

rules 

15 

202530354045505560FIFRDKBESEATELEA-19ITEU-28HRHUDENLSILUPTEESKPLESUKCZLVMTCYBGLTROIE 
 
                                                           
 
3.1. Public finances and taxation 

to 

debt ratio of 60 % of GDP by 2032 would require 
a fiscal adjustment of as much as 4.4 pps of GDP 
between  2019  and  2024  relative  to  the  baseline 
scenario  assuming  no  policy  change.  Adhering  to 
the  existing  fiscal  rules  (full  compliance  with  the 
requirements of the preventive arm of the SGP and 
convergence 
the  Medium-Term  Objective) 
would  bring  about  a  significantly  higher  decrease 
in  gross  public  debt  over  GDP  relative  to  the 
baseline  scenario  at  unchanged  fiscal  policy. 
Indeed,  in  this  case,  public  debt  would  reach 
76.1 %  of  GDP  in  2028,  a  level  around  18.7 
percentage  points  of  GDP  lower  than  what  is 
projected  under  the  baseline  scenario  (Graph 
3.1.2).  Conversely,  potential  shocks  in  nominal 
growth and interest rates would project public debt 
at around 100.6 % of GDP. 

Graph 3.1.2:  Public debt medium-term projection and 

scenarios ( % of GDP) 

The  general  government  debt  peaked  at 
106.8 % of GDP in 2014, increasing from 87 % 
of GDP in 2007. This development followed from 
surpluses, 
the  absence  of  primary  budget 
unfavourable 
differentials, 
interest-growth 
substantial support to the financial sector, loans to 
Greece and contributions to the European Stability 
Mechanism and its precursor. A gradual reduction 
of  the  public  debt  level  is  ongoing,  which  should 
allow for a debt-to-GDP ratio of 101.2 % in 2019 
according 
the  Commission  2017  autumn 
forecast.    

to 

it 

limits 

The high level of public debt increases economic 
vulnerabilities. Combined with the lasting budget 
deficit, 
the  authorities’  margin  for 
initiating new or countercyclical policies in case of 
a downturn. Not tackling the projected increase in 
age-related  spending  would  amplify  those  risks 
(see  following  section).  Moreover,  Belgium  will 
have to cope with important public investments in 
defence and infrastructure in the years to come. 

indebtedness  appear 

At  the  same  time,  short-term  risks  linked  to 
to  be 
high  public 
contained.  Belgian  authorities  have  been  using 
favourable  market  conditions  to  refinance  the 
outstanding  debt.  The  active  management  of  the 
debt  stock  has  led  to  an  extension  of  the  average 
maturity  of  the  existing  debt  (9.3  at  the  end  of 
2017 compared to 8.7  at the end of 2016). Its cost 
has also decreased with its average yields falling to 
2.5%  in  2017.  As  a  result,  Belgium  is  more 
protected  in  case  of  a  sudden  hike  in  the  interest 
rates.  For  instance  a  linear  increase  by  100  basis 
points would imply higher costs of EUR 0.5 billion 
(0.1 %  of  GDP)  in  2017,  and  of  EUR  1.6  billion 
(0.4 %  of  GDP)  by  2020  (Stability  programme 
2017). 

3.1.2.  SUSTAINABILITY OF PUBLIC FINANCES 

sustainability  analysis  and 

In  the  medium  term  Belgium  faces  high  fiscal 
sustainability  risks  as  measured  by  both  the 
the  S1 
debt 
indicator (9).  This  is  due  to  the  high  level  of 
public  debt  and  to  a  lesser  extent  to  the  projected 
increase  in  age-related  expenditure.  Reaching  a 

Source: European Commission (Debt Sustainability Monitor 
2018) 

In  the 
long  term,  sustainability  risks  are 
assessed at medium level. As indicated by the S2 
indicator (10),  an  upfront  fiscal  adjustment  of  4.5 

(9)  The  S1  indicator  measures  the  required  fiscal  adjustment 
needed  between  2019  and  2024  to  bring  the  public  debt 
ratio down to 60 % of GDP by 2032. 

(10)  The  S2  indicator  shows  the  adjustment  to  the  current 
structural  primary  balance  required  to  fulfil  the  infinite 
horizon inter-temporal budget constraint, including paying 
for  any  additional  expenditure  arising  from  an  ageing 

16 

94.876.1100.6100.275.080.085.090.095.0100.0105.0110.013141516171819202122232425262728Baseline no-policy change scenarioStability and Growth Pact (SGP) scenarioStandardized (permanent) positive shock (+1p.p.) to theshort- and long-term interest rates on newly issued androlled over debtStandardized (permanent) negative shock (-0.5p.p.) onGDP growth 
                                                           
 
                                                           
3.1. Public finances and taxation 

of  GDP,  projected  to  increase  by  1.7  pps  during 
the  period  from  2016  to  2070,  above  the  EU 
average increases of 1.2 pps. According to the Risk 
Scenario  this  increase  becomes  more  pronounced, 
with  3.5  pps  (above  the  EU  average  of  2.7  pps). 
This would bring expenditure up to 5.8 % of GDP 
by  2070  and  pose  an  important  challenge  to  the 
future  fiscal  sustainability  of  Belgium  (2018 
Ageing Report, forthcoming). 

3.1.3.  FISCAL FRAMEWORK 

Effective  budget  coordination  is  essential  in  a 
federal  country  like  Belgium.  A  large  part  of 
spending power has been devolved to sub-national 
governments.  In  addition,  the  central  government 
— which  is  responsible  for  most  of  the  debt  and 
faces  the  bulk  of  age-related  costs —  does  not 
have  the  legal  authority  to  impose  budget  targets 
on  regions  and  communities.  In  an  attempt  to 
improve internal coordination and to transpose the 
Treaty on Stability, Coordination and Governance 
in  the  EMU  (the  ‘Fiscal  Compact’),  the  federal 
government  and  the  regional  and  community 
governments  concluded  a  cooperation  agreement 
in  2013.  It  requires  the  Public  Sector  Borrowing 
Requirement  Section  of  the  High  Council  of 
Finance  to propose  multiannual  budget  targets  for 
each  government  in  preparation  for  the  annual 
Stability Programme. On the basis of this proposal, 
the  federal,  regional  and  community  governments 
are  expected  to  reach  a  binding  agreement  on 
overall  and  individual  multiannual  fiscal  paths. 
The  High  Council  of  Finance  is  responsible  for 
monitoring compliance with the agreed targets and 
if 
the 
it  signals  a  significant  divergence, 
government  concerned  has  to  adopt  corrective 
measures;  progress  on  the  corrective  measures  is, 
in turn, monitored.  

the 

the  2013  cooperation 
Implementation  of 
agreement has been poor. In 2017 as in 2015 and 
2016, 
regions  and 
federal  government, 
communities  did  not  achieve  an  agreement  to 
formally  commit  to  the  fiscal  trajectory  proposed 
by  the  High  Council  of  Finance.  This  lack  of 
internal 
sharing 
undermines  the  viability  of  the  country’s  overall 
trajectory  towards  its  MTO  as  laid  down  in  the 
Stability Programme.  

cooperation 

burden 

and 

pps  of  GDP  would  be  needed  to  ensure  the 
sustainability  of  the  public  finances  in  the  long 
term. This is mainly driven by the projected impact 
of the age-related costs (3.8 pps of GDP), with an 
additional  contribution  from  the  initial  budgetary 
position (0.7 pps of GDP). 

2018 

Ageing 

Report (European 
The 
Commission  –  EPC  (AWG),  2018)  projects 
pension  expenditure  to  increase  by  2.9  pps  of 
GDP  in  2070.  This  compares  with  an  increase  of 
1.3  pps  of  GDP  in  the  previous  update  and  a 
decrease of 0.1 ppt of GDP on average for the EA 
(2015 
Sustainability  Report).  The 
substantial upward revision is mostly grounded on 
the  new  demographic  projections 
(European 
Commission,  2017b).  Compared  to  the  previous 
vintage, 
total  population  for 
in 
Belgium  in  2060  has  been  revised  downward (11), 
with a significant and unfavourable impact on the 
dependency ratio.  

the  increase 

Fiscal 

The  pension  reforms  enacted  in  2015  were  a 
significant  first  step  towards  addressing  the 
long-term  cost  of  ageing.  Nevertheless,  because 
of  the  sustainability  risks  outlined  above,  various 
still  pending  issues  in  the  government's  reform 
roadmap require further action. This is the case, for 
instance,  for  the  introduction  of  a  credit-based 
pension  system  as  of  2030,  which  would  allow 
automatic 
life 
expectancy  or  the  dependency  ratio.  The  pension 
reform  also  helped  reducing  the  poverty  risk  for 
pensioners according to the analysis carried out for 
the forthcoming Pension Adequacy Report. 

adjustments 

changes 

to 

in 

Expenditure  projections  for  health  and  long-
term  care  contribute  to  the  sustainability 
challenge  in  the  long  term.  According  to  the 
findings  of  2018  Ageing  Report,  health  and  long-
term  care  expenditure  would  increase  by  2070, 
adding  to  the  sustainability  challenge.  Notably, 
according 
the  AWG  Reference  Scenario, 
expenditure  on  long-term  care  is,  as  a  proportion 

to 

population.  However,  the  adjustment  implied  by  the  S2 
indicator  could  lead  to  debt  stabilising  at  relatively  high 
levels.  Consequently,  the  indicator  has  to  be  treated  with 
caution  for  high-debt  countries  in  relation  to  the  SGP 
requirements. 

(11)  Total  population  in  2060  would  increase  to  13.6  million 
compared  to  15.4  million  expected  according  to  the 
previous vintage. 

17 

 
                                                                                   
3.1. Public finances and taxation 

The federal government has announced steps to 
reinforce  the  autonomy  of  the  High  Council  of 
Finance  and  the  independence  of  its  members. 
the  necessary  amendments 
The  adoption  of 
(including to the Royal Decree of 3 April 2006 on 
the  High  Council  of  Finance)  requires  prior 
consultation  with 
the  federated  entities.  The 
for  consultation  and  adoption  has 
calendar 
however not been communicated. 

3.1.4.  TAXATION 

10th highest in 2016 (13). Despite labour tax wedge 
reductions,  average  income  earners  in  Belgium 
remain  one  of  the  highest  taxed  in  the  EU  (see 
section 3.3).   

Graph 3.1.3:  Tax burden on labour for a single person at the 

average wage (2016) 

In spite of the on-going efforts to reduce the tax 
burden on labour, it is still comparatively high. 
The tax reform initiated in 2014 is currently being 
phased  in.  Taxes  on  labour,  including  social 
contributions,  are  being  reduced  in  several  steps 
between  2016  and  2020,  while  others,  mainly 
consumption  taxes,  have  been  increased,  thus 
partially  compensating  for  the  labour  tax  cuts 
(European  Commission,  2016a  and  2017a). 
Despite  labour  tax  wedge  reductions,  average 
income earners in Belgium remain the most taxed 
in  the  EU  and  in  the  euro  area  (see  Graph  3.1.3). 
The 2016 country report detailed and assessed the 
measures  mainly  from  a  budgetary  and  labour 
market 
on 
competitiveness, employment and growth are also 
expected to help funding the tax cuts, although the 
overall  budget-neutrality  of  the  reform  does  not 
seem  assured (12).  Additional  positive  effects  are 
expected  from  reductions  targeting  small  and 
medium-sized  enterprises 
self-
employed people.  

(SMEs)  and 

perspective. 

Positive 

effects 

In  2016,  the  tax  wedge  for  low  income  earners 
(67 %  of  the  average  wage)  decreased  by  1.9 
percentage points compared to 2015, although it 
remains one of the highest in the EU. For very low 
income  earners  (50 %  of  the  average  wage)  a 
larger reduction of 4.1 percentage points could  be 
seen. While  it  remains  above  the  EU  average,  the 
tax wedge at 50 % of the average wage has moved 
from being the 3rd highest in the EU in 2014 to the 

(12)  Cumulated  non  financed  balance  2015-2020  of  4786 
million  EUR  ex  ante  and  627  million  EUR  ex  post 
according  to  NBB,  2017  ("Incidence  macroéconomique  et 
budgétaire du scénario de tax shift révisé par le cabinet du 
ministre  des  Finances  et  comparaison  avec  l’exercice  de 
novembre 2015" – BNB 10/8/2017). 

The average wage indicator is 100 % of the average wage. 
No recent data is available for Cyprus. The line in the graphs 
represents the GDP-weighted EU average (benchmark used 
in the Eurogroup). 
Source: European Commission Tax and Benefit Indicator 
Database based on OECD data 

The  Belgian  tax  system  remains  complex,  with 
tax  bases  eroded  by  numerous  exemptions, 
deductions  and  reduced  rates.  These  may  entail 
revenue 
and 
economic 
additional administrative burden. The latest figures 
for  the  federal  government  show  that  the  total 
amount of tax expenditures is sizeable, and that the 
rising trend as a percentage of GDP continues (14).  

distortions 

losses, 

Belgian  revenues  from  environmentally  related 
taxes  remain  among  the  lowest  in  the  EU. 
Environmental  taxes  accounted  for  2.2 %  of  GDP 
in  2016  against  an  EU28  average  of  2.4 %,  and 
energy  taxes  to  1.4 %  of  GDP  against  an  EU 
average of 1.9 %. In the same year environmental 
tax revenues accounted to 5.0 % of total revenues 
from taxes and social security contributions against 

(13)  Tax  wedge  at  67 %  was  47.47  compared  to  49.39  (2015) 
and 49.87 (2014). Tax wedge at 50 % was 36.17 compared 
to 40.31 (2015) and 41.14 (2014). 

(14)  Chambre  des  représentants,  24  octobre  2017.  Inventaire 
2015  des  exonérations,  abattements  et  réductions  qui 
influencent  les  recettes  de  l’Etat,  annexe  au  projet  de  loi 
contenant le budget 2018. 

18 

0102030405060BEDEFRITATFISILVSKPTLTELESEELUNLIEMTEUEAOECD 
                                                           
 
                                                           
an  EU28  average  of  6.3 %,  excluding  imputed 
social  contributions  (15).  Fossil  fuel  subsidies 
showed no decrease in the past decade, with even 
some increasing trend in the last year (16). 

tax 

system 

corporate 

Belgium  has  adopted  at  the  end  of  2017  (17)  a 
reform of  its corporate  income  tax  system.  The 
is 
income 
current 
characterised  by  a  high  statutory  rate  of  33.99 %, 
including  the  3 %  crisis  surcharge  (with  lower 
rates  for  SMEs),  with  numerous  exemptions  and 
deductions.  .It  provides  for  a  move  towards  a 
system  with  lower  statutory  rates  and  fewer 
exemptions.  The  statutory  tax  rate  should  be 
reduced  to  29.58 %   in  2018  and  to  25 %  in 2020 
(for  SMEs:  20 %  on  the  first  100.000€  as  from 
2018).  

The reform introduces a de facto minimum tax 
with  the  limitation  to  a  deductible  basket  of  the 
new incremental notional interest deduction and of 
the carry forward of the following items: deduction 
of  the  notional  interest,  innovation  income,  losses 
and deduction of dividends received. However the 
Conseil d'Etat/Raad van State expressed doubts on 
the compatibility with EU law of the limitation of 
RDT deduction.  

Belgium  has  taken  measures  to  amend  some 
aspects  of 
its  tax  system  that  facilitated 
aggressive  tax  planning  (ATP) (18).  The  Code  of 
Conduct  on  Business  Taxation  Group  has 
approved  the  replacement  of  the  Belgium  patent 
box  by  an  innovation  box.  The  old  patent  box  is 

(15)  Source 

ESTAT: 

http://ec.europa.eu/eurostat/web/environment/environment
al-taxes/database. 

(16)  OECD  Inventory  of  Support  Measures  for  Fossil  Fuels 

2015: 
http://stats.oecd.org/Index.aspx?DataSetCode=FFS_BEL. 
(17)  "Projet  de  loi  portant  sur  le  réforme  de  l'impôt  des 

sociétés". 

on 

2012 

aggressive 

(18)  Aggressive tax planning consists in taking advantage of the 
technicalities  of  a  tax  system  or  of  mismatches  between 
two  or  more  tax  systems  for  the  purpose  of  reducing  tax 
liability.  (source:  Commission  Recommendation  of  6 
December 
planning 
(2012/772/EU)).  For  an  overview  of  the  most  common 
structures of aggressive tax planning and the provisions (or 
lack  thereof)  necessary  for  these  structures  to  work,  see 
Ramboll  Management  Consulting  and  Corit  Advisory 
(2016),  Study  on  Structures  of  Aggressive  Tax  Planning 
and  Indicators,  European  Commission  Taxation  Paper 
n°61.  It  should  be  noted  that  country-specific  information 
provided  in  the  study  gives  the  state  of  play  by  May/June 
2015. 

tax 

3.1. Public finances and taxation 

subject to a grandfathering clause which last until 
June  2021.  The  new  "nexus"  regime  requires  a 
stronger link between the intellectual property (IP) 
that can benefit from the regime, and the R&D that 
created  this  IP.  While  the  economic  evidence  on 
the  effectiveness  of  patent/innovation  boxes  as  a 
means to encourage R&D remains limited, it  may 
be  used  as  a  tax  competition  tool  (cf.  3.4.1).  The 
excess  profit  rulings  scheme,  which  had  the 
potential to facilitate aggressive tax planning, was 
put on hold by Belgium since 2015 and effectively 
abolished  in  2017.  Finally,  Belgium  will  have  to 
the  Anti-Tax 
transpose 
Avoidance Directive (ATAD) into national law by 
the  end of 2018  and 2019. This  is covered by  the 
project  that  provides  for  new  anti-abuse  rules 
including  an  alignment  of  the  thin  cap  rule 
(limitation  based  on  the  highest  of  30  %  of  the 
EBITDA and EUR 3 million) on the recent ATAD 
Directive.  An  assessment  of  the  extent  to  which 
the new measures, in conjunction with the effect of 
the transposition of the EU ATAD, limit the scope 
for  aggressive  tax  planning  in  Belgium  would  be 
warranted. 

the  provisions  of 

The  former  Notional  Interest  Deduction  (NID) 
regime that was based on the stock of equity has 
been  replaced  by  an  incremental  system.  The 
new  NID,  which  shares  an  incremental  baseline 
with  the  Allowance  for  Growth  and  Investment 
(AGI) proposed in the common corporate tax base 
(CCTB)  will  be  limited  to  incremental  equity 
capital calculated on the basis of a 5-year average. 
This  change  is  meant  to  contribute  to  the  budget-
neutrality  of  the  corporate  tax  reform  while 
addressing the potential use of the regime in ATP 
and  still  alleviating19  the  debt/equity  bias  issue.  It 
has  to  be  noted  that  the  absence  of  some  specific 
anti-abuse  rules  to  address  the  cascading  of 
deductions  and  notably 
transactions 
between  related  parties  are  features  of  the  tax 
tax 
system  which  may 
planning  by  multinational  groups 
locate 
financial  companies  in  Belgium.  At  the  current 
stage  of  the  reform,  the  anti-abuse  framework 
seems to remain unchanged under the new system. 

facilitate  aggressive 

targeting 

that 

(19)  Contrary  to  the  AGI,  the  new  Belgian  NID  cannot  be 
negative and therefore does not incentivise corporations to 
sustain their equity 

19 

 
                                                           
 
                                                           
3.2.  FINANCIAL SECTOR 

The  financial  sector  appears  relatively  stable, 
but  low  interest  rates,  digitalisation,  clients' 
evolving  preferences  and  intense  competition 
remain  a  challenge  for  the  traditional  business 
model.  Banks  are  moderately  profitable,  with  a 
return  on  equity  close  to  9 %  in  2016.  Their 
solvency  is  good,  with  a  capital  adequacy  ratio 
stable  at  18.5 %  in  June  2017  (see  Table  3.2.1). 
Credit  quality  is  at  a  high,  with  low  non-
performing  loans  (NPL)  ratios  for  both  non-
financial corporations and households. Because of 
the persistent low interest rate environment, credit 
remains  substantial.  State  ownership 
growth 
remains  significant,  and  still  represents  a  sizeable 
risk for the public finances and the financial sector, 
although  the  expected  progressive  privatisation  of 
Belfius  would  partly  address  the  issue.  Banks' 
challenges  remain  the  same  as  last  year:  a  high 
cost-to-income ratio, a relatively high banking tax 
only  partially  compensated  by  the  exoneration  of 
savings accounts, the obligation to pay a minimum 
interest 
regulated  savings 
accounts  which  puts  net  interest  margins  under 
pressure 
rate 
environment,  digitalisation,  compliance  costs, 
clients' 
intense 
competition.  Dexia  still  constitutes  a  sizeable,  but 
relatively  stable  contingent  liability  of  EUR  35 
billion (8.2 % of GDP) for the Belgian state.   

