COMMISSION STAFF WORKING DOCUMENT Country Report Belgium 2019 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2019 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: 2019-02-27
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, 27.2.2019  SWD(2019) 1000 final  COMMISSION STAFF WORKING DOCUMENT Country Report Belgium 2019 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2019 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(2019) 150 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 and housing 

3.3.  Labour market, education and social policies 

3.4.   Competitiveness and investment 

Annex A: Overview Table 

Annex B: Commission Debt Sustainability Analysis and fiscal risks 

Annex C: Standard Tables 

3 

7 

14 

19 

19 

29 

32 

43 

60 

73 

74 

Annex D: Investment Guidance on Cohesion Policy Funding 2021-2027 for Belgium 

80 

References 

LIST OF TABLES 

Table 1.1: 

Key economic and financial indicators - Belgium 

Table 2.1: 

Progress with the implementation of 2018 CSRs 

Table 3.2.1:  Domestic banking groups and standalone banks, foreign (EU and non-EU) controlled 

subsidiaries and foreign (EU and non-EU) controlled branches 

Table C.1: 

Financial market indicators 

Table C.2: 

Headline Social Scoreboard indicators 

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: 

Composition of investment spending ( %GDP) 

1 

85 

13 

16 

30 

74 

75 

76 

77 

78 

79 

7 

8 

 
 
 
 
Graph 1.3: 

Breakdown of potential growth 

Graph 1.4: 

Real labour productivity growth (2010=100) 

Graph 1.5: 

Regional disparities in Belgium 

Graph 1.6: 

Consumer inflation 

Graph 1.7: 

Employment growth by sector (thousands, year-on-year changes) 

Graph 1.8: 

Disparities in the employment rate for specific population groups (2017) 

Graph 1.9: 

Breakdown of current account balance ( %GDP) 

Graph 2.1:  Overall multiannual implementation of 2011-2018 CSRs to date 

Graph 3.1.1:  Primary expenditure versus gross fixed capital formation in 2017 

Graph 3.1.2:  Primary expenditure by type - % of GDP 

Graph 3.1.3:  Government investment: breakdown by functional classification (average 2008-

2016),  % of GDP 

Graph 3.1.4:  Share of direct expenditure (net of intra-government transfers) and investment by 

level of government 

Graph 3.1.5:  Public debt medium-term projection and scenarios ( % of GDP) 

Graph 3.1.6: 

Increase in pension expenditure - selected scenarios – percentage points of GDP 

Graph 3.1.7: 

Tax wedge on labour, single earner, average wage (2017) 

Graph 3.3.1:  Unemployment rate by region and level of urbanisation ( % of active population) 

Graph 3.3.2:  Reasons for inactivity by age (2007-2017) 

Graph 3.3.3: 

Transition rate from unemployment/inactivity to employment, 2014-2017 ( % total 

inactive or unemployed) 

Graph 3.3.4:  Activity rate by age and educational attainment (20-64, %) 

Graph 3.3.5:  Activity rate for older workers ( %) 

Graph 3.3.6:  Graduates in STEM (ISCED  5--8) as a percentage of total graduates (2016) 

Graph 3.4.1:  Distribution of labour productivity growth, selected countries, 2014 

Graph 3.4.2:  Public R&D intensity (government plus higher education) and GDP per capita (PPS) - 

2016 

Graph 3.4.3:  Change in GDP per head (PPS), index point difference, 2007-2016 

Graph 3.4.4:  Regions  in Belgium and factors endowment 

Graph 3.4.5: 

Target and emission under the effort-sharing legislation - Belgium (percentage 

change from 2005) 

LIST OF BOXES 

Box 2.1: EU funds and programmes contribute to addressing structural challenges and to fostering 

growth and competitiveness in Belgium 

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

Box 3.4.1: Investment challenges and reforms in Belgium 

Box 3.4.2: R&D tax incentives 

9 

9 

10 

10 

11 

11 

12 

14 

20 

21 

21 

22 

24 

25 

26 

32 

32 

34 

36 

36 

40 

43 

47 

55 

55 

56 

17 

33 

45 

48 

2 

 
 
 
 
 
EXECUTIVE SUMMARY 

progressing  with 

Recent  reforms  have  supported  a  job  rich 
economic  expansion.  The  Belgian  economy  has 
grown  at  a  moderate  but  steady  pace  over  recent 
years. Growth rates, however, remain below those 
recorded before  the  financial  crisis.  Strengthening 
potential  growth  would  require  a  combination  of 
further 
investment  and  productivity-enhancing 
reforms. This would imply maintaining the reform 
momentum  while 
the 
implementation  of  previously  announced  reforms. 
Challenges have been identified and have yet to be 
addressed,  notably:  by  removing  barriers 
to 
competition  and  investment  in  the  product  and 
services  market;  by 
infrastructure 
weaknesses  in  the  energy  and  transport  sectors; 
and  by  ensuring  the  long-term  sustainability  of 
public  finances.  Labour  market  participation  rates 
remain  low,  despite  high  vacancy  rates  in  some 
segments.  This  points 
skills 
mismatches and to the need for further investment 
in  training  and  in  the  education  system.  The 
current  political  situation,  with  a  caretaker 
government  at  federal  level,  risks  to  slow  down 
reforms. (1) 

significant 

tackling 

to 

Economic  growth  is  expected  to  slowdown 
gradually. In 2018, GDP growth was underpinned 
by  robust,  albeit  weakening  domestic  demand. 
Growth  in  consumer  spending  is  expected  to 
strengthen, as household income should rise owing 
to  employment  growth  and  new  tax  reductions  as 
part  of  the  continuing  of  the  ‘tax  shift’,  a  multi-
year  tax  reform  lowering  the  tax  pressure  on 
labour. Business investment growth is expected to 
increase  only  moderately, 
lower 
economic  growth  expectations.  After  contributing 
significantly  to  growth  in  2017  and  2018,  net 
exports  are  expected  to  start  weighing  on  growth 
from  2020,  as  Belgium’s  cost  competitiveness 
compared  to  neighbouring  countries  is  forecast  to 
weaken.  Overall,  GDP  growth  in  Belgium  is 
forecast to slow down from 1.4 % in 2018 to 1.3 % 
in 2019 and 1.2 % in 2020. 

reflecting 

(1)  This  report  assesses  Belgium’s  economy  in  light  of  the 
European Commission’s Annual Growth Survey (published 
on 21 November 2018. 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  —  delivering  high-quality  investment, 
efforts  on  productivity  growth, 
focusing 
reforms 
inclusiveness  and 
institutional  quality  and  ensuring 
macroeconomic stability and sound public finance. 

3 

In  recent  years,  growth  in  Belgium  has  been 
job-rich. This has led to the lowest unemployment 
rate  since  2000,  at  5.9 %  in  2018.  However,  the 
impact of policies to help create jobs, in particular 
wage  cost  moderation, 
fading. 
Combined  with  