(0.11 %)  on 

the  current 

preferences 

evolving 

interest 

low 

rate 

and 

in 

invested 

the  DGS  needs 

The  contributions  to  the  Belgian  Deposit 
Guarantee Scheme (DGS) are not invested into 
a  segregated  and  diversified  portfolio  of  low-
risk assets. The contributions to the Belgian DGS 
(around  EUR  3.4  billion  in  December  2017) 
directly  enter  the  budget  of  the  state  as  tax 
revenues and contribute to reduce the deficit. As a 
in  a 
they  cannot  be 
consequence, 
segregated  and  diversified  portfolio  of  low-risk 
assets.  If 
intervene  and 
compensate depositors, the Belgian state will have 
to  finance  the  entire  cost  of  the  intervention  from 
its  budget.  It  will  not  be  able  to  rely,  like  other 
Member  States,  on  the  accumulated  contributions 
paid  by  the  banks  into  a  safe  ring-fenced  fund.  It 
should  be  noted  that  the  issue  is  of  a  temporary 
nature.  Under  the  Commission´s  proposal  on  a 
European  Deposit  Insurance  Scheme  (EDIS)  all 
banks  in  the  Banking  Union  are  (gradually) 
contributing to a single European fund. Depending 
on the level of financial means a national DGS has 
already  raised,  it  may  compensate  its  member 

to 

banks  by 
contributions.  

reimbursing  previously 

received 

to 

increase 

traditional 

the  underwriting  of 

Traditional life business is suffering, mostly due 
to the 2 %  tax  on life-insurance premiums  and 
the low interest rate environment. Many insurers 
have  decided  to  stop,  or  at  least  significantly 
life 
reduce, 
contracts.  In  parallel,  they  are  taking  various 
measures 
their  profitability  and 
strengthen  their  capital  position.  Faced  with  the 
legacy  of  old  contracts  with  a  high  guaranteed 
interest  rate,  some  insurers  have  carried  out  quite 
successful 
sometimes 
facilitated by the uncertainty surrounding the state 
guarantee  on  life  insurance  contracts  (up  to  EUR 
100,000, like for banking deposits) after the sale of 
an insurance portfolio to a foreign entity.  

operations, 

buy-back 

the 

Many  insurers  benefit  to  some  extent  from  the 
volatility  adjustment (20)  of 
long-term 
guarantee package. For one insurer, the volatility 
adjustment raises the Solvency II ratio from 97 % 
to 165 %. On average, the value adjustment allows 
Belgian insurers to improve their Solvency II ratio 
by  20  percentage  points.  The  2 %  tax  on  life 
insurance  premiums 
to 
efficiently  compete  with  accumulating  investment 
funds  ("SICAV  de  capitalisation")  that  are  only 

is  also  a  handicap 

(20)  The  volatility  adjustment  is  part  of  the  so-called  Long-
Term Guarantee (LTG) package. It aims at dealing with so-
called "artificial" credit spread fluctuations not related to an 
increased  probability  of  default  of  the  counterparty.  It 
consists in a (upward) correction that can be applied to the 
risk-free curve under certain conditions. It allows to  lower 
the  value  of  technical  provisions  and,  consequently,  to 
increase the value of own funds but, even more, to reduce 
the  Solvency  Capital  Requirement.  These  two  effects 
increase  the  solvency  ratio  and  may  underestimate  the 
"true"  risks.  According  to  article  77d  of  the  Solvency  II 
directive  2009/138/EC,  "Member  States  may  require  prior 
approval  by  supervisory  authorities  for  insurance  and 
reinsurance undertakings to apply a volatility adjustment to 
the  relevant  risk-free  interest  rate  term  structure  to 
calculate the best estimate referred to in Article 77(2). For 
each  relevant  currency,  the  volatility  adjustment  to  the 
relevant risk-free interest rate term structure shall be based 
on the spread between the interest rate that could be earned 
from  assets  included  in  a  reference  portfolio  for  that 
currency  and  the  rates  of  the  relevant  basic  risk-free 
interest rate term structure for that currency. The reference 
portfolio  for  a  currency  shall  be  representative  for  the 
assets  which  are  denominated  in  that  currency  and  which 
insurance  and  reinsurance  undertakings  are  invested  in  to 
cover  the  best  estimate  for  insurance  and  reinsurance 
obligations  denominated  in  that  currency".  Note  that  in 
Belgium  insurers  can  apply  the  volatility  adjustment 
without prior approval by the NBB. 

20 

 
 
                                                           
 
3.2. Financial sector 

Table 3.2.1: 

Financial soundness indicators, all banks in Belgium 

Source: ECB CBD 

subject  to  a  stock  exchange  transaction  tax  of 
(typically)  0.12%  at  the  purchase  and  the  sale  of 
the shares in the fund. 

The  taxation  reform  of  financial  investments 
reduces  some  economic  distortions  but  also 
creates  new  ones,  and  generates  more 
complexity. On the positive side, the reduction by 
half  of  the  exonerated  amount  of  interests  from 
regulated  savings  accounts  (from  EUR  1 880  to 
EUR  940)  and  the  exoneration  of  the  first  EUR 
627 of dividends reduces the taxation gap between 
deposits and equity. The reduction of the nominal 
corporate income tax rate also reduces the taxation 
gap  between  debt  instruments  and  equity.  On  the 
negative  side,  the  increase  of  the  different  stock 
exchange  transaction  tax  rates  works  in  the 
opposite  direction,  by  penalising  investment  in 
securities.  Likewise,  the  exoneration  of  dividends 
only benefit to individual shares, and not to funds, 
which  penalises  diversification  and  encourages 
concentration  risk.  Finally,  the  new  tax  of  0.15 % 
on  securities  accounts  exceeding  EUR  500 000  is 
based  on  solidarity  principles.  It  likely  creates 
distortions given the number of products excluded 
from  its  scope  (life  insurance,  pension  products, 
nominal  shares,  term  savings  options,  liquidity). 
The  efficiency  and  efficacy  seem  questionable, 
the 
given 
the 
possibilities 
the 
administrative  burden  it  imposes  on  banks  and 
brokers.  Moreover,  it  suffers  from  a  cliff  effect: 
since  the  tax  applies  from  the  very  first  euro  as 
soon as the threshold of EUR 500 000 is reached, 
net income decreases as the gross income increases 
in the neighbourhood of the threshold. 

small 
to  circumvent 

concerned, 
tax  and 

amounts 

the 

Housing 

to 

(price 

income, 

indicators 

House prices have continued to steadily increase 
recently,  showing  some  signs  of  overvaluation, 
and  currently  they  stand  at  a  level,  in  nominal 
terms,  above  to  their  peak  before  the  financial 
crisis.  It  is  difficult  to  measure  overvaluation  and 
undervaluation  in  property  markets,  since  the 
results  depend  on  the  underlying  assumptions. 
i.e. 
Traditional 
affordability  and  price-to-rent  i.e.  dividend),  used 
to  assess  over-valuation  on  the  housing  market, 
suggest  that  Belgium's  housing  prices  might  be 
around  20%  above  their  long  term  average. 
However,  taking  into  account  a  broader  set  of 
factors, a model-based approach actually finds that 
house  prices  are  currently  in  line  with  their 
fundamental  value,  providing  a  more  benign 
assessment  of  recent  price  developments  (Graph 
3.2.1).  Overall,  house  prices  are  assessed  to  be 
slightly  overvalued  (Philiponnet  and  Turrini, 
2017). 

The  prolonged  increase  in  the  price-to-income 
ratio  has  made  the  financial  situation  of 
households  more  fragile  through  an  almost 
mechanic  increase  in  their  debt.  Between  2001 
and  2016  households'  disposable  income  has 
increased  at  annual  average  rate  of  2.4 %,  while 
over the same period of time nominal house prices 
have increased at an annual average rate of 4.6 %. 
The mortgage related indebtedness of the Belgium 
household  is  steadily  increasing  since  2002,  and 
stood at the start of 2016 at around 103 % of their 
disposable income.  

21 

(%)20102011201220132014201520162017Q2Non-performing debt3.94.25.15.33.33.02.62.4Non-performing loans----4.33.83.22.8Non-performing loans NFC----6.55.84.84.8Non-performing loans HH----4.53.93.73.4Coverage ratio29.331.628.129.340.542.243.744.3Loan to deposit ratio*62.460.156.658.259.562.366.266.1Tier 1 ratio15.515.115.916.415.316.016.216.1Capital adequacy ratio19.318.518.218.717.618.718.818.5Return on equity**10.51.43.36.27.810.38.9-Return on assets**0.50.10.20.40.50.70.6-*ECB aggregated balance sheet: loans excl to gov and MFI / deposits excl from gov and MFI**For comparability only annual values are presentedFinancial soundness indicators, all banks in Belgium 
 
 
 
3.2. Financial sector 

Graph 3.2.1:  Overvaluation gap with respect to 

Graph 3.2.2:  Gap to the fundamental-based and prudential 

price/income, price/rent and fundamental 
model valuation gaps 

benchmarks 

Source: European Commission 

Source: European Commission 

stability 

financial 

complex 

national  macroprudential 
The 
decision-making  process  may  leave  financial 
stability  risks  unaddressed.  A  macroprudential 
measure  addressing 
risks 
originating in the residential real estate (RRE) was 
implemented  in  Belgium  in  2014.  The  measure 
was  based  on  Article  458  of  the  CRR  and 
consisted  of  a  general  5  percentage  points  add-on 
on  risk  weights  for  mortgage  exposures.  In  the 
light of increasing RRE risks (see ESRB 2016), the 
NBB  proposed  to  replace  that  measure,  following 
its  expiration  in  May  2017,  by  a  more  stringent 
measure. The latter was not enacted by the Belgian 
government, effectively resulting in the temporary 
absence  of  a  formal  macroprudential  measure  to 
address  RRE  risk.  The  NBB  proposed  a  new 
in  November  2017, 
macroprudential  measure 
consisting  of  a  flat  5  percentage  points  add-on 
(prolongation  of  the  original  measure)  and  a 
multiplier  of  1.33  on  mortgage  risk  weights.  This 
stricter measure has the support of the government 
and  is  currently  in  the  notification  process  with 
European institutions.  

Despite  the  favourable  wealth  position  of 
Belgian households, the distribution of debt and 
assets  reveal  some  pockets  of  vulnerability. 
Belgium  households  hold  on  average  more  assets 
than in EA and have positive net assets positions. 
However,  micro-level  data  shows  that  for  around 
one  mortgage  out  of  five,  the  service  of  debt 
the  households' 
than  half  of 
absorbs  more 
disposable  income (National  Bank  of  Belgium, 
2017b).  Figures  from 
the  National  Bank  of 
Belgium (NBB) also show that the banks' lending 
criteria  have  not  tightened  and  that  the  share  of 
risky  mortgages  in  overall  banks  assets  has 
stopped falling since 2015. Those risky credits are 
characterised  by  a  high  loan-to-value  ratio,  or  a 
high  debt  service-to-income  ratio,  longer  than 
average maturity or a combination of the previous 
risks  factors.  The  time-to-maturity  length  of  the 
average  mortgage  debt  is  shorter  than  in  the  EA, 
but it has recently started to lengthen. 

the 

economic 

The  increase  in  households'  debt  since  2000  is 
substantial although in line with fundamentals. 
Households'  debt  is  close  to  but  below  the  level 
fundamentals. 
suggested  by 
Nevertheless  its  level  is  above  the  estimated 
prudential  threshold,  which  indicates  that  current 
households'  debt  level  could  have  amplifying 
impact  in  the  case  of  a  financial  crisis  (Graph 
3.2.2)  (Bricongne,  J.-C.,  L.  Coutinho  and  N. 
Philiponnet, 2018). 

22 

-40-30-20-10010203019951997199920012003200520072009201120132015Model-based valuations gapPrice to income vs. hist. avg.Price to rent vs. hist. avg.-10-5051015199619971998199920002001200220032004200520062007200820092010201120122013201420152016% of GDPPrudential threshold - HHFundamental benchmark - HH 
 
 
3.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

3.3.1.  LABOUR MARKET 

Employment  growth  has  recently  been  sound 
labour  market  participation 
but  overall 
remains  low.  In  2016,  robust  economic  growth, 
supported  by  competitiveness  gains  and  wage 
moderation  (see  page  29),  has  resulted  in  sound 
in  2016).  The 
employment  growth 
unemployment rate fell to 7.2 % in 2017Q3, which 
is only slightly above the pre-crisis level (7.0 % in 
2008).  However,  serious  challenges  persist.  The 
employment  rate  is  well  below  the  EU  average 
(68.5 %  vs.  72.6 %  in  the  EU  in  2017Q3)  (Graph 
3.3.1)  and  disincentives  to  work  remain  relatively 
high.  

(1.3 % 

Graph 3.3.1:  Key labour market indicators 

Source: European Commission 

level  of 

suggesting  a  high 

High  inactivity  coincides  with  a  high  vacancy 
rate, 
skills 
mismatches.  Belgium's  inactivity  rate,  at  26.7 % 
in 2016, is higher than that of its neighbours (FR: 
22.5 %;  DE:  18.0 %  and  NL:  18.4 % 
for 
population  aged  20-64  year  olds).  This  is  also 
reflected  in  a  large  number  of  very-low-work-
intensity  households  concentrated  among  single 
adult  households  (Vandenbroucke  &  Corluy, 
2015).  At  the  same  time,  the  vacancy  rate  was 
among  the  highest  in  the  EU  (3.6 %  in  2017Q3), 

and matching efficiency (21) has dropped by a long 
way  (European  Commission,  2017f).  The  gap 
between  the  employment  rates  of  low-,  medium-, 
and high-skilled workers was among the widest in 
the EU in all three Regions, well above the level in 
the  neighbouring  countries  (Graph  3.3.2)  (Kiss  & 
Vandeplas,  2015).  Skills  mismatches  are,  among 
other  factors,  associated  high  labour  costs  and 
taxation, 
low  wage 
employment  (see  section  3.1),  low  mobility  and 
inadequate  language  knowledge  (especially  in 
Brussels),  as  well  as  historical  factors,  such  as 
shifts in economic activity. 

taxation  on 

including 

Graph 3.3.2:  Relative dispersion of employment rates by 
education level, 2005 and 2016 

Source: Eurostat Labour Force Survey, European Commission 

Disincentives to work remain relatively high. In 
recent  years,  the  targeted  measures  to  reduce  the 
tax  wedge  on  labour  have  significantly  increased 
the  net  income  of  employees  especially  those  on 
low  wage  (Graph  3.3.3).  Despite  these  measures 
the  tax  wedge  for  a  single  household  earning  the 
average wage remained among the EU's highest in 
2016  (54 %),  although  it  has  declined  since  2015 
(55.3 %) (see section 3.1). The unemployment trap 
for  low  wage  earners  (67 %  of  the  average  wage 
for  a  single  household)  is  also  one  the  EU's 
highest.  Belgium  is  also  the  only  country  where 
unemployment benefits are not limited in time (22). 
In  addition,  high  tax  disincentives  for  second 
earners – mainly women – remain (see Box 3.3.1). 

(21)  Matching efficiency measures the relative efficiency of the 
process of matching job-seekers with available jobs. Using 
the Beveridge curve, which equalises flows into and out of 
unemployment, allows for the computation. 

(22)  According  to  the  benchmarking  exercise  in  the  area  of 
unemployment  benefits  and  active  labour  market  policies. 
See the draft Joint Employment Report 2018 for details. 

23 

63.064.065.066.067.068.069.005101520252001200220032004200520062007200820092010201120122013201420152016%%Employment rate 20-64 (rhs)Unemployment rate 15-74 (lhs)Long-term unemployment rate 15-74 (lhs)Youth unemployment rate 15-24 (lhs)NEET rate 15-24 (lhs)0.000.050.100.150.200.250.300.35UKDKNLPTATEEDELVFICZSESIEU28CYELMTESROPLLUHUSKFRFlandersLTITIEHRBGBEWalloniaBrussels20162005 
 
 
 
                                                           
3.3. Labour market, education and social policies 

Box 3.3.1: Monitoring performance in light of the European Pillar of Social Rights 

The  European  Pillar  of  Social  Rights,  proclaimed  on  17  November  2017  by  the  European  Parliament,  the 
Council and the European Commission, sets out 20 principles and rights to benefit citizens in the EU. In light 
of  the  legacy  of  the  crisis  and  changes  in  our  societies  driven  by  population  ageing,  digitalisation  and  new 
ways of working, the Pillar serves as a compass for a renewed process of convergence towards better working 
and living conditions.  

Belgium  performs  well  on  the  indicators  of  the  Social  Scoreboard1  supporting  the  European  Pillar  of 
Social Rights. This is notably the case for gender equality, active support to employment and social protection 
and inclusion, in particular childcare.   

The  low  employment  rate  and  the  high  share  of 
part-time  working  of  women  remain  challenges. 
Belgium combines a relatively low employment rate 
(67.7 %)  with  a  high  inactivity  rate  (26.7 %).  In 
particular  labour  market  outcomes  for  the  low-
qualified,  older  workers,  single  parent  households 
and  people  with  a  migration  background  are  far 
below the levels recorded for similar groups in other 
Member  States.  This 
largely  explained  by 
is 
structural  and  group  specific  factors  hindering 
integration on the labour market. Since 2015, several 
measures,  such  as  the  tax  shift  and  the  revision  of 
the  1996  Law  on  wage  formation,  are  implemented 
to reduce labour costs, improve cost competitiveness 
and  strengthen  incentives  to  work.  While  a  relative 
high  share  of  women  is  engaged  in  the  labour 
market,  the  share  of  part-time  work  of  women  is 
high as well. In addition, women are more likely to 
work  with  flexible  contracts  than  men.  The  high 
marginal effective tax rate and joint taxation system 
create  disincentives  for  second  earners,  mainly 
women, to work longer. 

The  effectiveness  of  social  transfers  in  reducing 
inclusion 
poverty  and  promoting 
is 
comparatively  high.  Childcare 
is  particularly 
important to enhance equal opportunities and promote 
social inclusion of children from disadvantaged background. It has reached the Barcelona targets, with half the 
children younger than 3 in childcare, and 99 % of those between 3 and the minimum compulsory school age. 
Several  factors  contribute  to  this  result  but  some  capacity  problems  seem  to  be  emerging,  particularly  in  the 
larger cities. It is culturally acceptable to put very young children in child care. Affordable full coverage is an 
important  policy  objective  in  all  communities  and  from  2.5  years  onwards,  child  care  is  basically  free  and 
linked to the school system. There is a formal and well-regulated system of care for very young children with 
child minders who operate from their private home. 

social 

1   The  Social  Scoreboard  includes  14  headline  indicators,  of  which  12  are  currently  used  to  compare  Member  States 
performance.  The  indicators  "participants  in  active  labour  market  policies  per  100  persons  wanting  to  work"  and 
"compensation  of  employees  per  hour  worked  (in  EUR)"  are  not  used  due  to  technical  concerns  by  Member  States. 
Possible alternatives will be discussed in the relevant Committees. Abbreviation: GDHI – gross disposable household 
income. 

24 

Early leavers from education and training (% of population aged 18-24)On averageGender employment gapTo watchIncome quintile ratio (S80/S20)Better than averageAt risk of poverty or social exclusion (in %)On averageYouth NEET (% of total population aged 15-24)Better than averageEmployment rate (% population aged 20-64)To watchUnemployment rate (% population aged 15-74)On averageGDHI per capita growth On averageImpact of social transfers (other than pensions) on poverty reductionBetter than averageChildren aged less than 3 years in formal childcareBest performersSelf-reported unmet need for medical care On averageIndividuals' level of digital skillsOn averageSocial protection and inclusionDynamic labour markets and fair working conditionsEqual opportunities and access to the labour marketBELGIUMMembersStates'areclassifiedaccordingtoastatisticalmethodologyagreedwiththeEMCOandSPCCommittees.ThemethodologylooksjointlyatlevelsandchangesoftheindicatorsincomparisonwiththerespectiveEUaverages,andclassifiesMemberStatesinsevencategories(from"bestperformers"to"criticalsituations").Forinstance,acountrycanbeflaggedas"betterthanaverage"iftheleveloftheindicatorisclosetoEUaverage,butitisimprovingfast.Formethodologicaldetails,please consult the draft Joint Employment Report 2018, COM (2017) 674 final. 
 
 
3.3. Labour market, education and social policies 

income 

could  provide 

"flexi-jobs"  to  new  sectors  and  opening  them  up 
for  pensioners.  The  government  also  plans 
introducing  a  tax-free  professional  income  up  to 
EUR  6 000  per  year  for  employees  who  work  at 
least  80 %,  self-employed  and  pensioners.  This 
only applies on voluntary work and services in the 
peer-to-peer economy. Both the extension of flexi-
jobs  and  the  envisaged  EUR  6 000  of  tax-free 
additional 
financial 
incentives  to  shift  some  professional  activities 
from  regular  full-time  employment  or  from  part-
time  self-employment  to  less  taxed  or  even  tax-
exonerated statures. In particular the latter measure 
could  entail  reduced  financing  of  the  social 
security and slower build-up of social rights. Other 
measures 
include 
that  have  been  announced 
combining  a  partial  pension  with  part-time  work, 
lowering  employer  charges  in  the  construction 
business,  a  system  of  'soft-end-of  career'  jobs  and 
the  option  of  part-time  retirement.  To  the  extent 
that some of the measures (flexi-jobs, EUR 6 000 
tax free) seem to target mainly those already on the 
labour  market  they  may  have  little  impact  on 
activity or employment rates. 

subnational 

level,  governments  have 
At 
reformed  and  simplified 
the  employment 
incentives  and  the  monitoring  and  guidance 
activities of their respective public employment 
services (PES). The new schemes were introduced 
in  the  course  of  2016  and  2017  (see  European 
Commission,  2017a).  It  is  not  yet  possible  to 
evaluate whether the newly reformed schemes are 
properly  targeted  and  cost-effective.  The  capacity 
of  the  various  public  employment  services  to 
carry-out  the  necessary  monitoring  and  act  on  the 
information generated seems uneven. The Walloon 
public employment service (Le Forem) has started 
an  ambitious  reorganisation project  to  improve  its 
effectiveness.  The  Flemish 
efficiency 
government  and  social  partners 
reached  an 
agreement  on  reforming  training  for  employees. 
The Flemish Region aims to improve employment 
performance through a new policy approach called 
'Focus  on  Talent',  which  provides  bespoke 
jobseekers. 
guidance 
Implementation  of 
the  Upskilling  Pathways 
Recommendation  offers  an  opportunity  for  all 
those  who  are  disadvantaged  in  adulthood  due  to 
educational inequalities and skills deficits. 

workers 

and 

and 

to 

Inactivity  and  unemployment  are 
largely 
concentrated among specific population groups. 

As a result, part-time work is relatively widespread 
in particular among women (41.9 % of the female 
employees  worked part-time  in  2016  compared  to  
9.3 % of the male employees) (see Box 3.3.1). 

Graph 3.3.3:  Change in average take-home pay after the 

tax-shift 

Source: OECD, Tax-Benefit Models; OECD, Taxing Wages 
database obtained from the 2017 Belgium economic survey 

At  federal  level  measures  have  focussed  on 
controlling  the  cost  of  labour,  strengthening 
financial  incentives  to  work  and  making  the 
labour  market  more  flexible.  The  government 
amended 
the  Competitiveness  Law,  which 
regulates  the  wage  formation  process  in  Belgium. 
The  principal  aim  of  the  reform  was  to  better 
safeguard  cost  competitiveness  and  keep  wage 
growth in line with that in Belgium’s main trading 
partners  (the  Netherlands,  France  and  Germany), 
but  without  interfering  with  wage    indexation 
clauses  in  collective  bargaining  agreements,  cf. 
Section  3.4  (see  also  European  Commission, 
2017a).  The  new  law  on  ''workable  and  flexible 
work''  allows 
flexible  worktime 
arrangements  and  is  designed  to  promote  in-
company training. 

for  more 

Further  measures  aim  at  improving  labour 
flexibility,  but  some  entail  risks 
market 
regarding  the  social  security.  They  include 
revising  the  labour  law  to  facilitate  e-commerce; 
revising the notion of 'suitable job' for recipients of 
unemployment  benefits;  making  provisions  to 
lower gross salaries for young workers between 18 
and 21 while keeping net salaries unchanged; and a 
slower build-up of the notice period and extending 

25 

024681012MinimumwageMedian wageAverage wageMaximumwage%2014-162017-21 
 
There 
age, 
are  differences  depending  on 
educational  attainment  level  and  origin  (Graph 
3.3.4).  People  with  a  migrant  background  and 
young are overrepresented among the unemployed, 
while  low-skilled  and  older  workers  are  more 
likely  to  be  inactive.  In  2014,  the  unemployment 
rate  for  foreign-born  immigrants  (17.1 %)  and  for 
native-born  with  foreign-born  parents  (14.0 %), 
which together account for 27.4 % of the working 
age  population,  was  much  higher  than  for  native-
born  with  native-born  parents  (5.6 %) (23).  The 
inactivity rate of low skilled, which represent 24 % 
of the working age population, is 45.9 % (2016; 20 
to 64 years). 

Graph 3.3.4:  Characteristics of the employed, unemployed 

and inactive (20-64), 2014 

The graph represents the proportion of different groups 
according to educational attainment and origin. Low-edu 
refers to educational attainment (ISCED 0-2) as compared 
to non-low edu (ISCED 3-6). Migrant background refers to 
individuals born outside the EU or who have at least one 
parent who is born outside the EU as compared to non-
migrant background.  
Source: Commission calculation based on the Eurostat AHM 
Labour Force Survey 

Youth unemployment  is falling.  The  youth  (<25 
years) unemployment fell from 23.7 % in 2013 to 
20.1 %  in  2016  but  is  still  above  the  EU  average 
(18.7 %)24.  The  rate  of  young  people  not  in 
education,  employment,  or  training  (NEETs)  is 

(23)  Source:  LFS  2014  ad  hoc  module  –  Migration  and  labour 
market  (see  European  Commission,  2017a  for  details  per 
region and origin). 

(24)  Regional  youth  unemployment  rates:  14.1%  Flanders, 

27.9% Wallonia and 35.9% in Brussels  

3.3. Labour market, education and social policies 

below  the  EU average  (9.9 %  vs  11.5 %)25.  There 
are  very  large  regional  differences,  with  major 
challenges in the Brussels Region26.  

to  be 

the  scheme  were  known 

On  average,  more  than  seven  in  ten  NEETs 
aged  15-24  years  were  registered  with  the 
Youth Guarantee Scheme. Three in five of those 
in 
leaving 
employment, education or training 6 months later. 
Abolishing of the reductions of the minimum wage 
for  young  people  does  not  seem  to  have  affected 
employment  (European  Commission,  2017f).  The 
number of recipients of an 'insertion allowance' has 
dropped  sharply  over  the  past  four  years,  as  a 
consequence  of  their  limitation  in  time.  The 
number  of  people  making  the  transition  into 
employment  has  risen  even  if  some  of  those 
coming to the end of their rights move on to other 
forms  of  social  security  support  (Rijksdienst  voor 
Arbeidsvoorziening, 2017). 

The employment rate of older workers remains 
low.  The  employment  rate  of  older  workers  (50-
64)  is  increasing  but  still  well  below  the  EU 
average (56.6 % vs 63.4 %). The low employment 
rate of older workers reflects high inactivity in this 
age  group.  A  large  proportion  (12.1 %)  of  the 
inactive  older  workers  who  are  not  yet  retired  is 
discouraged  and  not  looking  for  a  job  as  they 
believe there is nothing available (the rate is 2.4 % 
for 20-49 year-olds).  

age 

and 

incentives 

Generous early exit schemes used to provide the 
wrong 
to  both  employers  and 
employees.  These  have  been  addressed  by  earlier 
reforms  which 
career 
tightened 
requirement  and  strengthened  availability  to  work 
requirements.  Low  activity  of  older  workers  may 
also be linked to the higher pay for older workers 
in  Belgium  (Cockx,  Dejemeppe  and  Van  der 
Linden, 2017). In 2014 workers aged over 50 years 
earned  23 %  more  than  30  to  39  year-olds, 
controlling  for  educational  attainment,  type  of 
contract, occupation and sector of employment, see 
Graph  3.3.5.  Only  7 %  of  the  25-64  population 
engage  in  life-long  learning  activities.  This  is 
(11 %)  and 
the  EU  average 
lower 

than 

(25)Regional  NEET  rates:  7.5 %  in  Flanders,  12.2 %  In 

Wallonia and 15.2 % in Brussels.  

(26)Data  available  for  Flanders  suggests  that  a  long-term  trend 
of  falling  activity  rates  is  now  also  linked  to  the  fact  that 
young  people  need  more  time  to  complete  their  studies 
(OECD, 2016). 

26 

0%10%20%30%40%50%60%70%80%90%100%EmployedUnemployedInactiveNon-low edu & non-migrant backgNon-low edu & migrant backgLow edu & non-migrant backgLow edu & migrant backg 
 
                                                           
                                                           
3.3. Labour market, education and social policies 

considerably  below 
innovators  such  as 
top 
Sweden,  Denmark  and  Finland  (which  are  on 
average  above  25 %).  The  March  2017  law  on 
to 
'workable  and  feasible  work' 
encourage firms to step up their efforts to provide 
training. 

is  designed 

Graph 3.3.5:  Pay gap between older (50+) and younger 

(30-39) workers , 2014 

of 

Non-EU  born  migrants  are  less  well  integrated 
in the labour market than persons with Belgian 
origin.  In  2016,  the  employment  rate  of  non-EU 
born was 49.1 %, which is 21.1 percentage points 
lower  than  for  native  born.  This  is  one  of  the 
highest gaps in the EU (and even more pronounced 
for  women  at  27.4  percentage  points).  Several 
factors  drive  the  unfavourable  labour  market 
outcomes 
an 
immigrants, 
overrepresentation  of  lower  education  and  skills 
levels.  Moreover,  employment  outcomes  of 
immigrants  differ  strongly  across  origin,  gender 
and  reason  for  migration  (FOD  Werkgelegenheid, 
Arbeid  en  Sociaal  Overleg,  2017).  In  particular 
those  having  arrived  for  family  reasons  are  less 
likely  to  be  employed  (40 %  on  average,  35 % 
among  women) (27).  Factors  impeding  integration 
include  the  lack  of  recognised  qualifications, 
limited  professional  networks  and  insufficient 
language skills. 

notably 

(27)  This  strongly  matters  as  54 %  of  non-EU  born  migrants 
residing  in  Belgium  came  for  family  reasons  (and  up  to 
66 % among women). 

The results are based on Mincer equation that controls for 
educational background, type of contract, working hours, 
sector of employment and occupation. When limiting the 
sample to only private firms the pay gap decreases to 20 % 
which is still the highest among the Member States included 
in the sample. 
Source: Commission calculations based on the 2014 
Structure of Earnings Survey 

This  adverse  employment  situation  is  found 
among  immigrants  as  well  as  among  native-
born  people  with  at  least  one  foreign-born 
parent  ('second  generation')  (see  European 
Commission, 2017a). Part of this gap can be partly 
explained by the fact that they have less favourable 
educational  outcomes (28).  However,  even  after 
individual 
differences 
adjusting 
characteristics  (age,  sex,  education  level),  native-
born people with non-EU born parents remain less 
likely  to  be  in  employment (29),  although  the  gap 
narrows with education (Graph 3.3.6).   

for 

in 

(28)  Among those aged 25-54, native-born people with at least 
one foreign born parent were  (in 2014) more likely not to 
have  completed  higher  secondary  education  (18.0 %,  and 
up to 28.9 % for those with two foreign born parents) than 
native born with native background (16.3 %). 

(29)  People  with  a  'second-generation  migrant'  background  are 
less  likely  to  find  jobs,    even  if  adjustments  are  made  to 
take account of different literacy levels, see OECD (2014), 
'International Migration Outlook 2015', Table A.7. 

27 

-20%-15%-10%-5%0%5%10%15%20%25%BEPTITLUESFRCYNLSIDEROFIPLHUUKBGCZMTSKLTLVEE 
                                                           
 
                                                           
3.3. Labour market, education and social policies 

infringements 

''discriminatory'' 

adopted a federal law designed to make it easier to 
prove 
through 
testing (based on fake CVs) or 'mystery calls'. The 
Flemish Region updated its action plan to combat 
work-related  discrimination  while,  the  Brussels 
Region  adopted  a  specific  decree 
tackle 
discrimination  in  recruitment  practices  through 
'mystery  calls'.  However,  little  progress  has  been 
made towards setting the diversity objective for the 
federal  public  services  that  was  announced  in  the 
government  agreement.  There  is  still  a  lack  of 
coordination  across  policy  domains  and  political 
levels  to  address  the  challenge  of  integrating 
people with a migrant background into work.  

to 

3.3.2.  POVERTY AND SOCIAL INCLUSION 

are 

very 

effective 

transfers 

Social 
in 
Belgium (30). Pre-transfer poverty was reduced by 
41 pp thanks to social transfers, whereas the EU28 
average  was  33 pp  (in  2016).  A  uniform  ‘right  to 
social 
from 
integration’  covers  all  aspects 
eligibility  conditions  to  governance  arrangements. 
The right to social integration main aims are being 
a  pathway  to  employment  and  the  provision  of  a 
guaranteed  minimum  income.  However,  for  a 
country  with  a  relatively  low  level  of  income 
inequality and a comparatively high level of social 
spending, Belgium has a comparatively high level 
of  relative  income  poverty (31).  At  15.5 %  it  is 
lower  than  the  EU  and  EA  averages  (17.3 %  and 
17.4 % respectively). It is also lower that the figure 
for  Germany  (16.5 %)  but  above  those  for  the 
Netherlands (12.7 %) and France (13.6 %).  

Certain  groups  have  higher  poverty  rates  than 
the  EU  average.  This  is  notably  the  case  for 
people  in  quasi  jobless  households  with  children 
(80.7 %  versus  an  EU  average  of  68.3 %)  or  for 
people  born  outside  of  the  EU  (44.9 %  versus  an 
EU  average  of  30.8 %).  This  at-risk-of-poverty 
rate among people born outside of the EU has risen 
to  44.9 %  in  2016  (when  it  was  41.5 %  in  2015) 
and  is  four  times  higher  than  among  native 
Belgians  (11.1 %).  Severe  material  deprivation 
was  found  to  be  more  than  five  times  higher 

(30)  The inequality reducing effect of taxes and transfers on the 
Gini  coefficient  is  23.6  percentage  points,  one  of  the 
highest in the EU.  

(31)  People who are at-risk-of poverty (AROP): in a household 
with  an  equivalised  disposable  income  below  60 %  of  the 
national median.   

Graph 3.3.6:  Likelihood of employment by origin, gender 
and educational attainment 

Based on a logit regression, which allows estimating the 
adjusted probability of employment controlling for age, 
education and gender. 
Source: Commission calculations based on the 2014 AHM of 
the Labour Force Survey 

The lower probability of employment for people 
with  a  migrant  background  suggests  that 
discriminatory  practices  may  be 
involved. 
Existing studies based on tests conclude that being 
of foreign origin directly affects a person's chance 
to  be  hired,  all  other  things  being  equal  (OECD, 
2013)  though  the  effect  seems  to  decline  with 
experience  (Baert  et  al,  2017).  There  is  also 
evidence that activation measures do not reach all 
the  sectors  of  the  population  equally  efficiently. 
Participation 
activation  measures  varies 
markedly  depending  on  people's  origin  (FOD 
Werkgelegenheid,  Arbeid  en  Sociaal  Overleg, 
2017).  In  Flanders,  taking  part  in  activation 
measures helps people with a migrant background 
of  the  second generation  find  a  job,  although  to  a 
lower extent than for people with a Belgian origin 
(Vandermeerschen  et  al,  2018).  This  is  also 
corroborated  by  measurements  of  subjective 
perception  of  discrimination,  which  are  higher  in 
Belgium than in other EU countries (Fundamental 
Rights Agency, 2017). 

in 

to 

A few measures to help newly arrivals integrate 
and 
including 
tackle  discrimination, 
discrimination  on  the  basis  of  ethnic  origin, 
have been adopted. The three Regions have now 
adopted  integration  measures  that  are  compulsory 
for  newly  arrived  non-EU  nationals.  Belgium 

28 

0%10%20%30%40%50%60%70%80%90%100%MenWomenMenWomenMenWomenLowMediumHighNative born with at least one non-EU born parentNative born with native born parents 
 
                                                           
(18.3 % versus 3.6 % among native Belgians). The 
main reason for this is the lower employment rates 
among people born outside of the EU but another 
reason is higher in work poverty within this group 
(19.5 %  versus  3.3 %).  Child  poverty  is  also 
comparatively  high  and  driven  mainly  by  the 
number  of  children  in  quasi-jobless  households. 
This  applies  particularly  for  children  with  parents 
educated  to  less  than  lower  secondary  level.  The 
poverty rate for this group is above the EU and EA 
averages  and  the  rates  for  the  Netherlands  and 
France  though  lower  than  for  Germany.  Belgium 
has  one  of  the  largest  gap  between  the  risk  of 
poverty  or  social  exclusion  for  persons  with 
disabilities  and  those  without.  Among  people  of 
working age, the poverty risk rises significantly for 
those with  low  educational  attainment.  It  is worth 
noting  that  it  is  also  increasing  for  those  with  a 
‘medium’  educational  attainment  (FOD  Sociale 
Zekerheid, 2017).  

Despite  increased  employment  the  rate  of  very 
low  working  intensity  households  has  barely 
decreased. Many people find themselves excluded 
from  the  labour  market  and,  despite  a  slight 
decrease  in  2016,  the  proportion  of  the  working 
age  population  (25-54)  living  in  very  low  work 
intensity  households  remains  high  by  comparison 
with the neighbouring countries (Graph 3.3.7). The 
proportion  of  women  at  risk  of  poverty  increased 
in  2016,  probably  because  of  the  increase  in 
relative  poverty  among  single-parent  households 
which  reached  41.4 % (32).  The  risk  of  very  low 
work intensity in these households has increased in 
recent  years.  The  federal  government  announced 
that  it  will  automatically  grant  social  rights  to 
beneficiaries who meet the criteria and increase the 
tax  deductibility  of  child  care  costs  for  working 
parents  at  the  bottom  of  the  pay  scale.  It  has 
restated its intention to raise the level of benefits to 
the level of the poverty threshold.  

(32)  83 % of the heads of single-parent households were women 

in 2014. 

3.3. Labour market, education and social policies 

Graph 3.3.7:  Share of the population (25-54) living in very 

low work intensity households, 2005-2016 

Source: Eurostat 

not 

entitled 

self-employed 

Belgium  has  a  well-developed  social  protection 
system  for  the  self-employed  but  differences 
with  employees  remain.  Social  contributions  are 
lower  than  for  employees  but  also  confer  fewer 
rights. Belgium is one of the nine countries where 
the 
to 
are 
unemployment  benefits33.  Public  provision  can  be 
complemented  by  private 
insurance.  Self-
employed  people  and  family  workers  are  much 
more  likely  than  employees  to  be  at  risk  of 
poverty.  This  can  hamper  the  attractiveness  of 
entrepreneurship  (see  section  3.4.3  and  3.4.4).  In 
recent  years,  the  authorities  have  taken  important 
steps  to  harmonise  the  protection  levels  for  the 
self-employed  and  the  employed.  The  federal 
government has announced a number of measures, 
and  a  few  have  been  adopted,  notably  additional 
support  for  pension  build-up  of  self-employed 
individuals  and  a  reduction  of  the  social  security 
contribution limit for self-employed at the start of 
their activities. The lag time at the beginning of a 
incapacity  period  during  which  no 
work 
substitution  income  is  granted  was  cut  by  half  to 
two weeks.  

Access  to  quality  healthcare  is  an  issue  for 
vulnerable  groups.  The  level  of  unmet  needs  for 
medical care is high in the lowest income quintile 

(33)However,  in  2016  the  federal  government  introduced  a 
“bridging  right”,  with  which  social  rights  are  maintained 
and  allowances  are  provided  under  certain  circumstances, 
while the payment of social contributions is suspended.  

29 

0246810121416050607080910111213141516%BEDEFRNL 
 
                                                           
 
                                                           
3.3. Labour market, education and social policies 

encourage firms to step up their efforts to provide 
training. 

Whilst Belgium performs well on top achievers, 
the  downward  trend  and  differences  among 
communities  are  raising  concerns.  The  PISA 
2015 survey confirms that the Belgian share of top 
performers  is  above  the  OECD  in  all  tested  areas 
with  a  downward  trend  in  mathematics  and 
communities' 
European 
Commission,  2017a).  Moreover,  disadvantaged 
groups  are  much  underrepresented  amongst  top 
achievers in science, mathematics and reading.  

differences 

(see 

likely 

The  proportion  of  tertiary  graduates  is  high. 
Yet,  educational  inequalities,  skills  shortages 
  At 
and  regional  disparities  are  observed. 
45.6 %  in  2016,  the  percentage  of  30  to  34  year-
old graduates is high. The Brussels Region attracts 
highly  skilled  young  people,  but  it  has  the  lowest 
to  successfully 
proportion  of  students 
complete  tertiary  education  (Statistics  Belgium, 
2015). Inequalities linked to socioeconomic status, 
family  and  migrant  background  persist  in  tertiary 
education.  The  attainment  gap  between  people 
with disabilities and those without far exceeds the 
EU  average  (18.3 pps.  vs.  13.7 pps.,  EU-SILC 
2015).  The  share  of  STEM  graduates  is  one  the 
lowest in the EU (see section 3.5.3). The different 
language  Communities  face  different  levels  of 
teaching staff shortages36. 

include 

unequal 

teachers' 

Large  performance  gaps  between  schools  go 
hand-in-hand  with 
educational 
opportunities.  Disadvantaged  pupils  are  more 
likely  to  be  steered  towards  certain  schools  and 
towards lower educational pathways. The variance 
in science performance between schools is high by 
international  and  EU  comparison.  Explanatory 
factors 
lower  expectations, 
greater  turnover  in  teaching  staff,  difficulties  in 
of 
attracting 
cooperation between teachers, cultural differences. 
(King  Baudouin  Foundation,  2017)  and  unequal 
access 
(European 
Commission,  2017b).  There  is  limited  monitoring 
of  schools  performance.  The  French  Community 
has  developed  new 
the 
proportion of schools whose pupils' average score 
is below the basic level.  

indicators  such  as 

experienced 

educational 

resources 

teachers, 

levels 

to 

(36 ) In the Flemish Community the shortages are only recently 
emerging and are confined to certain subjects and cities 

compared  to  other  EU  countries  and  has  been 
rising  in  recent  years (34).  The  difference  between 
the  5th  and  the  1st  income  quintile  in  self-reported 
unmet  health  needs  has  increased  steadily  since 
2011, reaching 6.8 pps in 2015 (6th highest in EU) 
and 7.4 pps in 2016. It is not clear what caused the 
increase.  Non  take  up  or  deteriorated  income 
situations could be possible causes. 

3.3.3.  EDUCATION, TRAINING AND SKILLS, 

Belgium  combines  an  overall  good  education 
performance with major education inequalities; 
this  is  intricate  with  wide  performance  gaps 
between  schools  and  differences  between  the 
Communities.  The  two  main  education  systems 
face  longstanding  structural  problems  relating  to 
equal  opportunities  and 
inclusive  education. 
However  reforms  are  being  implemented.  The 
challenges  could  increase  as  the  strong  growth  of 
the  school  population  should  be  concentrated  in 
disadvantaged  groups 
(European  Commission 
2016a). Both communities had lower than average 
results than the EU-average at the 2016 Progress in 
International  Reading  Literacy  Study  (PIRLS), 
with  the  French  Community  score  being  the  EU's 
lowest  one  and  with  the  sharper  downward  trend 
recorded for the Flemish Community.  

Participation  in  life-long-learning  is  very  low 
(7.0%  against  an  EU  average  of  10.8%).  In  the 
Cedefop's  European  Skills  index  (35)  and  on  the 
Skills  Matching pillar  Belgium  ranks  amongst the 
lowest  with  a  poor  performance  for  structural 
vacancies  (27th)  and  for  Skils  obsolescence  (19th). 
To  prevent  skills  obsolescence  and  to  enable 
people to handle transitions, more commitment by 
individuals  and  employers  to  continuous  adult 
learning would be important. The March 2017 law 
on  'workable  and  feasible  work'  is  designed  to 

(34)  It was 4.2 % in 2011 and has increased to 7.7 % in 2016. 
35  The  Cedefop's  European  Skills  Index  measures 

the 
comparative  performance  of  the  skills  formation  and 
matching  system  across  EU  Member  States.  This  is  a 
composite index with three pillars, each of which measures 
a  different  aspect  of  a  country's  skills  formation  and 
matching system: 

Pillar  1 

'Development'  measures 

training  and  education 

activities, 

Pillar 2 'Activation' measures the transition of people into work, 

and participation in the labour market, 

Pillar 3 'Matching' measures the degree of successful matching 
of  skills  that  is  the  extent  to  which  skills  are  effectively 
matched in the labour market. 

30 

 
                                                           
                                                           
3.3. Labour market, education and social policies 

in 

girls 
large  cities.(Vlaams  Ministerie  van 
Onderwijs  and  Vorming,  2016).  Such  analysis  is 
not available for the French Community.  

The  implementation  of  major  schools  reforms 
and measures is at an early stage. Major school 
reforms to improve equity, basic competences and 
vocational training have been launched by both the 
French and the Flemish Communities. In 2017, the 
Communities  introduced  new  measures  on  early 
childhood  education 
(European  Commission, 
2017b). In 2017 the French Community adopted a 
set  of  objectives,  a  multi-annual  budget,  and  an 
implementation  calendar  for  the  reform  ('Pacte 
pour  un  enseignement  d’excellence  2015-2030') 
and the 2017-2018 key measures. In July 2017, the 
Flemish government gave its initial approval for a 
draft  decree  on  the  structure  and  organisation  to 
modernise  secondary  education.  It  decided  in 
November  2017  to  postpone  the  incremental 
implementation  of  the  decree  from  2018  to  2019. 
On  related  reforms,  the  adoption  of  the  decree  on 
dual  learning reform  has  been  postponed  to  2019, 
although the new system of dual learning has been 
in  a  trial  phase  for  the  last  two  years.  A  draft 
decree  on  the  basic  principles  of  the  attainment 
targets  has  been  adopted.  New  measures  also 
support  the  implementation  of  the  2015-2016 
decree to include students with special educational 
needs  in  the  mainstream  system  (M-Decree).  Full 
implementation will take time to materialise. 

Specific measures target groups or schools with 
disadvantaged  pupils.  The  Communities  have 
taken and plan to take specific measures (European 
Commission  2017b).  An  evaluation  (Rekenhof, 
2017) of Flemish equal opportunities policy for the 
most  disadvantaged  schools  ('GOK')  in  primary 
education  found  no  overall  improvement  but 
identified  success  factors  enabling  policy  to  be 
improved and adapted to take account of growing 
pupil  diversity.  These  included  a  broad  support 
base, parents involvement and a student follow-up 
system.  The  French  Community  improved  its 
funding  formula  for  such  schools  in  2017.  Since 
2012 enrolment policy in the Flemish Community 
has required all schools to reserve a share of places 
for both disadvantaged and advantaged pupils. The 
first  positive  impacts  on  social  mix  have  been 
observed. The long awaited evaluation and reform 
of  the  French  Community's  enrolment  policy  is 
pending.  

lower  performance  of  pupils  with  a 
The 
migrant  background 
is  a  concern,  with 
differences  across  the  Communities.  Belgium  is 
one  of  the  EU  countries  with  the  largest  share  of 
students  with  a  migrant  background  (17 %  vs 
11.3 %  EU  average),  mostly  concentrated  in  big 
cities.  PISA  2015  shows  that  36.9 %  of  those 
pupils  are  low  achievers  and  only  2.9 %  top 
achievers,  compared  with  15 %  and  10.5 % 
respectively 
for  students  without  a  migrant 
background.  After  adjusting  for  socioeconomic 
status,  migrant  background  has  an  impact  above 
in  Belgium.  The  adjusted 
the  EU  average 
performance gap in the Flemish Community is the 
highest in the OECD. In the other Communities it 
is below average (Universiteit Gent, 2016).  

Graph 3.3.8:  Between schools variation in performance 
explained by schools' and students' social-
economic status (PISA 2015- Science) 

Source: DG EAC based on Pisa 2015(science), averages 
weighted,  

More attention may need to be given to gender 
differences  in  education.  Boys  and  girls  make 
different study choices of in secondary and tertiary 
education.  Boys  significantly  outperform  girls  in 
science  (12  points  vs  3.5  OECD  average,  Pisa 
2015).  Female  students'  underrepresentation  in 
sciences,  mathematics  and  statistics  is  among  the 
highest 
In 
addition,  there  are  some  indications  of  recent 
potentially  worrying  trends.  Despite  the  quasi 
universal  enrolment  in  pre-primary  at  the  age  of 
three,  a  recent  survey  suggests  that  the  profile  of 
the  few  cases  of  non-enrolment  and/or  irregular 
attendance  after  enrolment  are  mostly  immigrant 

(OECD,  2017c,). 

internationally 

31 

0510152025HULUFRBECZBGSKATDEPTMTROSIESPLIEELNLSEHRLTUKDKFIITCYLVEE 
 
3.3. Labour market, education and social policies 

Postponement  of  retirement  age  for  Belgian 
teachers (from 2019 onwards) will bring additional 
challenges  regarding  (re)training  and  organisation 
of end of career.  

in 

the 

2014-2019 

Reforms  relating  to  initial  teacher  education 
and  career  are  making  slow  progress  in  a 
context of emerging teacher shortage. Measures 
announced 
government 
agreements referring to the need to attract qualified 
teachers  to  disadvantaged  schools  have  not  yet 
materialised.  The  French  Community  introduced 
mandatory  support  to  new  teachers  in  2016/2017. 
Negotiations  on  teachers'  careers  are  ongoing 
(Flemish Community) or have resulted in planned 
reforms 
both 
Communities,  the  results  of  surveys  on  teachers’ 
missions and workload are awaited.  

Community). 

(French 

In 

The  effects  of  the  reforms  and  measures  will 
very much depend on their implementation and 
monitoring.  It is too early to see if the reforms of 
the  Flemish  secondary  education  will  address  the 
negative  effects  on  equity  of  the  current  general, 
tracks.  Educational 
technical  and  vocational 
inequalities  may  even  increase  if  early  tracking  is 
not  effectively  counterbalanced  (OECD,  2017b). 
Delays  in  the  implementation  are  observed.  The 
monitoring  will  rely  on  the  current  system.  The 
new  longer  common  curriculum  in  the  French 
Community  should  yield  positive  results.  The 
French  Community  is  improving  its  monitoring 
system. 

support 

autonomy.  To 

New  quality  assurance  and  school  governance 
measures  are  designed  to  reduce  inequalities 
between  schools.  In 
the  French  Community 
central  steering  will  be  stepped  up  while  giving 
schools  greater 
a 
collaborative  approach,  all  schools  will  establish 
by  2018/2019  a  six-year  plan  covering  pupil 
performance,  school  climate,  inclusive  education, 
pupil  pathways  and  professionalization.  Support 
measures  will  be  taken  to  help  underperforming 
schools.  On  the  Flemish  side,  measures  may  help 
strike 
and 
accountability (OECD, 2015) and address concerns 
about 
the 
the  possible  unequal  value  of 
qualifications  awarded.  In  2017-2018,  centrally 
validated tests to be used in the award of primary 
school  certificates  will  become  part  of  schools’ 
internal  quality  assurance  systems.  A  new  quality 
framework is available for the inspectors.   

a  balance  between 

autonomy 

to  adapt 

teachers'  continuous 
The  need 
professional  development  is  recognised.  There 
are  few  measures 
teachers  combine 
to  help 
teaching and continuous professional development 
(CPD).  The  existing  system  is  not  well-suited  to 
helping  school  teams  deal  with  an  increasingly 
diverse  school  population.  It  is  neither  well 
developed nor mandatory in all Communities. Nor 
is it recognised for career development (European 
Commission,  2017a).  It  involves  actors  at  central, 
levels.  The  French 
intermediate  and  school 
continuous 
Community  plans 
2019. 
professional 

to 
development 

step  up 

from 

32 

 
3.3. Labour market, education and social policies 

Box 3.3.2: Policy highlights: Reform of early childhood and compulsory education in the 
French Community (Pact for Excellence in Teaching, 2015-2030) 

A systemic reform to address longstanding educational challenges 

The  school  reform,  launched  in  2015,  aims  to  reduce  high  educational  inequalities,  raise  the  average 
performance (with Pisa 2015 results below the national average and below or close to the OECD average) 
and  the  overall  efficiency  of  the  system.  To  strengthen  prevention,  the  reform  includes  early  childhood 
education (ECEC). The French Community adopted in 2017 the objectives, priorities of the reform, a well-
defined implementation plan with a 15-year horizon and a multi-annual budget.  

The five strategic axes to reform the system:  

1)   Teach  the  knowledge  and  skills required  for  21st  century  society:  A  common  comprehensive  pathway 
from ECEC till the third year of lower secondary education (currently second year) will be progressively 
rolled  out  starting  with  ECEC  in  2019/20.  Its  successful  implementation  requires  inter  alia  to  adapt 
school and teaching approaches to face the increasing diversity of the school population.  

2)   Mobilise  education  stakeholders  within  a  framework  of  school  autonomy  and  accountability.  The 
overhaul of the governance involves a) a stronger central steering namely by setting objectives at system 
level and by geographical area; b) schools and teachers greater autonomy and responsibility to achieve 
agreed  objectives  and  c)  support  and  monitoring  of  schools  by  geographical  area  with  measures  for 
significantly  low-performing  school.  At  central  level,  plans  include  a  redefinition  of  roles  (e.g.  of  the 
school  inspectorate)  and  a  decentralisation  of  responsibility  by  geographical  area.  Less  administrative 
burden  on  heads  is  coupled  with  a  strengthening  of  their  role  on  teaching,  shared  leadership  and  in 
human resource management. School plans to achieve the objectives are to be established by 2018/2019. 
Teachers’  reforms  focus  on  continuous  professional  development  and  on  the  introduction  of  a 
differentiated career and of an appraisal system.  

3)   Make  the  vocational  pathway  a  stream  of  excellence.  Close  to  50%,  the  share  of  pupils,  mainly  from 
disadvantaged background, enrolled in initial vocational training is above the EU average.  To increase 
its quality and relevance, initial vocational training would be reduced to one track of 3 years (currently 
four) after a longer common pathway. Main measures aim for a stronger monitoring and faster revision 
of the training offer with less and more relevant study options and greater focus on basic competences.  

4)  Promote  inclusive  education,  and  strengthen  the  fight  against  school  failure,  drop  out  and  repetition. 
Objectives encompass to half by 2030 the grade repetition rate (at 46%, the highest in Pisa 2015) and the 
early  school  leaving  rate.  Main  measures  target  groups  or  schools  with  disadvantaged  pupils  or 
significantly underperforming, new pedagogical approaches, social mixity and cooperation with parents. 

5)   Ensure  the  well-being  of  each  child  in  a  quality  school,  favouring  a  democratic  school.  Measures  to 
address  infrastructure  shortages  and  increase  public  investment  in  this  area  are  a  priority.  A  range  of 
measures cover quality school environment, a revised school timetable and extracurricular activities.  

With a 15-years horizon, implementation is at an early stage and deserves close monitoring 

The  reform  process  so  far  attests  a  positive  shift  towards  a  participatory  process  and  an  evidence-based 
policy.  The  reform  has  been  adopted  and  the  implementation  of  first  measures,  inter  alia  on  governance, 
started. However, the results of the reform will very much depend on the design of measures and on their 
implementation.  Sustained  political  support,  support  to  teachers  engagement,  a  phased  implementation, 
consistency  with  the  initial  teacher  education  reform  led  by  the  minister  of  Higher  Education  are  seen  as 
success factors. The context is challenging with one of the highest growth of the school population in the 
EU. For more information see: http://www.pactedexcellence.be, Education and Training Monitor - European 
Commission  

33 

 
3.4. INVESTMENT AND COMPETITIVENESS 

3.4.1.  EVOLUTION OF PRODUCTIVITY GROWTH 

Low  productivity  growth  remains  a  challenge 
for  Belgium.  Since  2000,  labour  productivity 
growth 
in  Belgium  has  underperformed  by 
comparison with average growth in the EA (Graph 
3.4.1).  In  the  aftermath  of  the  crisis,  productivity 
growth  was  slower  than  in  the  pre-crisis  period. 
The  main  reason  for  this  was  low  productivity 
growth  rates  in  the  services  sector,  which  halved 
between the two periods. Productivity growth rates 
in manufacturing, on the other hand, proved more 
resilient  (cf.  Biatour  and  Kegels,  2017).  A  regain 
in productivity growth is essential to ensure future 
growth,  as  well  as  the  sustainability  of  public 
finances,  as  the  expected  increase  in  the  share  of 
the 
old-age  population 
contribution  from  labour  utilisation  (see  Section 
3.1). 

to  depress 

likely 

is 

Graph 3.4.1:  Developments in labour productivity growth 

(Gross value added per hours worked) 

Source: European Commission 

sectors,  such  as  business  services,  have  weighed 
on productivity growth. Some inefficiencies in the 
Belgian  research  and  innovation  system,  reflected 
by a lower export share of medium-high and high 
tech  products  compared  to  the  EA  average(38)  in 
spite of relatively higher R&D expenditure (2.5 % 
of  GDP  in  2015  compared  to  2.1 %  in  the  EA), 
also  played  a  role.  A  rather  heavy  administrative 
burden with a complex tax system (see section 3.2) 
and  low  scores  on  entrepreneurship  are  likely  to 
hamper  productivity  developments.  Finally,  the 
slow  productivity  growth  also 
the 
persistent  low  level  of  public  investment,  notably 
in  transport  infrastructure  as  illustrated  by  the 
highly  saturated  road  and  rail  network.  This 
appears  to  have  a  negative  impact  on  firms' 
decision  to  invest  in  Belgium  (National  Bank  of 
Belgium, 2017c) (see Box 3.4.1 and section 3.5).  

reflects 

in 

investment 

Investment  in  research  and  innovation  and 
other intangibles, which have the most potential 
for  innovation  output,  is  high,  though  rather 
concentrated  within  a  few  sectors  in  Belgium. 
Overall 
intangibles  (knowledge 
based  capital (39)),  one  of  the  highest  in  the  EU, 
has grown strongly since the crisis to reach 4.4 % 
of  GDP  in  2015(40),  representing  20 %  of  total 
private  investments.  However,  the  level  remains 
below  that  of  France  (5.1%)  and  the  Netherlands 
(4.6%)  (Biatour  &  Kegels,  2017).  Business  R&D 
has  risen  to  one  of  the  highest  levels  in  the  EU 
(1.73%  of  GDP,  ranking  6th  in  the  EU).  This 
the 
performance 
biopharmaceutical sector which accounts for about 
a  third  of  total  business  R&D (41),  followed  by 
computer, electronic and optical products (7%) and 
chemicals  (6%).  The  strong  R&D  performance  of 
these high-tech sectors is a key driver for Belgium 
strength in exports and productivity.  

is  notably  underpinned  by 

A  key  driver  of  the  productivity  slowdown  has 
been the low growth in total factor productivity 
(TFP) (37) (cf. European Commission (2016b)). In 
this  respect,  Belgium  has 
its 
neighbours.  In  addition  to  the  structural  factors 
shared by all the most advanced economies, some 
features  are  specific  to  Belgium.  In  particular, 
remaining  barriers  to  competition  in  services 

lagged  behind 

(37)  That  is,  how  efficiently  firms  combine  capital  and  labour 

inputs for producing outputs. 

(38)However,  the  exports  diamond  trade  (a  contribution  to  the 
export  share  of  “low-tech”  goods  worth  EUR  11.4  billion  
in  2016,  approximately  3%  of  total  Belgian  exports) 
contributes  to  explain  the  low  share  of  medium  and  high-
tech exports in total exports. 

(39)  cf. footnote (42) 
(40)  Based  on  national  accounts.  The  figure  increases  to  8 % 
when  incorporating  additional  dimensions  covered  in  the 
INTAN database. 

(41)  This  assumes  that  part  of  the  ‘scientific  research  and 
development’  service  sector  (10.4 %  of  Business  R&D), 
where  many  biotech  firms  are  classified,  should  be  added 
to the pharmaceutical sector (28.8 % of Business R&D). 

34 

951001051101151200001020304050607080910111213141516BEDEFREA-19NL 
 
 
                                                           
                                                           
3.4. Investment 

Box 3.4.1: Investment challenges and reforms in Belgium 

Section 1. Macroeconomic perspective 

Investment in Belgium has proved resilient to the crisis. Unlike in neighbouring countries and the EA as a 
whole, in 2016, the level of overall investment in Belgium exceeded that of 2007. At 23.4 % of GDP it is 
currently higher than the EA average and the level observed in France, Germany and the Netherlands. This 
relatively  good  overall  performance  is  due  to  private  investment,  in  particular  business  investment,  which 
has increased compared to its pre-crisis level. The share of household investment in total GDP has remained 
stable at 5.9 %, a level which is in line with neighbouring countries. By contrast, public sector investment 
remains  a  major  challenge  both  with  respect  to  its  overall  level  and  with  respect  to  its  orientation  and 
contribution to the country's growth potential. Belgium is one of the beneficiaries of the Juncker Plan with 
approved financing reaching EUR 1.3 billion. 

Section 2. Assessment of barriers to investment and ongoing reforms (1) 

Barriers  to  private  investment  in  Belgium  are  overall  relatively  moderate  as  confirmed  by  the  European 
Commission assessment. Substantial progress was made on wage setting. Some progress was also made on 
education. More ambitious liberalisation of regulated professions and business services and the retail sector 
could spur investment in the affected sector as well as economy-wide. 

Main barriers to investment and priority actions underway: 

1.  Belgium  appears  to  lag  behind  as  regards  the  quality  of  public  infrastructure  to  support  the 
competitiveness  of  the  economy  (see  Section  3.5).  With  its  National  Pact  for  Strategic  Investment,  the 
Belgian federal government aims to promote structural reform and address the deficit in public investment. 
Wallonia  has  also  recently  adopted  its  investment  plan,  contributing  to  that  process.  It  is  hoped  that  the 
national investment pact will provide around EUR 60 billion in public and private investment by 2030, not 
only  by  mobilising  public  funds,  but  also  by  tapping  private  sources  of  finance,  notably  by  developing  a 
framework  for  public-private  partnerships  (PPS).  Several  policy  areas  are  within  the  remit  of  the  pact: 
support for innovative firms and funding for research and development, health, mobility, education, energy 
transition, digitalisation.  

2. The comparatively high level of taxation (in spite of the recent reforms) and the overall complexity of the 
tax system, characterised by a large number of exemptions, deductions and reduced rates, makes Belgium 
less attractive to potential investor. For this reason, the authorities have undertaken a reform of the corporate 
tax system (see section 3.1).  

(1)  See 'Member States Investment Challenges', SWD(2015)400final/2. 

35 

Regulatory/ administrative burdenTaxationPublic administrationAccess to financePublic procurement /PPPsCooperation btw academia, research and businessJudicial systemFinancing of R&D&IInsolvency frameworkBusiness services / Regulated professionsCSRCompetition and regulatory frameworkRetailCSREPL & framework for labour contracts ConstructionWages & wage settingDigital Economy / TelecomCSREducation CSREnergyCSRLegend:TransportCSRNo barrier to investment identifiedCSRInvestment barriers that are also subject to a CSRSome progressNo progressSubstantial progressLimited progressFully addressedPublic administration/ Business environmentFinancial Sector / TaxationR&D&ISector specific regulationLabour market/ Education 
 
 
Broadening the innovation base to encompass a 
larger  pool  of  firms  would  help  disseminate 
innovation  to  SMEs  as  well  making  the  system 
more resilient. A high concentration of R&D in a 
few  large  firms  and  sectors  is  a  widespread 
observation,  especially  in  small  economies.  In 
Belgium, 
firms  with  over  500  employees 
undertake  most  of  the  R&D  (54 %  in  2013),  a 
share  that  has  remained  broadly  stable  over  the 
years. Moreover, 60 % of business R&D is carried 
out by foreign-controlled firms, the largest share in 
the  EU  after  Ireland  (OECD,  2015).  However, 
SMEs also make a significant contribution to R&D 
in Belgium compared with other EU countries, (in 
2013, 0.58 % of GDP compared to 0.33 % of GDP 
for EU countries for which data is available). 

The existing productivity gap between the most 
productive  firms  and  the  rest  of  businesses  is 
widening.  As  in  other  countries,  Belgium's  most 
productive  firms,  particularly  top  frontier  firms, 
display  significantly  higher  productivity  growth 
rates  than  the rest  of  the firms.  This  may  point  to 
obstacles  hampering  the  diffusion  of  innovation. 
Investment  in  intangibles,  (so-called  knowledge 
based capital (42)) including R&D, could also be an 
important  factor  that  differentiates  firms  at  the 
global  productivity  frontier  from  those  that  are 
lagging behind (cf. European Commission, 2016b). 
This  disparity  is  observable  in  all  sectors,  though 
the gap is widest in the manufacturing sector (see 
Graph 3.4.2). 

The  dynamics  of  entrepreneurial  activities  and 
innovative  business  growth  seems  particularly 
weak, hindering the potential innovation impact 
of SMEs in terms of sales and jobs. The share of 
employment  in  fast  growing  SMEs  in  innovative 
sectors  is  only  2.5 %,  which  is  one  of  the  lowest 
proportions  in  the  EU  (European  Commission, 
2017a).  The  proportion  of  the  population  aged 
in  early-stage  entrepreneurial 
18-64  engaged 
activity  has  increased  to  6.2 %  but  remains  quite 

(42)  According 

to 

the  OECD,  knowledge-based  capital 
encompasses  all  assets  that  lack  physical  substance  but, 
like  physical  capital,  generate  economic  benefits  that  can 
be  retained  by  firms,  at  least  to  some  extent,  for  a  period 
that exceeds one year. Three main categories of intangible 
assets  are  usually  measured:  computerised  information 
(which 
innovative 
property  (covering  R&D,  design,  mineral  exploration, 
financial  innovation  and  artistic  originals)  and  economic 
competencies  (including  advertising,  marketing  research, 
own-account organisational capital and training). 

includes  software  and  databases), 

below the average of advanced economies (8.4 %). 
Crucially, Belgian entrepreneurs appear much less 
driven by opportunity than those in other advanced 
economies (43). A large majority of SMEs polled in 
a  survey  report  having  recently  introduced  a 
product  or  process  innovation  that  is  new  to  the 
firm (75 %) or new to the market (69 %). But the 
share  of  their  turn-over  relating  to  innovation  is 
low (7.6 %) compared to the EU average (13.7 %). 

Graph 3.4.2:  Distribution of labour productivity growth, 

Belgium, (average 2011-2013) 

Notes: a) Real estate activities; b) Manufacturing; c) 
Professional, scientific and technical activities; d) 
Accommodation and food service activities; e) 
Administrative and support service activities; f) Information 
and communication; g) Transportation and storage; h) 
Construction; i) Wholesale and retail trade. 
(1) The vertical axis shows the average annual productivity 
growth rate between 2011 and 2013 for five group of firms 
classified according to their level of productivity, namely: 
those at the percentile 99, i.e. firms whose level of 
productivity is higher than that of 99% of firms; those at the 
percentile 90 (P90) and 10 (P10); those more productive 
than 50% of firms but less productive than the remaining 50% 
(median); those whose level of productivity is equal to the 
average productivity level in the sector (mean). 
Source: Compnet 

Firms  directly  linked  with  foreign  markets 
appear to have higher productivity. The share of 
firms  in  Belgium  that  export  or  import  directly  is 
in  other  advanced  economies (44). 
small,  as 

(43)  Based  on 

the  motivational 

the  Global 
Entrepreneurship  Monitor,  which  measures  opportunity-
driven  entrepreneurship  as  opposed  to  necessity-driven 
entrepreneurship. 

index  of 

(44)  In 2014, only 2.1 % of Belgian firms were exporting, 3.9 % 
were  importing,  and  1.3%  were  both  exporting  and 
importing a significant amount defined as 1 % of total sales 
or  total  input  consumption  (Dhyne,  Duprez  2017,  The 

36 

-20%0%20%40%60%80%abcdefghiMeanP10P50P90P99 
 
                                                           
 
                                                           
3.4. Investment 

a 

been 

policies 

integration  of  research  policy  with  enterprise  and 
innovation 
positive 
has 
development. This has gone some way towards the 
complex  governance 
rationalisation  of 
framework,  by  integrating  executive  agencies  and 
simplifying programmes and instruments. There is 
also a strong focus now on boosting innovation in 
SMEs and start-ups. 

the 

With  the  gradual  expansion  of  these  measures 
and  greater  uptake  by  firms,  total  measures  in 
support  of  R&D  has  expanded  considerably  to 
reach EUR 1.7 billion of fiscal spending in 2015 
(see  Graph  3.4.3).  Together  with  direct  support 
from  regional  grants,  total  public  support  to 
business  R&D  represented  0.39 %  of  GDP  in 
2015,  the  highest  level  observed  in  the  OECD 
(OECD,  2017c).  The  announced  expansion  of  the 
partial  exemption  of  advance  payment  of  the 
withholding  tax  on  wages  to  researchers  with  a 
bachelor's  degree  and  the  introduction  of  the 
innovation  box  will  probably  contribute  to  this 
growing trend (see Section 3.1). 

Graph 3.4.3:  Federal fiscal measures in support of R&D (left 

scale in billion EUR) and business R&D (right 
scale in billion EUR), 2008-2015 

However,  almost  two  thirds  of  businesses  are 
directly or indirectly connected to foreign demand. 
Recent  empirical  results  also  show  a  productivity 
their 
ranking  of  Belgian  firms  according 
proximity  to  foreign  markets  and  firms  that  are 
indirectly connected to markets abroad tend to lag 
behind  in  terms  of  technological  efficiency  (cf. 
Dhyne and Duprez, 2017). 

to 

Public support for research and innovation   

The  quality  of  public  research  offers  an 
excellent base for public-private collaborations. 
The  openness  and  quality  of  the  public  science 
base  is  reflected  in  the  number  of  highly  cited 
publications, 
public-private 
collaborations  and  the  fact  that  a  significant 
proportion of research is contracted by the private 
sector. 

many 

the 

intensity 

Despite Belgium's excellent science base, public 
R&D 
remains  below 
(0.74 %) 
innovation  leaders  (0.87 %  on  average) (45). 
Flanders  however  is  making  progress  towards  its 
objective  of  spending  1 %  of  its  GDP  on  public 
research  (estimated  at  0.79 %  for  the  Flanders 
region,  Debackere  et  al.,  2017).  The  main  reason 
for this is the expansion of public research centres. 
Developments  seem  more  moderate  in  the  other 
regions/community,  pulling  down  Belgium  public 
R&D intensity to 0.74 %. Research undertaken by 
public institutions  is supported  by  public budgets, 
which  represent  0.62 %  of  GDP,  also  a  relatively 
modest  level  by  comparison  with  advanced  peers. 
However, 
towards 
increasing  R&D  budgets  in  all  entities  in  recent 
years. The only exception is the cuts at the federal 
level, particularly following the reforms of federal 
research programmes.  

there  has  been  a 

trend 

Innovation is high on the agenda of regions and 
communities,  with  the  dual  aim  of  making 
existing 
industries  more  competitive  and 
enabling  the  emergence  of  new  ones.  At 
individual  regional/community  level,  the  closer 

World is a village… The integration of Belgian firms into 
the world economy, NBB Economic Review, Sept.2017). 
(45)  Innovation  leaders  defined  in  the  European  Innovation 
Scoreboard  2017  (with  respective  public  R&D  intensities 
for 2016) are Sweden (0.98%), Denmark (0.97%), Finland 
(0.92%)  ,  Germany  (0.94%), the  Netherlands  (0.88%)  and 
the United Kingdom (0.52%). 

Source: Eurostat and SPF/FOD Finance 

While business R&D has grown by about 50 % 
since 2008, total fiscal spending in incentives for 
R&D,  including  the  patent  box  (see  section 
3.1.4),  has  grown  by  almost  500 %.  The 
efficiency  of  the  schemes  seems  questionable  in 
the  absence  of  an  in-depth  evaluation.  The  latest 
the  Federal  Plan  Bureau 
available  study  by 
the  period 
(Dumont,  2015),  which  analyses 

37 

01000200030004000500060007000800002004006008001,0001,2001,4001,6001,80020082009201020112012201320142015R&D tax credit/investment deductionPatent boxPartial withold. tax exempt. for researchers (private sector)BERD 
                                                                                   
 
3.4. Investment 

In  2016,  nominal  wages  remained  stable  as 
compared  with  2015,  while  relatively  strong 
growth in inflation led to a decline of 1.6 % in real 
wages.  There  was  no  change  in  the  nominal  unit 
labour cost as compared with 2015, leading for the 
third year in a row to a relative improvement vis-à-
vis  the  euro  area  and  reversing  some  of  the 
competitiveness losses accumulated in the past. In 
2017  and  2018,  nominal  unit  labour  costs  are 
expected to increase again driven by relative high 
inflation  growth.  This  will  have  to  be  closely 
monitored  as  the  acceleration  of  inflation  in 
Belgium tends to enhance the risk of second-round 
effects  in  the  economy  through  automatic  wage 
indexation.   

Graph 3.4.4:  Determinants of changes in unit labour cost 

between  2005  and  2011  questioned  the  efficiency 
of  the  tax  credits  and  the  patent  box.  The  study 
also  suggests  that  combining  different  support 
schemes seemed to reduce their effectiveness 

objectives, 

questionable 

the  cost-competitiveness  of 

Central  to  the  issue  is  the  lack  of  a  distinction 
between the objective of incentivising additional 
R&D,  especially  in  new  sectors,  and  that  of 
improving 
the 
sectors  that  are  strong  R&D  performers.  In 
2013,  the  Belgian  Court  of  Auditors  criticised 
some  of  the  schemes  as  suffering  from  a  lack  of 
and 
clear 
insufficient  monitoring  (Court  of  Auditors,  2013). 
Since the measures were introduced at the request 
of  the  pharmaceutical  and  chemistry  sectors,  their 
objectives: 
design 
incentivising  additional  R&D  and  improving  the 
cost-competitiveness  of  these  sectors,  which  are 
already strong R&D performers (see above). As  a 
result, the beneficiaries are, on average, larger and 
older  firms  rather  than  a  more  representative 
population of enterprises (Dumont, 2015).  

apparently  mixed 

design 

two 

The  Belgian  economy  could  have  a  relatively 
high  share  of  non-viable  businesses.  An 
estimated  14 %  of  capital  stock  was  sunk  in 
zombie firms (46) in 2013, down from around 17 % 
in  2010  but  still  higher  than  Germany  or  France 
(McGowan  et  al.,  2017).  Yet,  Belgium's  zombie 
firms accounted for 9 % of the total in 2013 (6 % 
in  2007  and  8 %  in  2010) (47).  The  increasing 
number  of  zombie  firms  and  their  survival  have 
adversely  affected  average  productivity  growth 
and  limited  the  availability  of  credit  in  the 
economy for more productive firms.  

3.4.2.  COST-COMPETITIVENESS AND INFLATION 

Recent  prolonged  wage  moderation  has  halted 
the  decline  and  reversed  some  of  the  cost-
competitiveness  losses  accumulated  in  the  past. 

(46)  Firms aged 10y or more and with an interest coverage ratio 

below 1 over three consecutive years. 

(47)  According to the McGowan et Al., 2017, Belgium exhibits 
a higher number of zombie firms as compared to other EU 
countries: for examples, in 2013 zombie firms were 2 % in 
France,  and  6 %  in  Italy.  However,  the  high  Belgian 
number  should  be  interpreted  with  caution  since  interest 
charges  are  to  a  certain  extent  influenced  by  intra-group 
loans  that  are  particularly  important  in  Belgium.  Sample 
biases  might  also  explain  the  relatively  higher  Belgian 
figure. 

Source: European Commission 

After  having  peaked  in  2016,  the  inflation  gap 
between  Belgium  and  the  euro  area  has 
narrowed  considerably  in  2017.  The  inflation 
gap  between  Belgium  and 
three  main 
neighbouring  countries  (Germany,  France  and  the 
Netherlands)  also  became  smaller.  Total  inflation 
in  these  countries  in  2017  has  accelerated  (1.5 % 
versus  0.3 %  in  the  previous  year)  more  than  in 
Belgium, but remained lower than that in the latter.  

its 

of 

The  spike  in  the  inflation  gap  was  mainly  the 
government  measures  which 
result 
temporarily  pushed  up 
the  year-on-year 
inflation for services and, to a lesser extent, for 
energy  and  processed  food  (Graph  3.4.5). 
According  to  some  estimates  (National  Bank  of 
Belgium,  2017d),  these  categories  accounted  for, 

38 

-4-3-2-1012345602030405060708091011121314151617*18*19*Rate of change y-o-y (%)Inflation (GDP deflator growth)Real Compensation per EmployeeProductivity Contribution (negative sign)Nominal unit labour costULC in Euro Area 
                                                           
 
3.4. Investment 

electricity prices in 2016 was mainly related to the 
adoption of a couple of fiscal measures, such as the 
increase in VAT from 6 % to 21  % in September 
2015  or,  in  Flanders  the  sharp  increase  in  the 
contribution  “energy  fund”  –a  yearly  tax  for  each 
active connection point– in March 2016, as well as 
the  abolition  of 
free  electricity.  Although 
electricity  inflation  has  now  slowed  down,  partly 
due  to  the  fading  out  of  the  effect  of  tax  on 
electricity  consumption,  it  is  still  high  due  to  the 
remaining  effects  of  measures  taken  in  2016, 
e.g.,contribution  in  the  "energy  fund"  March 
2016),  removing  free  electricity  in  Flanders  (May 
2016).  The  resulting  increase  at  the  national  level 
is expected to fade out in 2018. 

The rise in processed food prices has also been 
responsible  for  higher  inflation  in  Belgium.  It 
was  driven  by  decisions  taken  as  part  of  the 
(partial)  financing  of  the  policy  action  to  reduce 
the tax wedge on labour income (the so-called "tax 
shift"),  through  the  increase  of  excise  duties  on 
alcohol and tobacco and soft drinks. 

in 

Over  time,  services  prices  seem  to  be  the 
primary reason for the inflation gap persistence 
with respect to the euro area. Core inflation –as 
measured  by 
the  HICP  excluding  volatile 
components such as unprocessed food and energy– 
has been systematically higher than on average in 
Germany,  France  and  the  Netherlands.  Between 
2008 and 2016 core inflation, in cumulated terms, 
increased  by  14.9 %  in  Belgium  compared  to  an 
average  9.6 % 
the  neighbouring  countries 
(12.3 % in the Netherlands, 9.9 % in Germany and 
8.4 %  in  France).  Over  the  same  period,  services 
contributed slightly more than half to the inflation 
differential,  compared  with  a  contribution  of  less 
than a third for processed food and just over a fifth 
industrial  goods (50).  More 
for  non-energy 
precisely,  the  Price  Observatory  (2016)  identifies 
three  sectors,  namely  bars  and  restaurants  (which 
have  a  higher  weight  in  the  Belgian  price  index), 
telecommunications  and  culture,  which  accounted 
for  most  of  the  service  price  differential  between 
Belgium and its three main neighbouring countries 
throughout 
the  period.  An  additional  factor 
explaining  the  higher  service  market  prices  could 

(50)  The  underlying  inflation  is  divided  into  three  product 
groups,  namely  processed  food,  non-energy  industrial 
goods  and  services,  which  correspond  to  16 %,  34 %  and 
50 %  of  the  weight  of  the  three  product  groups  in  the 
calculation of underlying inflation in Belgium respectively. 

respectively, 1.1, 0.6 and 0.4 percentage points of 
headline inflation from 2015 to 2017.  

to 

the 
Electricity  contributed  significantly 
acceleration of inflation in 2015-2017, and thus 
also  to  the  widening  inflation  gap.  Inflation  in 
Belgium  shows  greater  sensitivity  to  world  oil 
price movements, as a result of a low level of flat-
rate taxation (excise duties) on heating oil and the 
higher  weight  it  has  in  energy  consumption 
patterns. This factor has mitigated the inflation gap 
in  2015  and  2016,  in  periods  of  falling  oil  prices, 
but exacerbated it at the beginning of 2017.  

Graph 3.4.5:  Contribution of the main product groups to the 
inflation differential with the EA 

Source: European Commission 

However,  the  acceleration  of  energy  prices  in 
2015-17  was  mainly  related  to  the  non-energy 
components (48) of the retail price (49) of gas and 
electricity. The share of the energy component in 
the overall bill for electricity has clearly decreased 
over  the  years;  as  such,  the  acceleration  of 

(48)  The  non-energy  components 

include  network 

tariffs 
(distribution  and  transmission  costs),  as  well  as  levies, 
taxes  and  VAT.  In  the  context  of  the  sixth  State  reform 
(Law  of  January  6,  2014)  the  regulation  of  distribution 
tariffs  for  electricity  and  gas  were  transferred  to  the 
regions.  Since  2008,  the  transmission  tariffs  on  electricity 
and gas are approved by the federal regulator CREG for a 
period of four years. 

(49)  Although  the  pre-tax  energy  price-setting  in  Belgium  was 
subject  to  a  price  control  mechanism,  the  “safety  net 
mechanism”, till the end of 2017, its impact, especially on 
electricity  prices,  is  very  limited,  since  these  non-energy 
components  are  not  concerned  by  the  control  mechanism 
and since almost two thirds of the contracts are fixed-price 
contracts to which the mechanism does not apply either. 

39 

-1-0.500.511.5208091011121314151617EnergyProcessed foodUnprocessed foodNEIGServicesHICP 
 
                                                           
                                                           
3.4. Investment 

with  ten  or  more  employees  in  the  'business 
economy' were high-growth firms, which is below 
the  EU-average  of  9.2 % (51).  Again,  3 %  of  new 
businesses  tend  to  be  fast  growing  firms  in  their 
first  five  years  of  activity  (gazelles)  (De  Mulder, 
Godefroid, Swartenbroekx, 2017).  

Belgium has adopted several policy measures to 
foster  entrepreneurship,  although  differences 
exist  between  the  social  protection  system  for 
self-employed  and  that  for  employees  (see 
section 3.3.2). At the federal level, measures have 
been  taken  for  the  self-employed,  including  the 
establishment  of  a  specific  status  for  student 
entrepreneurs and the extension of the duration of 
maternity  leave  period  for  the  self-employed.  At 
level,  a  new  action  plan  on 
the 
entrepreneurial  education  has  been  implemented, 
specific  projects  have  been  put  into  place  for 
immigrant  entrepreneurs  and  to  stimulate  social 
entrepreneurship (Flanders), to support enterprises 
(Brussels  region)  and  new  dedicated  growth 
acceleration services for SMEs (Wallonia). 

regional 

Belgium  has  a  vibrant  start-up  environment 
due  to  the  wide  range  of  public  support 
measures  as  well  as  one-stop-shops 
for 
enterprise creation. Concerning firms' scaling-up, 
public  support  is  available  at  regional  level  for 
SMEs’  growth  mostly  in  the  form  of  coaching  or 
subsidies 
of 
the 
management/accounting services. As from January 
2018  a  new  scale-up  measure  will  become 
effective  for  SMEs  aged  between  5  and  10  years 
and  complying  with  a  set  of  requirements.  Fiscal 
benefits  for  investments  and  employment  in  start-
ups  were  included  in  the  federal  Start-up  plan  of 
2015.  

provision 

for 

(51)  In line with the Commission implementing regulation (EU) 
No 439/2014, high-growth enterprises are defined as firms 
with at least 10 employees in the beginning of their growth 
and  average  annualised  growth  in  number  of  employees 
greater  than  10  %  per  annum,  over  a  3-year  period.  The 
share  of  high-growth  enterprises  is  the  number  of  high 
growth  enterprises  divided  by  the  number  of  active 
enterprises  with  at  least  10  employees.  Source  of  the  data 
on 
Eurostat 
(http://ec.europa.eu/eurostat/web/products-datasets/-
/bd_9pm_r2,  last  accessed  10.04.2017).  Due  to  data 
availability  on  Eurostat,  the  data  on  high-growth  firms 
refers to the ‘business economy’, which covers sections B-
N including section K (financial activities, except activities 
of  holding  companies).  The 
‘non-financial  business 
economy‘ excludes section K. 

high-growth 

enterprises 

is 

be that prices for services, such as notaries, public 
transport, 
are 
administered and index-linked — albeit with some 
time lag.  

insurances, 

education 

and 

3.4.3.  BUSINESS ENVIRONMENT AND PUBLIC 

ADMINISTRATION  

Business environment and access to finance   

The administrative burden on firms in Belgium 
is  relatively  heavy,  despite  some  reforms  over 
the  last  5  years.  The  time  and  number  of 
procedures  needed  for  starting  a  business  are 
among  the  most  favourable  (three  days  and  three 
procedures),  but  the  administrative  burden  is 
relatively  high  (cf.  OECD  2017b).  Higher  costs 
and  capital  requirements,  complex  administrative 
procedures,  administrative  capacity  and 
the 
relatively  low level  of  regulatory  certainty remain 
significant  obstacles  (cf.  European  Commission, 
2017c).  The  country’s  complex  legislative  and 
administrative 
system  creates  a  challenging 
context  for  potential  for  high-growth  innovative 
enterprises  (HGIE),  which  may  explain  why 
Belgium is among the laggards both in terms of the 
number  of  and  employment 
in  HGIEs  (cf. 
European  Commission,  2016c).  The  tax  system  is 
also  extremely  complex  (cf.  3.1.4).  As  regards 
SMEs,  growth  has  been  moderate  in  recent  years. 
The  added-value  of  SMEs  increased  by  10 %  in 
the  period  2002-2016  with  the  sharpest  rise  in 
small  firms,  whose  value  added  increased  by 
19.6 %.  To  stimulate  investment  in  recently  born 
SMEs  (up  to  four  years  old),  the  government 
approved  a  tax shelter  measure  to  reduce rates  on 
investments.  

Belgium  ranks  among  the  lowest-performing 
EU countries in terms of entrepreneurship. The 
enterprise  birth  rate  is  the  lowest  in  Europe 
(according  to  Eurostat,  it  was  6.4 %  in  2015, 
compared  to  10.1%  for  the  EU28  average).  Yet, 
business  creation  in  Belgium  is  among  the  lowest 
of  the  EU15  since  2008  (De  Mulder,  Godefroid, 
2016). At the same time exit rates are very low (cf. 
OECD,  2017a).  Recent  research  shows  that  the 
decline in business dynamism has a secular feature 
since  the  share  of  young  firms  becoming  high-
growth  firms,  and  small  firms  experiencing  fast 
growth has been declining since 2000 (Bijnens G. 
and Konings J., 2017). In 2014, 8.0 % of all firms 

40 

 
                                                           
3.4. Investment 

complement  the  different projects underway,  such 
as the “Vlaanderen Radicaal Digitaal” programme, 
the  Open  data  Decree  in  Wallonia  or  the  Federal 
Open Data Strategy 2015-2020 ("Stratégie fédérale 
'Open  Data';  Federale  open  data-strategie").  In 
certain  areas,  such  as  in  the  judiciary,  the  full 
potential of ICT has not been tapped. 

Insufficiencies  in  the  reliability,  comparability 
and  uniformity  of  court  data  and  delayed 
actions  to  improve  the  quality  of  the  judicial 
system remain a serious concern. The roll-out of 
initiatives to digitalise certain court services to all 
courts  such  as  e-box  or  e-deposit  are  behind 
schedule.  A  working group  is  tasked  to develop  a 
uniform national coding system for judicial cases. 
(expected for January 2019).  However, as long as 
this uniform coding system is not applied across all 
courts, data on efficiency of court proceedings will 
remain  of  limited  reliability  and  comparability. 
Quality standards on informing parties about their 
case  progress  do  not  exist  (2018  EU  Justice 
Scoreboard).  

3.4.4.  SERVICES SECTOR 

Competition in the services sector   

Disproportionate regulatory restrictions remain 
in the services sector. These restrictions continue 
to  impact  negatively  competitiveness  of  services. 
For example, the lack of tacit approval mechanism 
in  many  sector-specific  legislation  (construction, 
tourism,  food  and  beverage,  real  estate,  business 
services  etc.)  results  in  delays  in  the  award  of 
business  authorisations  for  services  providers, 
creating  uncertainty.  Differences  in  authorisation 
requirements  between  the  Belgian  regions  further 
increase complexity and may fragment the Belgian 
market.  Recently,  Flanders  decided  to  abolish  the 
Establishment  Act  for  a  selected  number  of  craft 
professions.  The  assessment 
for  another  11 
regulated  professions  is  still  ongoing.  The  other 
regions  have  not  undertaken  similar  reforms  of 
these professions. 

Tackling  restrictions  in  services  could  lift  the 
productivity  of  the  overall  economy.  The 
manufacturing  sector  is  increasingly  relying  on 
services, whether as inputs or output bundled with 
goods. In Belgium, services already represent over 
in 
40 %  of 

added  value  generated 

the 

to  resort 

Belgium  continues  to  perform  well  in  terms  of 
SME  access  to  finance. During 2016,  the cost  of 
borrowing for small loans increased somewhat and 
the  banks’  willingness  to  provide  loans  has  fallen 
slightly  but,  on  the  other  hand,  loan  rejections 
declined.  Bank  loans  remain  the  main  form  of 
external  financing  (58  %  of  SMEs  vs  50%  at  EU 
level). Fewer SMEs did not apply because of fear 
of  rejection  (4%)  or  got  their  application  rejected 
(5%)  than  in  the  EU  on  average  (6%  and  7% 
respectively).  However,  there  is  evidence  that 
start-ups  or  businesses  without  a  mature  balance 
sheet  have  difficulties  accessing  bank  financing 
and  have 
to  alternative  source  of 
financing  (National  Bank  of  Belgium,  2017e). 
Policy  measures  continue  to  be  implemented,  at 
to  support 
both  federal  and  regional 
businesses financing. At federal level, a regulation 
regarding  access 
to  finance  for  SMEs  was 
adapated at the end of 2017 in order to improve the 
information  for  entrepreneurs.  At  regional  level, 
Wallonia has adopted a series of measures as part 
of  a  comprehensive  plan 
to  support  SME 
financing.  They  aim  to  facilitate  microcredit  and 
support other forms of private lending through the 
introduction  of  targeted  tax  reductions.  Various 
alternative  financing  mechanisms  are  encouraged 
both  at  federal  and  regional  level,  such  as  crowd-
funding, spin-off funding, access to equity, venture 
capital,  business  angels,  as  well  as  investments  in 
specific sectors, e.g. creative industries. 

level, 

Digital public services 

in 

only 

13th 

2017 

ranks 

digital 

structure  poses 

Belgium  is  an  average  performer  in  digital 
public  services.  Compared  to  its  good  overall 
position in the development of its digital economy, 
public 
it 
(d)). 
services (European  Commission, 
Belgium’s 
specific 
federal 
challenges in establishing coherent and nationwide 
eGovernment services. Diverse and not necessarily 
interoperable  systems  create  friction  losses.  In 
December  2016,  the  Belgian  federal  government 
announced 
the  Digital 
creation 
Transformation  Office  in  charge  of  the  digital 
transformation of the federal government services. 
The  new  Office  aims  to  be  a  centre  of  excellence 
and innovation in the use of new technologies and 
the  use  of  data.  The  federal  government  also 
launched  a  new  government  cloud  (“G-Cloud”) 
which  integrates  the  ICT  applications  of  several 
federal  services  and  ministries.  These  initiatives 

the 

of 

41 

 
3.4. Investment 

manufacturing  value  chains,  of  which  around  one 
fifth  relates  to  non-tradable  services (52).  As  a 
result,  low  competition  in  services  markets,  as 
evidenced  by  below  EU-average  churn  rates  in 
sectors such as legal, accounting, architectural and 
engineering  activities,  can  also  affect  Belgian 
manufacturing industries depending on services as 
inputs. Lowering regulatory restrictions would thus 
lead to higher value added and productivity in the 
manufacturing  industry  (cf.  Curnis  and  Manjón 
Antolín, forthcoming). 

Restrictions in services sector negatively impact 
manufacturing  through  value  chains.  The  share 
of  manufacturing  in  gross  exports  is  significantly 
higher  than  in  added  value  exports.  As  concerns 
services, the share is higher in added value exports 
than  in  gross  exports  for  both  tradable  and  non-
tradable services. These trends are similar to those 
observed  at  EU  level.  They  seem  to  indicate  that 
Belgium has positioned itself in upstream input on 
services  and  downstream  input  on  manufacturing. 
This  would  imply  that  restrictions  in  the  services 
sector  in  Belgium  and  in  other  Member  States 
reduce  added  value  in  Belgium's  manufacturing. 
Indeed, it has been estimated that more than 20 % 
of  regulation  embodied  in  manufacturing  exports 
from  an  EU  country  is  imported  from  other  EU 
countries.  

High  regulation  in  some  professional  services 
remains  and  is  likely  to  negatively  impacts 
competition.  This  is  particularly  the  case  for  real 
estate  agents,  with  lengthy  mandatory  training 
requirements.  There are also high barriers to entry 
for  architects  and  accountants, 
in  particular 
requirements  for  establishing  a  practice,  such  as 
legal  form  and  shareholding  requirements  and 
restrictions  on 
the  exercise  of  professional 
activities such as incompatibility rules on the joint 
exercise of professions.  

In  the  construction  sector,  building  permits 
remain  complex  despite  measures  adopted  in 
recent  years.  The  churn  rates  in  the  Belgian 
construction sector are substantially below the EU 
average, which may indicate that the sector suffers 
from  insufficient  competition.  This  also  impacts 
the  delivery  of  important  infrastructure  projects. 
Horizontal authorisation schemes for access to the 
imposed.  Ongoing 
construction  market  are 

(52)  Source: JRC using WIOD 2016 data. 

to 

remove 

discussions 
these 
simplify  or 
requirements  have  started  (notably  in  the  Flemish 
region). More extensive authorisation schemes are 
additionally  imposed  regarding  specific  segments 
(e.g.  demolition  with  asbestos,  certain  drilling 
services  and  alarm  installation).  None  of  these 
authorisations  operate 
to  simplify  subsequent 
building  permits,  since  Belgium  does  not  foresee 
alternative  simpler  procedures  for  pre-approved 
providers.  Finally,  an  insurance  requirement  (in 
view  of  the  stringent  10-year  liability  rule  for 
structural works) has been put in place recently.  

Retail sector   

a  broad  margin 

the  substantive  conditions 
leave 

Recent  reforms  have  aimed  at  improving  the 
performance  of  the  sector  and  reducing  the 
regulatory  burden.  In  retail  establishment,  new 
regional laws have introduced simpler procedures, 
for  granting 
but 
for 
authorisations 
interpretation.  The  concrete  implementation  of 
these  rules  will  be  important  to  ensure  that  this 
does  not  lead  to  entry  barriers.  Some  operational 
restrictions  are  likely  to  be  eased  soon  as  the 
government  is  going  to  present  a  draft  legislative 
project  abolishing  the  cool-off  period  prior  to  the 
sales.  The  new  rules  will  make  it  possible  to 
announce  price  reductions  just  before  the  sales. 
However,  the  ban  on  sales  below  costs  remains, 
even  though  past  reforms  have  added  several 
exceptions making this provision more flexible. In 
its current shape it still does not provide sufficient 
incentives  for  large  competitors  on  the  retail 
market, such as the supermarket chains, to strongly 
compete on prices.  

Despite efforts to improve the functioning of the 
sector,  retail  prices  remain  relatively  high. 
Prices for many product categories continue to be 
higher  than  in  neighbouring  countries.  However 
the  level  of  inflation  has  recently  decreased 
significantly,  especially  for  non-transformed  food 
products 
(SPF  Économie,  P.M.E.,  Classes 
moyennes et Energie, 2017). Lower level of prices 
on  the  other  side  of  the  border  incites  many 
Belgians  to  shop  cross-border  both  for  non-food 
products  and  daily  consumer  goods  (53).  The 
Benelux  Union  is  currently  investigating  into  the 

(53)  It  is  estimated  that  Belgian  consumers  spend  for  physical 
cross-border  shopping  nearly  €3  billion  annually  (GfK, 
Foreign Purchases of Private Belgian Households). 

42 

 
                                                           
                                                           
3.4. Investment 

issue of territorial supply constraints, i.e. business 
practices that could lead  to a fragmentation of the 
market  and  result  in  higher  consumer  prices.  The 
results  of  the public consultation  on  this issue  are 
expected  during  the  first  quarter  of  2018.  On  this 
basis 
the  Belgian  authorities  could  consider 
measures to tackle this issue.   

€6.000 provided the activity is registered (see also 
section 3.3.1)  

continue 

centres 
in 

The  potential  of  e-commerce  on  the  Belgian 
market  is  considerable.  A  recent  legislative 
change  has  made  night  work  in  e-commerce 
possible,  but  more  flexibility  would  be  needed  to 
attract  investment  in  this  sector  as  e-commerce 
distribution 
choose 
establishment 
the  neighbouring  countries. 
Belgian citizens are also more likely than other EU 
citizens to buy online from another Member State. 
Further fostering the use of e-commerce, but also a 
business environment and a regulatory framework 
favouring  its  development,  could  contribute  to 
the  domestic 
increasing  consumer  choice  on 
market.  

to 

Collaborative economy  

In 

requirements 

the  accommodation 

Belgian  authorities  are  actively  establishing  a 
policy  and  regulatory  framework  for  the 
collaborative  economy.  The  approach  taken  by 
the  three  regions  in  Belgium  differs  however 
significantly. 
sector, 
Flanders  and  Wallonia  have  adopted  a  regulatory 
framework  designed  to  facilitate  the  development 
of  the  collaborative  economy,  while  the  Brussels 
region  has  adopted  a  complex 
regulatory 
tourist  accommodation  with 
framework  on 
restrictive 
imposed  on  hosts, 
including private citizens wishing to rent out their 
own  houses  only  occasionally.  In  the  urban 
passenger transport sector, regulatory requirements 
are  high 
three  Belgian  regions  and 
quantitative  restrictions  apply  to  some  services. 
Belgium is planning the introduction of a new law 
whereby  peer  providers  of  collaborative  services 
are  subject  to  a  simplified  tax  scheme  with  a 
reduced income tax rate of 10 % and an exemption 
from social security contributions up to an income 
threshold  of  €5 100  -  under  the  condition  that  the 
transaction is between peers and it is intermediated 
by especially registered platforms (see also section 
a 
3.3.1).  Currently,  Belgium 
modification  of  this  regime  to  make  income  by 
peers  providing  certain  services  tax-free  up  to 

is  planning 

in  all 

43 

 
 
3.5. SECTORAL POLICIES 

3.5.1.  TRANSPORT 

its  public 

Belgium  appears  to  lag  behind  with  regard  to 
infrastructure 
the  quality  of 
supporting  the  competitiveness  of  the  economy 
(see also Box 3.4.1). In particular, Belgium gets a 
below average score for the quality of its road and 
railway  network (World  Economic  Forum,  2017). 
These  results are  mostly  explained  by  a  relatively 
poor  efficiency  of  public  spending  on  transport 
(National  Bank  of  Belgium,  2017f)  as  well  as  a 
level  of  public  spending. 
comparatively 
transport 
on 
According 
and  maintenance 
infrastructure 
spending,  Belgium  has  among 
lowest 
the 
investment rate in inland transport infrastructure in 
the  EU.  Over  the  period  2000-14,  annual  inland 
transport  infrastructure  investment  (0.44 %  of 
GDP) was well below the EU average (1.01 %).  

to  OECD 

investment 

data 

low 

Transport  activity  is  projected  to  increase  in  a 
situation of already largely saturated transport 
infrastructure.  Congestion  in  the  major  cities 
continues  to  worsen  year  by  year (54).  Congestion 
around  Antwerp  is  particularly  worrying  as  it 
impacts  the  port  activity,  a  major  source  of  the 
country trade in- and outflows. In 2013, 78.5 % of 
road transport was by private car (FPB, 2016) and 
in  Flanders,  75 %  of  commuters  still  use  their 
private  car  (European  Commission,  2014).  By 
2030  transport  demand  is  expected  to  grow  by 
another  11 %  for  passengers  and  44 %  for  goods 
(Federal  Planning  Bureau,  2015).  This  is  partly 
linked  to  the  preferential  treatment  of  company 
cars.  

The  government  is  introducing  an  alternative 
for  the  current  system  of  favourable  tax 
treatment of company cars, a so-called 'mobility 
allowance'  or  "cash  for  car".  This  mobility 
allowance  would  provide  certain  employees  the 
option  to  hand  in  their  company  car  in  return  for 
cash. The fiscal treatment of this cash benefit will 
be similar to that for the company car. Its success 
will  nevertheless  depend  on  the  final  level  of 
incentives  provided.  The  impact  of  the  new 
scheme on congestion and pollution remains to be 
seen. Moreover, the announced plans would add to 

(54)  A 2011 study by CE Delft (Van Essen et al., 2011) referred 
to  in  the  2013  OECD  economic  survey  of  Belgium 
estimates  the  costs  of  congestion  at  1-2 %  of  GDP.  Since 
then structural traffic jams have more than doubled. 

the  complexity  of  the  Belgian  tax  system  (see 
section  3.1)  and  could  continue  to  favour  a 
subgroup  of  the  working  population,  in  particular 
(European  Commission, 
high-income  earners 
2017e).  

is  a 

important 

investments 

The  management  and  development  of  the  road 
regional 
(and  waterway)  network 
competence. In 2016, the Walloon Region started 
implementing  its  "Plan  Infrastructure",  which  is 
focused  on  the  upgrade of  the  road  and  waterway 
network. In addition, the Walloon Investment Plan 
adopted  in  January  2018  foresses  over  the  period 
2019-2024 
in  mobility 
(EUR  1.1  billion)  The  Brussels-Capital  Region 
intends  to  mainly  invest  in  public  transport  and 
cycling  routes in  the  following  years. For  its  road 
network, the Flemish Government is preparing the 
capacity increase of the ring roads of Brussels and 
Antwerp,  and  tackling  bottlenecks  and  missing 
links, as well as the construction of a regional light 
rail  network  (Brabantnet).  The  waterway  network 
has also an important role in the modal shift from 
road  haulage  and  the  reduction  of  congestion (55). 
Since 2007works are ongoing on the Seine-Scheldt 
link  in  two  regions.  Besides  this,  works  are 
ongoing  throughout  the  country  on  the  inland 
waterway  network  and  on  several  sea  and  inland 
locks.  In  parallel,  Flanders  and  Wallonia  have 
launched in 2017 their initiatives to promote modal 
shift  of  road  freight  to  alternative  modes  of 
transport 
"FAST 
("multimodaal.vlaanderen", 
terms  of  ports 
vision-  mobility  2030"). 
development,  on  8  December,  the  ports  of  Gent 
and  Zeeland  officially  signed 
their  merger 
agreement  to  become  known  as  the  "North  Sea 
Port", immediately positioning itself among the top 
of  European  sea  ports:  number  three  in  added 
value and number ten in cargo transhipment. 

In 

is  a 

transport 

Differently  from  local  and  regional  public 
federal 
transport,  railway 
competence.  The  last  negotiations  at  the  federal 
level  led  to  a  multiannual  investment  plan,  for 
investments for the next five years, where priority 
will  be  given  to  the  completion  of  the  Regional 
ExpressNet  (GEN/RER)  around  Brussels.  The 
Federal government approved an additional EUR 1 
billion  for  finalising  the  Regional  ExpressNet 

(55)  The  Flemish  Government  has  proposed  to  SRSS  a  project 
to improve the efficient handling of inland waterways as an 
alternative to road transport. 

44 

 
 
                                                           
                                                           
3.5. Sectoral policies 

(GEN/RER) 
infrastructure projects. 

and 

other 

priority 

railway 

Pact (58).  The  finalisation  of  "Energy  Pact"  is 
foreseen for 2018. 

There are also important barriers for transport 
in  domestic  passenger 
services.  Competition 
railway  services  and 
long-distance  coach 
in 
services  is  low.  According  to  a  study  undertaken 
for  the  Commission  (cf.  Frazzani  et  al.  2016),  in 
the 
taxi  and  car-sharing  services,  regulatory 
requirements  are  high  in  all  three  Belgian  regions 
and  quantitative 
to  some 
services.  These  complicate 
the  provision  of 
collaborative  transport  services  and  in some  cases 
have  made  them  de  facto  impossible,  despite 
strong  consumer  demand  (cfr.  Section  3.4.4  on 
collaborative economy). 

restrictions  apply 

3.5.2.  ENERGY 

Belgium's  import  dependency  remains  above 
the  EU  average  for  all  fuels,  and  in  particular 
due  to  the  dependence  on  gas  and  petroleum 
products (56).  The  energy  mix  is  characterised  by 
a lower share of coal and other solid fuels than the 
EU  average,  a  lower  share  of  renewable  energy 
and  a  higher  share  of  petroleum  products  and 
nuclear.  

Work  is  on-going  to  finalise  the  long-term 
energy  and  climate  policy.  It  will  be  the  basis 
for the integrated National Energy and Climate 
Plan (NECP) required under the Energy Union 
Governance. It can build on a number of regional, 
federal  and  national  energy  and  climate  vision 
texts,  plans  and  roadmaps (57).  Another  crucial 
input  into  the  plan  will  be  the  timely  adoption  of 
the  inter-federal  "Energy  Pact",  for  which  a 
political  agreement  is  still  pending.  In  December 
2017  the  four  responsible  Ministers  for  Energy 
agreed  on  a  text  setting  out  the  main  outline  of  a 

(56)  Source  Eurostat: 

http://ec.europa.eu/eurostat/statistics-

explained/index.php/Energy_production_and_imports. 
(57)  Because the cooperation agreement on a burden sharing for 
the  period  2013-2020  was  only  ratified  in  January  2017, 
the  National  Climate  Commission  decided  in  2017  not  to 
draft a successor to the 2009-2012 national climate plan for 
the  period  2013-2020.  Instead  the  focus  lays  on  the 
development  of  the  integrated  National  Energy  Climate 
Plan (NECP) 2021-2030.  

(FPB,  2017) 

to  decarbonise 

the  economy  while 
Plans 
guaranteeing the security of supply will require 
significant  investments  in  the  energy  system 
and in innovation. An October 2017 study by the 
that 
Federal  Planning  Bureau 
describes  the  evolution  of  the  national  energy 
system  until  2050,  estimated  that  with  unchanged 
policy every year 1100 MW of additional capacity 
would  have  to  be  built,  amounting  to  investments 
of  over  EUR  30  billion.  Another  study  by  the 
from 
transmission 
November  2017  concluded 
the  planned 
nuclear  phase-out  by  2025  is  still  possible,  but 
the 
immediate 
would 
Government  to  ensure  that  the  much  needed 
replacement  capacities  are  available  on  time.  The 
European  Union's  investment  instruments  can 
underpin these efforts. 

system  operator,  ELIA, 

require 

action 

that 

by 

to 

Based  on  the  import  capacity,  the  Belgian 
interconnection level was 19 % in 2017, which is 
higher  than  the  EU  average.  Various  projects, 
notably  Projects  of  Common  Interest,  are  under 
electricity 
preparation 
interconnections  between  Belgium 
its 
and 
neighbours (59).  Adequate  interconnection  levels 
for electricity play an important role in improving 
security  of  supply  and  facilitating  the  integration 
of  an 
increasing  share  of  renewable  energy 
sources. 

develop 

further 

The  level  of  market  concentration  for  power 
generation  significantly  decreased  over  the 
recent years, and is now below the EU average. 
Wholesale  electricity  prices  are  now  below  EU 
average  and  decreasing (Eurostat).  The  average 
price  has  been  following  the  average  price  in  the 
neighbouring  countries  since  2013.  By  contrast, 

(58)  The agreement  maintains 2025 for planned nuclear phase-
out, and sets out a vision of the energy system for 2030 that 
includes  a  rapid  increase  of  renewable  energy  sources  in 
combination  with  additional  gas-fired  power  plants.  By 
2050 the entire electricity system should be carbon-neutral. 
(59)  The Nemo project will connect Belgium to the UK, leading 
to  greater  diversification  of  supply.  The  PCI  ALEGrO 
(Aachen  Liege  Electric  Grid  Overlay),  will  be  the  first 
interconnection  between  Belgium  and  Germany,  and  can 
result  in  price  convergence  within  the  CWE  region.  In 
addition,  two  projects  of  common  interests  (internal  lines) 
aim  at  strengthening 
the  northern  Belgian  border 
connections to allow for better integration of the electricity 
from offshore wind. 

45 

 
                                                           
                                                           
3.5. Sectoral policies 

for SMEs selling online. Stimulating the adoption 
of digital technologies combined with a workforce 
able  to  use  these  technologies  could  further 
underpin  productivity  growth.  The  share  of  firms 
providing ICT training to their staff is high (34 %). 
Investment in ICT has increased but remains lower 
than  in  France  and  the  Netherlands  (Biatour  & 
Kegels,  2017).  The  digitisation  of  businesses  and 
“industry 4.0“ are a priority in the agendas of both 
the Flemish and the Walloon region, such as Made 
Different 
(Flanders)  or  Plan  Marshall  4.0 
(Wallonia).  

Belgium has a low share of graduates in science, 
technology  and  mathematics  (“STEM”),  one  of 
the  lowest  in  the  EU  (ranks  22nd).  In  2015,  only 
20 % of  students  were graduating  in STEM  fields 
at  master  level  (compared  to  35 %  in  Germany, 
30 %  in  Sweden,  28 %  in  Finland,  24 %  in 
Denmark).  As  the  majority  of  tertiary  educated 
workers in ICT sectors and of ICT specialists have 
an  academic  background 
in  a  STEM  fields 
(OECD,  2017b),  shortages  in  these  fields  could 
become a major barrier to growth and innovation, 
with  scarcities  already  emerging  for  certain 
functions which require, for example, digital skills. 
Already today, in certain geographic areas, there is 
experts (62). 
a 
Addressing the shortage of ICT specialists remains 
crucial to support the digital transformation of the 
Belgian economy.  

shortage  of  qualified 

ICT 

The 

A  number  of  measures  have  been  taken  to 
shortages. 
address 
Flemish 
these 
Community  and 
the  Walloon  Region  are 
developing  plans  to  strengthen  STEM  and  digital 
competences,  as  for  instance  the  Digital  School 
Plan (2014-20) in Wallonia and the Flemish STEM 
action plan (2012-2020) in Flanders. In early 2017, 
the  Belgian  federal  government  announced  a 
digital  skills  fund  of  €  18  million  over  3  years 
which will also fund coding and other digital skills 
training courses for young people.  

3.5.4.  CIRCULAR ECONOMY, CLIMATE CHANGE 

Belgium  has  made  substantial  progress  on 
promoting  a  circular  economy  at  all  levels  of 

(62)  In  October  2017,  there  were  more  than  14,000  open 
vacancies  for  ICT  experts.  Source:  real-time  online 
database of the European Commission. 

the average gas price in Belgium remains constant, 
lower  than  the  EU,  but  above  the  average  in  the 
neighbouring  countries  (Eurostat).  See  section 3.4 
for  an  analysis  of  the  impact  of  energy  prices  on 
inflation. 

Triggered by several government measures (60), 
retail  markets  for  gas  and  electricity  have 
become  significantly  more  dynamic  in  recent 
years,  as  reflected  in  lower  market  shares,  higher 
switching  rates  and  higher  entry  rates.  Domestic 
gas 
EU-28 
average (Eurostat).  Domestic  retail  prices  for 
electricity  remain  above  the  EU  average,  driven 
mainly by consecutive increases in the non-energy 
component  (distribution  and  transport  tariffs,  as 
well as VAT) (Eurostat).  

prices 

lower 

than 

are 

3.5.3.  DIGITAL ECONOMY  

of 

in 

terms 

Belgium  has  a  good  coverage  of  digital 
communications  networks  and  is  third  in  the 
connectivity 
EU 
overall 
performance (61).  However,  as 
the 
regards 
adoption  of  mobile  broadband,  the  country  is 
outclassed by other high-performing countries. 4G 
coverage  has  improved  significantly  since  2014 
and  Belgium  has  caught  up.  It  now  ranks  fifth  in 
the  EU28  with  a  coverage  rate  of  99.9%  in  2016. 
However,  mobile  broadband  uptake  is  still  below 
the levels of comparable countries.  To achieve the 
objective of the Digital Agenda for Europe that at 
least  half  of  households  have  access  to  Internet 
speeds  of  at  least  1  Gbps  by  2020,  reliance  is 
placed  on  market-led  investment,  combined  in 
Flanders with a planned public investment in fibre 
the  Investment  plan 
networks.  In  Wallonia, 
foresees  EUR  50  million  for  covering  the  'white 
zones'. 

The  country  is  overall  making  steady  progress 
in  the  integration  of  digital  technology,  except 

(60)  Such as a  modification of the energy law  making it easier 
to  switch  provider;  a  campaign  organised  together  with 
local  communes  informing  and  assisting  consumers  in 
using  comparison  tools  for  comparing  energy  prices;  and 
promotion  of  joint  energy  purchases.  Current  regulatory 
guidance specifies that contract termination can take place 
at any moment without cancelation fees (as long as the one 
month notification period is respected). 

(61)  European  Commission,  Digital  Economy  and  Society 
https://ec.europa.eu/digital-single-

2017, 

Index 
market/en/desi. 

46 

 
                                                           
                                                           
3.5. Sectoral policies 

in  terms  of  emissions  intensity  of  the  economy  is 
mainly  driven  by  innovation (ICF  International, 
2016), and is proof of the importance of ambitious 
research  and  innovation  strategies  in  this  area. 
Meanwhile  though,  (national)  public  investments 
in  the  Energy  Union  R&I  priorities  in  2015  have 
decreased  by  3 %  compared  to  2014  (from  EUR 
167  million  to  EUR  162  million)  and  were 
significantly  lower  than  the  EUR  211  million 
reported in 2012 (65). A large part of this (48 % in 
2015) was also dedicated to Nuclear Safety. At the 
regional  level,  public  funding  to  support  energy 
R&I has increased, particularly in renewables and 
energy efficiency (66). 

Transport  activity  also  remains  a  challenge  in 
view  of  the  medium  (2020  and  2030)  and  long 
term  (2050)  greenhouse  gas  emission  reduction 
objectives (67). CO2 emissions from road transport 
are  31 %  higher  than  in  1990,  having  stabilised 
since 2005. The proportion of transport greenhouse 
gas  emissions  among  Belgium’s  total  emissions 
has steadily increased to 21.4 % in 2014. Transport 
also  causes  significant  air  pollution  problems.  In 
2015  it  was  responsible  for  22.6 %  of  greenhouse 
gas  emissions  (21 %  in  EU28),  51.8 %  of  NOx 
emissions  (46 %  in  EU28)  and  16.6 %  of  PM2.5 
emissions (13 % in EU28). A kilometre-charge for 
heavy  vehicles  over  3.5  tonnes  was  introduced  in 
2016  across  the  whole  territory,  but  there  is  no 
agreement on extending this to light duty vehicles 
(68).  The  Walloon  and  the  Flemish  region  have 
increased the share of their road network for which 
a  toll  is  to  be  paid.  In  the  Brussels  Region  a 
working  group  has  been  created  on  vehicle 
taxation  with  a  report  due  in  spring  2018.  From 
January  2018,  a  low  emission  zone  covering  the 
entire Brussels Region, adding to the existing one 
in  Antwerp 
the  actual 
in  2017;  however, 
environmental benefits need to be demonstrated.  

(65)  International  Energy  Agency  RD&D  Statistics  database  
(http://www.iea.org/statistics/RDDonlinedataservice/) 
(66)  Notably  via  the  Flanders  Innovation  and  Entrepreneurship 
and  the  Research  Foundation  (FWO)  in  Flanders,  the 
"Wallonie  Energie  SPW"  and  the  Innoviris  funds  in 
Brussels). 

(67)  Passengers transport activity increased in 2015 by 3.1 % as 
comparing  to  2005,  similar  with  freight  transport  activity 
and  with  the  increase  of  energy  consumption  in  transport 
(excl.  aviation).  In  addition,  the  share  of  collective 
passengers land transport has slightly decreased, indicating 
a relative higher use of private transport. 

(68)  The Flemish Region is currently examining the possibility 
of  introducing  a  smart  kilometre  charge  for  light  duty 
vehicles through detailed studies. 

government.  Year  2017  has  seen  a  rollout  of 
measures  in  all  three  regions  and  at  federal  level. 
Belgium continues to be among the top performers 
with  regard  to  waste  management  with  recycling 
rates  of  municipal  waste  of  53.5 %  in  2016  (EU 
average  45.6 %) (Eurostat).  Belgium  also  has 
sustainable  development  strategies  for  each of  the 
regions,  and  published  the  National  Sustainable 
Development  Strategy  (NSDS)  in  the  spring  of 
2017.  Air  pollution  in  Belgium  continues  to  give 
rise of serious human health concerns and cause of 
premature deaths (63). 

According  to  the  2017  national  projections 
based  on  existing  measures,  the  2020  target  of 
15 %  greenhouse  gas  emission  reductions 
relative  to 2005  levels  is expected  to be missed, 
with  non-emissions  trading  system  (non-ETS) 
emissions  only  11.5 %  lower  than  2005  levels  in 
2020.  While  Belgium  would  therefore  miss  the 
2020  target  itself,  it  expects  to  generate  a  small 
surplus  based  on  emission  levels  over  the  whole 
compliance period 2013 to 2020.  

by 

the 

fuel 

direct 

Belgium’s  non-ETS  emissions  are  mainly 
caused 
consumption, 
predominantly  for  residential  and  commercial 
purposes.  The  renovation  of 
inefficient 
building  stock  therefore  remains  a  key  sectorial 
challenge. A national debate on the introduction of 
carbon pricing in non-ETS sectors started in 2017, 
which,  in  order  to  promote  the  development  of 
renewables,  could  lead  to  a  new  environmental 
policy  shifting  taxation  from  electricity  towards 
fossil fuels. The internal burden sharing agreement 
reached  in  December  2015  was  finally  translated 
into  a  formal  and  legally  binding  cooperation 
agreement  on  22  November  2017.  Regarding  the 
ETS  sector,  the  accumulated  revenues  from  the 
auctioning  of  emission  allowances  under  the 
ETS (64)  have  been  distributed  among  the  Federal 
State  and  the  regions  and  used  for  climate  and 
energy purposes.  

Belgium  is  not  fully  exploiting  its  potential  to 
become a low carbon innovation leader. Ex-post 
evaluation of climate  policies  shows  that progress 

(63)  The  number  of  premature  deaths  was  estimated  at  8340  
from particulates, 1870 from nitrogen dioxide & 190 from 
ozone  in  2014,  Air  quality  in  Europe  —  2017  report, 
European Environment Agency, pp.57-58. 

(64)  According  to  Belgium's  own  reporting  amounting  to EUR 

354 million in 2015.  

47 

 
                                                           
                                                           
ANNEX A  

OVERVIEW TABLE 

Commitments 

Summary assessment (69) 

2017 Country-Specific recommendations (CSRs) 

CSR 1:  

Pursue a substantial fiscal effort in 2018 in line 
with  the  requirements  of  the  preventive  arm  of 
the  Stability  and  Growth  Pact,  taking  into 
account  the  need  to  strengthen  the  ongoing 
recovery  and  to  ensure  the  sustainability  of 
Belgium's  public  finances.  Use  windfall  gains, 
such as proceeds from asset sales, to accelerate 
the  reduction  of  the  general  government  debt 
ratio. 

Agree  on  an  enforceable  distribution  of  fiscal 
targets  among  government  levels  and  ensure 
independent fiscal monitoring. 

Belgium  has  made  limited  progress  in  addressing 
country-specific  recommendation  1  (this  overall 
assessment  of  country-specific  recommendation  1 
does not include an assessment of compliance with 
the Stability and Growth Pact): 

Limited  progress  has  been  made  towards  an 
enforceable distribution of fiscal targets among the 
various levels of government.  

  The  federal  government  is  taking  steps  to 
reinforce the autonomy of the High Council and 
the independence of its members. The adoption 
of  the  necessary  amendments  requires  prior 
entities. 
the 
consultation  with 
However  the  calendar  for  consultation  and 
adoption has not been communicated.  

federated 

  The federal government  has partially  dismissed 
its participation in BNP Paribas. Proceeds from 
the  sale  of  the  participation  have  been  used  to 
reduce the debt. 

  Wallonia has created a public debt management 

(69)  The following categories are used to assess progress in implementing the 2015 country-specific recommendations: 

No  progress:  The  Member  State  has  not  credibly  announced  nor  adopted  any  measures    to  address  the  country-specific 
recommendation. Below a number of non-exhaustive typical situations  that could be covered under this, to be interpreted on a 
case by case basis taking into account country-specific conditions: 
− 

no  legal,  administrative,  or  budgetary  measures  have  been  announced  in  the  National  Reform  Programme  or  in  other 
official  communication  to  the  national  Parliament  /  relevant  parliamentary  committees,  the  European  Commission,  or 
announced in public (e.g. in a press statement, information on government's website);  
no non-legislative acts have been presented by the governing or legislator body;   
the  Member State  has  taken  initial steps  in  addressing the  country-specific  recommendation,  such  as  commissioning  a 
study or setting up a study group to analyse possible measures that would need to be taken (unless the country-specific 
recommendation explicitly asks for orientations or exploratory actions), while clearly-specified measure(s) to address the 
country-specific recommendation has not been proposed. 

− 
− 

Limited progress: The Member State has: 

− 
− 

− 

announced certain measures  but these only address the country-specific recommendation to a limited extent; and/or 
presented legislative acts in the governing or legislator body but these have not been adopted yet and substantial non-
legislative further work is needed before the country-specific recommendation will be implemented;  
presented non-legislative acts, yet with no further follow-up in terms of implementation which is needed to address the 
country-specific recommendation. 

Some  progress:  The  Member  State  has  adopted  measures  that  partly  address  the  country-specific  recommendation  and/or  the 
Member State has adopted measures that address the country-specific recommendation, but a fair amount of work is still needed 
to  fully  address  the  country-specific  recommendation  as  only  a  few  of  the  adopted  measures  have  been  implemented.  For 
instance: adopted by national parliament; by ministerial decision; but no implementing decisions are in place. 

Substantial  progress:  The  Member  State  has  adopted  measures  that  go  a  long  way  in  addressing  the  country-specific 

recommendation and most of which have been implemented. 

Full  implementation:  The  Member  State  has  implemented  all  measures  needed  to  address  the  country-specific  recommendation 

appropriately. 

48 

 
 
 
 
 
 
 
 
                                                           
 
A. Overview Table 

agency. 

  Some  Progress  has  been  made 
removing distortive tax expenditure.  

toward 

  The corporate tax reform contributes to simplify 
the  system,  however  several  distortive  tax 
expenditures remain. 

the  voluntary  nature  of 

  Company  car  system:  the  conditions  attached 
and 
the  mobility 
allowance  proposal  (a  second  reading  by  the 
Government is expected after the State Council 
provided  its  opinion)  will  result  in  uncertain 
environmental gains, with very little changing to 
the level of tax expenditure. 

Limited  progress  has  been  made  to  improve  the 
composition of public spending. 

  There  are  plans  to  limit  the  increase  of  current 
expenditure,  this  should  determine  the  relative 
increase of the share of capital expenditure.  

  The  Flemish  region  plans 

to 

introduce  a 

spending review in its budgetary exercise. 

  The  federal  government  has  announced  a 
to 
National  Pact  for  Strategic  Investment 
promote  structural  reform  and  address  the 
deficit in public investment.  

  Regional  government  plans 

to 

increase 

investment in transport infrastructures. 

Belgium  has  made  some  progress  in  addressing 
country-specific recommendation 2. 

Remove distortive tax expenditures. 

to  create 

Improve  the  composition  of  public  spending  in 
infrastructure 
room 
order 
transport 
including 
investment, 
infrastructure. 

for 

on 

CSR 2:  

Ensure  that  the  most  disadvantaged  groups, 
including  people  with  a  migrant  background, 
have equal opportunities to participate in quality 
education, vocational training,  

Some  progress  has  been  made  in  ensuring  equal 
opportunities to participate in quality education and 
vocational training. 

  The  reform  of  adult  education  was  adopted  by 
the  Flemish  Community  in  June  2017  and 
should be phased in by August 2019. It requires 
a  scale  increase  in  order  to  better  use  available 
resources,  modernise 
resources 
management and offer full-pathways. 

human 

  Flemish  Dual  learning  reform  in  secondary 
education,  the  pilot  has  been  extended  to  new 
fields,  however,  its  full  implementation  has 

49 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
A. Overview Table 

been postponed to 2019/2020. 

  The  Flemish  action  plan  on  pre-primary 
education  was  launched  in  Dec  2016.  To  be 
progressively implemented 

  Both  communities  are  developing  specific 
attainment targets. In Flanders a draft decree on 
the basic principles of the attainment targets was 
adopted. Working groups  started work  to made 
them operational. The first ones should be ready 
by  2019/2020,  in  time  for  the  progressive 
the  modernisation  of 
implementation  of 
secondary  education.  Similar  measures  are 
taken  in  the  overall  framework  of  the  French 
Community reform. 

 

 

and the labour market.  

a  multi-annual 

In  2017  the  French  Community  adopted  the 
objectives, 
an 
implementation calendar for its systemic reform 
of  ECEC  and  compulsory  education.  The 
implementation will be rolled out in the next 15 
years starting with early childhood education. 

budget, 

In  the  French  community  in  the  framework  of 
the  school  reform  several  measures  were 
adopted:  a)  on  pre-primary  education 
the 
introduction  of  an  ‘initial  key  competences 
framework’,  which  should  enter  into  force  in 
2019/2020  and  a  EUR  50  million  budget  to 
recruit  1  100  pedagogical  staff  between  2017-
2019;  b)  the  establishment  by  2018/2019  of  a 
six-year  plan  covering  pupil  performance, 
school  climate, 
inclusive  education,  pupil 
pathways  and  professionalization;  c)  new 
governance measures, for instance the set-up of 
quality 
a 
measures.  

geographical 

responsible 

and 

Limited progress has been made in ensuring equal 
opportunities  in  participating  to  the  labour  market. 
The initiatives taken by the federal government and 
the  three  Regions  focus  on  first  arrivals,  notably 
asylum 
fighting 
discrimination. They include:   

refugees  and 

seekers  and 

  Cooperation  agreements  between  the  reception 
agency  Fedasil  and  the  Flemish  Employment 
Service  as  well  as  with  the  Forem  (Walloon 
agency for employment and training) to provide 
information on labour market opportunities and 
training  to  asylum  applicants,  as  well  as  to 

50 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A. Overview Table 

perform  a  screening  of  the  competences  in  an 
early  stage.  Belgium  also  developed  special 
procedures for asylum seekers and refugees deal 
their 
incomplete  documentation  of 
with 
qualifications, to allow for validation of relevant 
competences. 

  The  three  Regions  have  adopted  integration 
measures that are compulsory for newly arrived 
third-country  nationals.  However  this  is  not 
likely 
the 
sufficient 
multifaceted  obstacles  to  labour  market  for 
immigrants.  

to  address 

to  be 

  Practice  tests  (double  CVs  or  mystery  calls)  to 
detect  and  fight  discrimination  on  the  labour 
market  have  been  authorised  in  the  Brussels 
region  and  will  soon  be  possible  in  the  whole 
country.  

  The Flemish Region also updated its action plan 
to  combat  work-related  discrimination  together 
with  social  partners  and  other  stakeholders, 
focussing  on  awareness-raising,  self-regulation 
and reinforced monitoring.  

  The  Brussels  Region  adopted  a  "regional  plan 
for  diversity  and  combat  discrimination  in 
into  an 
hiring"  which  must  be 
operational plan. 

translated 

Belgium  has  made  limited  progress  in  addressing 
country-specific recommendation 3. 

CSR 3:  

Foster  investment  in  knowledge-based  capital, 
notably  with  measures 
increase  digital 
technologies adoption, and innovation diffusion. 

to 

Some  progress  has  been  made 
knowledge-based capital. 

in  fostering 

  The tax shelter for equity investment in start-ups 
to  scale-ups 
(fast  growing 
was  extended 
enterprises).  A 
fund-of-fund  which  would 
facilitate  the  availability  of  venture  capital 
funding in Belgium was also announced.  

  Via  the  National  Pact  for  Strategic  Investment, 
Belgium  notably  announced  more  investments 
in the digital economy. 

  Flanders  made  substantial  budgetary  effort  in 
2017  in  support  of  research  and  innovation 
(EUR  195  million  additional  funding),  notably 
in 
public-private 
collaborations  (via  the  strategic  centres  like 

stronger 

support 

of 

51 

 
 
 
 
 
 
 
 
A. Overview Table 

IMEC and the new cluster policy). 

  Under  Flanders' 

cluster  policy, 
targeted 
initiatives  in  the  area  of  sustainable  chemistry, 
logistics,  materials  and  energy  started  in  2017. 
Specific  cluster  pacts  lay  out  the  commitments 
of  businesses,  knowledge  institutions  and  the 
government. 

  Flanders  pursued  its  STEM  initiatives  which 
dispose  of  a  sizable  budget  of   EUR  9  million. 
In  2017,  the  ICT  impulse  programme  was 
and 
increase 
launched 
programming skills in young people. 

computer 

to 

  Flanders  started  implementing  the  Innovation 
Procurement  Action  plan   with  the  aim  of 
fostering  innovation  in  the  private  sector  in 
response  to  public  needs  (budget  EUR   5 
million). 

  The  Brussels  region  has  started  implementing 
the  action  plan  of  its  Regional  Innovation  Plan 
2016-2020.  

  The  Walloon  region  is  implementing  its  Small 
Business  Act  2015-2019,  integrated  in  the 
Marshall plan 4.0. 

 

In  its  Walloon  investment  plan,  the  Walloon 
government  announced  additional  investments 
in research, development and innovation for the 
period 2019-2024 

Increase  competition  in  professional  services 
markets and retail  

Limited  progress  has  been  made  in  increasing 
competition in professional services and retail 

  Flanders  has  initiated  the  assessment  of  the  27 
craft professions. For 16 of them the assessment 
has  been  finalised.  On  march  2017  it  has  been 
decided  to  abolish  the  Establishment  Act  a 
selected number of professions. 

  The  profession  of 

travel  agent  has  been 

completely deregulated in the Walloon region. 

  Simplified procedures for retail establishment in 
Flanders  entered  into  force  on  1  January  2018. 
A monitoring system to assess the impact of the 
new legislation is foreseen. Brussels Region has 
also  adopted  new  rules  recently,  which  will 
to  force  gradually  as  of  2018.  An 
enter 

52 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A. Overview Table 

Enhance  market  mechanisms 
industries.  

in  network 

evaluation  of  the  new  legislation  on  retail 
establishment is ongoing in the Walloon region. 

Limited  progress  has  been  made  in  enhancing 
market mechanisms in network industries 

  Since July 2017 a simplified procedure has been 
introduced  to  change  of  telecom  operator.  The 
new 
the 
administrative  burden  and  of  the  technical 
transfer. 

telecom  operator 

is  charged  of 

Europe 2020 (national targets and progress) 

Employment rate (20-64): 

73.2 %. 

R&D: 

3 % of GDP. 

Greenhouse gas emissions: 

-15 %  in  2020  compared  to  2005  (in  the 
sectors  not  covered  by  the  EU  Emissions 
Trading System (ETS)). 

Renewable energy: 

13 %, with a share of renewable energy in all 
modes of transport equal to 10 %. 

  The IBPT has been charged with the analysis of 
the telecom  market in order to adapt regulation 
in 
increase 
to  new  operator 
relation 
competition 

to 

The  employment  rate  for  20-64  years  old  workers 
increased  to  67.7 %  in  2016,  remaining  more  than  3 
pps below the EU average (71.7 %). 

Job creation has  been high; nevertheless,  the 73.2 % 
target still seems out of reach. 

R&D  intensity  has  pursued  its  increase  to  reach 
2.49 %  in  2016.  This  is  due  to  increasing  private 
R&D (1.77 %) while public R&D remains relatively 
stable (0.68 %). 

According to the latest national projections submitted 
to  the  Commission  and  taking  into  account  existing 
measures, it is expected that the target will be missed: 
-11.5 %  in  2020  compared  with  2005  (i.e.  projected 
shortfall of 3.5 percentage points).  

Compared  to  1995,  the  share  of  renewable  energy 
increased  more  than  the  EU  average  (from  less  than 
1 %  to  6.9 %  in  2015),  but  remains  at  rather  low 
levels (70).  Still,  in  2015  for  the  first  time  Belgium's 
renewable energy share decreased compared with the 
previous  year (71),  and  although  the  2016  RES  share 
of  8.65 %  of  final  energy  consumption  is  above  the 
2015-2016 indicative target of 7.1%, such a tendency 
would  not  be  compatible  with  a  timely  2020  target 
achievement. Following the agreement on the internal 

(70)  Thanks to their deployment, it is estimated that Belgium has consumed in 2014 about 6.7% less fossil fuels than they would 

have otherwise. In addition, greenhouse gas emissions have been 6.5% lower. 

(71)  This  is  notably  due  to  decreases  in  renewable  energy  shares  in  the  heating  and  cooling  and  transport  sectors,  and  is  also 
explained by the drop of biodiesel supply by 42% compared to 2014 because of the invalidation of the law specifying the rules 
for the mixing of biofuel in diesel in June 2015. 

53 

 
 
 
                                                           
A. Overview Table 

effort  sharing  reached  in  December  2015,  regional 
governments  have  introduced  new  legal  instruments 
and  expressed  their  intention  to  promote  renewables 
in the future. A range of policies and measures have 
recently been launched at regional level. 

In  terms  of  energy  efficiency,  there  is  still  a  gap 
final  energy 
between  Belgium's  primary  and 
consumption (respectively 45.7 Mtoe and 35.8 Mtoe 
in 2015) and its indicative national 2020 targets (43.7 
Mtoe in primary consumption and 32.5 Mtoe in final 
energy consumption.  

In  2016,  Belgium  reached  its  Europe  2020  national 
target  on  early  school  leaving  (ESL).  With  8.8 %  at 
national level, the rate is below the EU average but it 
remains high in the Brussels region. The gender gap 
is close to the EU average. The gap between foreign- 
(17.8 %)  and  native-born  (7.6 %)  students  is  high. 
The  proportion  of  young  people  in  2016  not  in 
employment,  education  or  training  (NEET,  15-24 
years old) at 9.9 %, is below the EU average. 

In 2016, the proportion of 30- to 34-year-old tertiary 
graduates  in  Belgium  jumped  to  45.6 %,  on  track  to 
reach  the  Europe  2020  national  target  of  47 %. 
Belgian  and  regional  rates  (47.3 %  in  Flanders, 
51.9 % 
in 
Wallonia) are above the EU average of 39.1 %. 

the  Brussels  region  and  39.6 % 

in 

Energy efficiency: 

43.7 Mtoe 
primary 
32.5 Mtoe final energy consumption  

consumption 

and 

Early school leaving: 

9.5 %. 

Tertiary education: 

47 % of the population aged 30-34 years old. 

Target  for  reducing  the  number  of  people  at 
risk of poverty or social exclusion: 

The  number  of  people  at  risk  of  poverty  or  social 
exclusion  has  been 
increasing.  The  cumulative 
difference from 2008 stood at (in thousands): 

- 380 000 compared to 2008. 

+146 in 2014; 

+143 in 2015; 

+141 in 2016. 

Belgium is therefore unlikely to achieve its target of 
reduction by 380 000. 

54 

 
 
 
ANNEX B  

MACROECONOMIC IMBALANCE PROCEDURE SCOREBOARD 

Table B.1: 

The MIP scoreboard for Belgium (AMR 2018) 

Flags: e: Estimated. p: Provisional.           
1) This table provides data as published under the Alert Mechanism Report 2018, which reports data as of 24 Oct 2017. Please 
note that figures reported in this table may therefore differ from more recent data elsewhere in this document.2) Figures 
highlighted are those falling outside the threshold established in the European Commission's Alert Mechanism Report.   
Source: European Commission 2017, Statistical Annex to the Alert Mechanism Report 2018, SWD(2017) 661. 

55 

Thresholds201120122013201420152016Current account balance, % of GDP 3 year average-4%/6%-0.1 0.2 -0.5 -0.4 -0.4 -0.3 Net international investment position% of GDP-35%60.9 51.8 51.9 45.1 47.2 51.2 Real effective exchange rate - 42 trading partners, HICP deflator3 year % change±5% (EA) ±11% (Non-EA)-1.6 -4.3 -0.2 -0.6 -1.6 -0.4 Export market share - % of world exports5 year % change-6%-7.5 -15.2 -12.7 -13.0 -11.9 -2.3 Nominal unit labour cost index (2010=100)3 year % change9% (EA) 12% (Non-EA)5.3 5.4 8.3 5.5 1.5 -0.6 House price index (2015=100), deflated 1 year % change6%1.0 0.3 0.4 -1.3 1.4p1.0pPrivate sector credit flow, consolidated% of GDP14%21.8 15.3 7.4 -1.9 12.2 13.3 Private sector debt, consolidated% of GDP133%177.0 185.5 165.4 166.0 178.9 190.1 General government gross debt% of GDP60%102.6 104.3 105.5 106.8 106.0 105.7 Unemployment rate3 year average10%7.8 7.7 7.7 8.2 8.5 8.3 Total financial sector liabilities, non-consolidated1 year % change16.5%5.4 -5.2 0.9 2.7 2.7 1.2 Activity rate - % of total population aged 15-643 year change in pp-0.2 pp-0.4 0.0 -0.2 1.0 0.7 0.1 Long-term unemployment rate - % of active population aged 15-743 year change in pp0.5 pp0.2 -0.1 -0.1 0.8 1.0 0.1 Youth unemployment rate - % of active population aged 15-243 year change in pp2 pp0.7 -2.1 1.3 4.5 2.3 -3.6 External imbalances and competitivenessInternal imbalancesEmployment indicators 
 
 
 
 
 
ANNEX C 

STANDARD TABLES 

Table C.1: 

Financial market indicators 

1) Latest data Q3 2017. Includes not only banks but all monetary financial institutions excluding central banks 
2) Latest data Q2 2017. 
3) As per ECB definition of gross non-performing debt instruments. 
4) Quarterly values are not annualised. 
* Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators). 

56 

201220132014201520162017Total assets of the banking sector (% of GDP)(1)280.1260.4275.3261.6260.5234.9Share of assets of the five largest banks (% of total assets)66.364.065.865.566.2-Foreign ownership of banking system (% of total assets)(2)50.451.150.349.249.549.1Financial soundness indicators:2)              - non-performing loans (% of total loans)(3)5.15.33.33.02.62.4              - capital adequacy ratio (%)18.218.717.618.718.818.5              - return on equity (%)(4)3.36.27.810.38.95.1Bank loans to the private sector (year-on-year % change)(1)-1.26.29.97.06.85.9Lending for house purchase (year-on-year % change)(1)6.010.119.512.19.27.0Loan to deposit ratio(1)56.658.259.562.366.267.0Central Bank liquidity as % of liabilities--1.61.01.92.9Private debt (% of GDP)185.5165.4166.0178.9190.1-Gross external debt (% of GDP)(2) - public55.056.667.865.566.664.3    - private103.3103.6102.5103.8118.7113.6Long-term interest rate spread versus Bund (basis points)*150.584.055.034.438.642.1Credit default swap spreads for sovereign securities (5-year)*124.836.331.030.028.814.6 
 
 
 
 
 
Table C.2: 

Headline Social Scoreboard indicator 

† The Social Scoreboard includes 14 headline indicators, of which 12 are currently used to compare Member States 
performance. The indicators "participants in active labour market policies per 100 persons wanting to work" and 
"compensation of employees per hour worked (in EUR)" are not used due to technical concerns by Member States. Possible 
alternatives will be discussed in the relevant Committees. 
(1) People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) and/or suffering from 
severe material deprivation (SMD) and/or living in households with zero or very low work intensity (LWI).       
(2) Unemployed persons are all those who were not employed but had actively sought work and were ready to begin 
working immediately or within two weeks.       
(3) Gross disposable household income is defined in unadjusted terms, according to the draft Joint Employment Report 2018.       
(4) Reduction in percentage of the risk of poverty rate, due to social transfers (calculated comparing at-risk-of poverty rates 
before social transfers with those after transfers; pensions are not considered as social transfers in the calculation).       
(5) Average of first three quarters of 2017 for the employment rate and gender employment gap. 
Source: Eurostat. 

57 

201220132014201520162017 5Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)12.011.09.810.18.8:Gender employment gap (pps)11.010.28.78.39.39.8Income inequality, measured as quintile share ratio (S80/S20)4.03.83.83.83.8:At-risk-of-poverty or social exclusion rate1 (AROPE)21.620.821.221.120.7:Young people neither in employment nor in education and training (% of population aged 15-24)12.312.712.012.29.9:Dynamic labour markets and fair working conditions†Employment rate (20-64 years)67.267.267.367.267.768.1Unemployment rate2 (15-74 years)7.68.48.58.57.87.2Gross disposable income of households in real terms per capita3 (Index 2008=100) ::96.696.496.7:Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction444.842.643.644.241.1:Children aged less than 3 years in formal childcare48.046.048.850.143.8:Self-reported unmet need for medical care1.71.92.52.42.4:Individuals who have basic or above basic overall digital skills (% of population aged 16-74):::60.061.061.0 
 
 
 
 
 
Table C.3: 

Labour market and education indicators 

* Non-scoreboard indicator       
(1) Long-term unemployed are people who have been unemployed for at least 12 months.       
(2) Difference between the average gross hourly earnings of male paid employees and of female paid employees as a 
percentage of average gross hourly earnings of male paid employees. It is defined as "unadjusted", as it does not correct for 
the distribution of individual characteristics (and thus gives an overall picture of gender inequalities in terms of pay). All 
employees working in firms with ten or more employees, without restrictions for age and hours worked, are included.       
(3) PISA (OECD) results for low achievement in mathematics for 15 year-olds.       
(4) Impact of socio-economic and cultural status on PISA (OECD) scores.Values for 2012 and 2015 refer respectively to 
mathematics and science.       
(5) Average of first three quarters of 2017, unless for the youth unemployment rate (annual figure).   
Source: Eurostat, OECD 

58 

Labour market indicators201220132014201520162017 5Activity rate (15-64)66.967.567.767.667.6:Employment in current job by durationFrom 0 to 11 months11.610.510.910.811.2:From 12 to 23 months9.08.57.98.18.1:From 24 to 59 months16.215.916.615.915.1:60 months or over63.165.164.665.265.7:Employment growth* (% change from previous year)0.4-0.30.40.91.31.4Employment rate of women(% of female population aged 20-64)61.762.162.963.063.063.3Employment rate of men (% of male population aged 20-64)72.772.371.671.372.373.0Employment rate of older workers* (% of population aged 55-64)39.541.742.744.045.447.7Part-time employment* (% of total employment, aged 15-64)24.724.323.724.324.724.6Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)8.18.18.69.09.110.3Transition rate from temporary to permanent employment(3-year average)37.338.038.335.6::Long-term unemployment rate1 (% of labour force)3.43.94.34.44.03.6Youth unemployment rate (% active population aged 15-24)19.823.723.222.120.119.1Gender gap in part-time employment34.533.832.832.132.631.7Gender pay gap2 (in undadjusted form)8.37.56.66.5::Education and training indicators201220132014201520162017Adult participation in learning(% of people aged 25-64 participating in education and  training)6.96.97.46.97.0:Underachievement in education319.0::20.1::Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)43.942.743.842.745.6:Variation in performance explained by students' socio-economic status419.6::19.3:: 
 
 
 
 
Table C.4: 

Social inclusion and health indicators 

*  Non-scoreboard indicator 
(1) At-risk-of-poverty rate (AROP): proportion of people with an equivalised disposable income below 60 % of the national 
equivalised median income.  
(2) Proportion of people who experience at least four of the following forms of deprivation: not being able to afford to i) pay 
their rent or utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have a washing 
machine, viii) have a colour TV, or ix) have a telephone. 
(3) Percentage of total population living in overcrowded dwellings and exhibiting housing deprivation. 
(4) People living in households with very low work intensity: proportion of people aged 0-59 living in households where the 
adults (excluding dependent children) worked less than 20 % of their total work-time potential in the previous 12 months. 
(5) Ratio of the median individual gross pensions of people aged 65-74 relative to the median individual gross earnings of 
people aged 50-59.   
(6) Fixed broadband take up (33%), mobile broadband take up (22%), speed (33%) and affordability (11%), from the Digital 
Scoreboard. 
Source: Eurostat, OECD 

59 

201220132014201520162017Expenditure on social protection benefits* (% of GDP)Sickness/healthcare8.28.38.48.5::Disability2.12.22.32.4::Old age and survivors11.511.811.812.1::Family/children2.12.22.22.1::Unemployment3.43.43.43.1::Housing0.20.20.30.2::Social exclusion n.e.c.0.70.70.60.7::Total28.328.829.029.1::of which: means-tested benefits1.51.51.41.4::General government expenditure by function (% of GDP, COFOG)Social protection19.520.119.920.2::Health7.98.08.17.7::Education6.26.46.36.4::Out-of-pocket expenditure on healthcare (% of total health expenditure)18.018.118.217.6::Children at risk of poverty or social exclusion (% of people aged 0-17)*22.821.923.223.321.6:At-risk-of-poverty  rate1 (% of total population)15.315.115.514.915.5:In-work at-risk-of-poverty rate (% of persons employed)4.54.44.84.64.7:Severe material deprivation rate2  (% of total population)6.35.15.95.85.5:Severe housing deprivation rate3, by tenure statusOwner, with mortgage or loan0.10.20.40.10.8:Tenant, rent at market price2.23.43.03.05.5:Proportion of people living in low work intensity households4 (% of people aged 0-59)13.914.014.614.914.6:Poverty thresholds, expressed in national currency at constant prices*1081511164111401106111317:Healthy life years (at the age of 65)Females11.010.911.011.0::Males10.610.811.011.2::Aggregate replacement ratio for pensions5 (at the age of 65)0.50.50.50.50.5:Connectivity dimension of the Digital Economy and Society Inedex (DESI)6::69.374.675.877.9GINI coefficient before taxes and transfers*49.348.749.549.850.3:GINI coefficient after taxes and transfers*26.525.925.926.226.3:Notes: 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table C.5: 

Product market performance and policy indicators 

1 The methodologies, including the assumptions, for this indicator are shown in detail here: 
http://www.doingbusiness.org/methodology.        
2 Average of the answer to question Q7B_a. "[Bank loan]: If you applied and tried to negotiate for this type of financing over 
the past six months, what was the outcome?". Answers were codified as follows: zero if received everything, one if received 
most of it, two if only received a limited part of it, three if refused or rejected and treated as missing values if the application is 
still pending or don't know.       
3 Percentage population aged 15-64 having completed tertiary education.       
4 Percentage population aged 20-24 having attained at least upper secondary education.       
5 Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are 
shown in detail here: http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm       
6 Aggregate OECD indicators of regulation in energy, transport and communications (ETCR).       
Source: European Commission; World Bank — Doing Business (for enforcing contracts and time to start a business); OECD (for 
the product market regulation indicators); SAFE (for outcome of SMEs' applications for bank loans). 

60 

Performance Indicators2010201120122013201420152016Labour productivity (real, per person employed, year-on-year % change)Labour productivity in Industry6.84-0.33-0.132.606.295.090.58Labour productivity in Construction0.44-1.691.400.20-0.603.10-0.67Labour productivity in Market Services1.890.23-1.020.34-0.071.47-0.93Unit labour costs (ULC) (whole economy, year-on-year % change)ULC in Industry-5.532.833.930.24-3.95-5.33-0.81ULC in Construction-0.111.361.480.920.18-3.48-0.33ULC in Market Services-0.771.453.421.471.100.29-0.30Business Environment2010201120122013201420152016Time needed to enforce contracts(1) (days)505.0505.0505.0505.0505.0505.0505.0Time needed to start a business(1) (days)4.04.04.04.04.04.04.0Outcome of applications by SMEs for bank loans(2)0.450.480.680.540.360.460.31Research and innovation2010201120122013201420152016R&D intensity2.052.162.272.332.392.472.49General government expenditure on education as % of GDP6.006.206.206.406.306.40naPersons with tertiary education and/or employed in science and technology as % of total employment50505050525151Population having completed tertiary education(3)31303132333333Young people with upper secondary level education(4)83828383848485Trade balance of high technology products as % of GDP0.370.220.140.330.520.50naProduct and service markets and competition200320082013OECD product market regulation (PMR)(5), overall1.641.521.39OECD PMR5, retail4.684.564.06OECD PMR5, professional services2.522.472.47OECD PMR5, network industries(6)2.842.081.84 
 
 
 
 
 
 
Table C.6:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2010 prices)         
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)         
          Carbon intensity: greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)         
          Resource intensity: domestic material consumption (in kg) divided by GDP (in EUR)         
          Waste intensity: waste (in kg) divided by GDP (in EUR)         
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP           
Weighting of energy in HICP: the proportion of 'energy' items in the consumption basket used for the construction of the HICP         
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual % 
change)         
Real unit energy cost: real energy costs as % of total value added for the economy         
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2010 EUR)          
Real unit energy costs for manufacturing industry excluding refining : real costs as % of value added for  manufacturing 
sectors         
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP         
Electricity and gas prices for medium-sized industrial users: consumption band 500–20 00MWh and 10 000–100 000 GJ; figures 
excl. VAT.         
Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste         
Public R&D for energy or for the environment: government spending on R&D for these categories as % of GDP         
Proportion of GHG emissions covered by EU emissions trading system (ETS) (excluding aviation): based on GHG emissions         
(excl land use, land use change and forestry) as reported by Member States to the European Environment Agency.         
Transport energy intensity: final energy consumption of transport activity (kgoe) divided by transport industry gross value 
added (in 2010 EUR)         
Transport carbon intensity: GHG emissions in transport activity divided by gross value added of the transport sector         
Energy import dependency: net energy imports divided by gross inland energy consumption incl. consumption of 
international bunker fuels         
Aggregated supplier concentration index:  covers oil, gas and coal. Smaller values indicate larger diversification and hence 
lower risk.         
Diversification of the energy mix: Herfindahl index covering natural gas, total petrol products, nuclear heat, renewable 
energies and solid fuels         
* European Commission and European Environment Agency         

Source: European Commission and European Environment Agency (Share of GHG emissions covered by ETS); European 
Commission (Environmental taxes over labour taxes and GDP); Eurostat (all other indicators) 

61 

Green growth performance201120122013201420152016MacroeconomicEnergy intensity kgoe / €0.150.150.150.140.140.15Carbon intensity kg / €0.330.320.320.300.31-Resource intensity (reciprocal of resource productivity)kg / €0.470.420.410.400.380.37Waste intensity kg / €-0.15-0.15--Energy balance of trade % GDP-4.6-5.0-4.5-3.8-2.7-2.2Weighting of energy in HICP%11.0211.7111.2910.9211.029.22Difference between energy price change and inflation %14.63.3-5.8-8.0-5.50.4Real unit of energy cost% of value added17.217.616.516.8--Ratio of environmental taxes to labour taxesratio0.090.090.080.090.09-Environmental taxes% GDP2.32.22.12.12.12.2Sectoral Industry energy intensity kgoe / € 0.200.200.210.200.190.19Real unit energy cost for manufacturing industry excl. refining% of value added28.427.725.826.0--Share of energy-intensive industries in the economy% GDP10.2910.0610.4410.9011.6311.61Electricity prices for medium-sized industrial users€ / kWh0.110.110.110.110.110.11Gas prices for medium-sized industrial users€ / kWh0.030.030.040.030.030.03Public R&D for energy % GDP0.010.010.010.010.010.01Public R&D for environmental protection% GDP0.010.010.010.010.010.01Municipal waste recycling rate%54.353.452.653.653.453.5Share of GHG emissions covered by ETS*%40.439.137.938.538.036.9Transport energy intensitykgoe / €0.520.500.510.520.540.56Transport carbon intensitykg / €1.291.271.291.311.36-Security of energy supplyEnergy import dependency%75.476.177.480.084.376.0Aggregated supplier concentration indexHHI19.214.116.214.414.0-Diversification of energy mixHHI0.270.270.270.280.290.28 
 
 
 
 
REFERENCES 

Andrews  D.,  Criscuolo  C.,  and  Gal  P.  (2015),  Frontier  firms,  technology  diffusion  and  public  policy: 
micro evidence from OECD countries, OECD.  

Andrews  D.,  Criscuolo  C.,  and  Gal  P.N.  (2016),  The  global  productivity  slowdown,  technology 
divergence and public policy: a firm level perspective. 

Baert, S. et al. (2017), Does work experience mitigate discrimination? 

Belgian  Court  of  Auditors  (2013),  Mesures  fédérales  de  soutien  indirect  à  la  recherche  et  au 
développement  technologique  (R&D),  Rapport  de  la  Cour  des  comptes  transmis  à  la  Chambre  des 
représentants, Brussels, August 2013. 

Biatour B. and Kegels C. (2017), Growth and productivity in Belgium, Federal Planning Bureau, working 
paper 11-17, October 2017. 

Bijnens G. and Konings J. (2017), Where has the Belgian Business Dynamism gone? The decline in high 
growth (small) firm, August 2017. 

Bricongne, J.-C., L. Coutinho and N. Philiponnet (2018), Deleveraging needs in the EU: methodology to 
benchmark private debt, European Economy. 

Cockx,  B.,  Dejemeppe,  M.  and  Van  der  Linden,  B.  (2017),  L’emploi  des  seniors  en  Belgique:  quelles 
politiques pour quels effets? 

Curnis C. and Manjón A. M. (2018), [title – not yet published], forthcoming. 

Debackere et al. (2017), Totale O&O intensiteit in Vlaanderern 2005-2015 – “3% nota”, ECOOOM and 
EWI. 

De  Mulder,  Godefroid  (2016),  How  to  stimulate  entrepreneurship  in  Belgium,  NBB  Economic  review, 
Sep. 2016. 

De  Mulder,  Godefroid,  Swartenbroekx  (2017),  Growing  to  survive?  A  picture  of  young  high-growth 
enterprises in Belgium, NBB Economic review. 

Dhyne  E.  and  Duprez  C.  (2017),  It´s  a  small,  small  world…  a  guided  tour  of  the  Belgian  production 
network, 2017. 

Dumont,  M.,  (2015),  Evaluation  of  federal  tax  incentives  for  private  R&D  in  Belgium:  An  update, 
Working Papers 05-15, Federal Planning Bureau, Belgium. 

ELIA 
at: 
http://www.elia.be/~/media/files/Elia/About-Elia/Studies/20171114_ELIA_4584_AdequacyScenario.pdf. 

Electriciy 

scenarios 

available 

Belgium 

towards 

(2017), 

2050, 

for 

European Commission (2014), 2014 Belgium country report. 

European Commission (2015a), Public Spending Reviews: design, conduct, implementation, available at: 
http://ec.europa.eu/economy_finance/publications/economic_paper/2014/ecp525_en.htm. 

62 

 
 
 
European  Commission  (2015b),  A  Single  Market  Strategy  for  Europe  –  analysis  and  evidence, 
SWD(2015) 202 final, 2015. 

European Commission (2016a), 2016 Belgium country report. 

European Commission (2016b), Report on Single Market integration and competitiveness in the EU and 
its Member States, November 2016.  

European  Commission  (2016c),  Framework  conditions  for  high-growth  innovative  enterprises  (HGIE), 
September 2016.  

European Commission (2017a), 2017 Belgium Country Report. 

European  Commission  (2017b),  2018  Ageing  Report  -  Underlying  Assumptions  and  Projection 
Methodologies,  available  at:  https://ec.europa.eu/info/publications/economy-finance/2018-ageing-report-
underlying-assumptions-and-projection-methodologies_en. 

European Commission (2017c), 2017 SBA Fact Sheet Belgium, 2017. 

European  Commission 
https://ec.europa.eu/digital-single-market/en/desi. 

(2017d),  Digital  Economy  and  Society 

Index  2017,  available  at 

European  Commission  (2017e),  Economic  Brief  "Taxation  of  Company  Cars  in  Belgium  –  Room  to 
Reduce their Favourable Treatment, European Economy, May 2017. 

European  Commission  (2017f),  Labour  Market  and  Wage  Developments  in  Europe  2017,  Publications 
Office of the European Union, Luxembourg. 

European Commission (2018), Debt Sustainability Monitor 2017. 

European Commission (2018), Study on operational restrictions in the retail sector, forthcoming. 

European Commission – EPC (AWG) (2018), 2018 Ageing Report: Economic and Budgetary Projections 
for the EU Member States (2016-2070), forthcoming. 

Federal  Planning  Bureau  (2017),  Le  paysage  énergétique  belge  à  l’horizon  2050  -  Perspectives  à 
politique 
at: 
http://www.plan.be/admin/uploaded/201710270928090.For_Energy_2017_11531_F.pdf. 

inchangée, 

available 

FOD  Sociale  Zekerheid  (2017),  The  evolution  of  the  social  situation  and  social  protection  in  Belgium 
2017. Monitoring the social situation in Belgium and the progress towards the social objectives and the 
priorities of the National Reform Programme and the NSR. 

Frazzani S., Grea G., and Zamboni A. (2016), Study on passenger transport by taxi, hire car with driver 
and ridesharing in the EU, Grimaldi, CERTeT Università Luigi Bocconi, Wavestone. 

Goesaert, T., & L. Struyven (2017), Voltijds, deeltijds of als flexwerk bij een nieuwe werkgever – Trends 
in aanwervingsdynamiek op de Belgische arbeidsmarkt, DynaM Review 2017/1. 

ICF  International  (2016),  Decomposition  analysis  of  the  changes  in  GHG  emissions  in  the  EU  and 
Member 
at: 
https://ec.europa.eu/clima/sites/clima/files/strategies/progress/docs/dca_report_en.pdf. 

Commission, 

European 

available 

report, 

States 

final 

63 

 
 
McGowan  et  al.  (2017),  The  walking  dead?  Zombie  firms  and  productivity  performance  in  OECD 
countries, Economic department working papers No. 1372, OECD. 

National Bank of Belgium (2014),  Fiscal policy and TFP in the OECD: Measuring direct and indirect 
effects. 

National Bank of Belgium (2017a), Elevated corporate debt in Belgium: should we be worried?, Belgian 
Prime News N° 78, available at: https://www.nbb.be/doc/ts/publications/bpnews/bpn78.pdf. 

National Bank of Belgium (2017b), Pockets of risk in the Belgian mortgage market: Evidence from the 
Household Finance and Consumption Survey (HFCS), Working paper n. 332. 

National  Bank  of  Belgium  (2017c),  The  potential  growth  of  the  Belgian  economy,  available  at: 
https://www.nbb.be/doc/ts/publications/economicreview/2017/ecorevii2017_h3.pdf. 

National  Bank  of  Belgium  (2017d),  Special  Topic:  Narrowing  inflation  gap  between  Belgium  and  the 
euro area, Belgian Prime News, September 2017. 

National Bank of Belgium (2017e), Revue économique, December. 

National Bank of Belgium (2017f), Public sector efficiency in Belgium. 

OECD (2013), International Migration Outlook 2013, OECD Publishing Paris. 

OECD (2016), Education at a glance 2016, OECD Publishing Paris. 

OECD (2017a), Entrepreneurship at a glance 2017, OECD Publishing, Paris, 2017 

OECD (2017b), OECD Economic Surveys: Belgium 2017, OECD Publishing, Paris, June 2017 

OECD (2017c), Science, Technology and innovation scoreboard, 2017. 

SPF  Économie,  P.M.E.,  Classes  moyennes  et  Energie  (2017),  Price  analysis,  2nd  quarterly  report, 
Institute of National Accounts, Price Observatory. 

Philiponnet and Turrini (2017), Assessing House Price Developments in the EU, European Commission, 
available at: https://ec.europa.eu/info/sites/info/files/dp048_en.pdf. 

Rijksdienst  voor  Arbeidsvoorziening 
inschakelingsuitkeringen.  

(2017), 

Impact  van  de  beperking  van  het  recht  op 

Vandenbroucke  F.,  &  V.  Corluy  (2015),  Huishoudens  zonder  werk  in  Belgie,  Leuvense  economische 
standpunten 2015/149. 

World Economic Forum (2017), Global Competitiveness Report 2017-2018.  

64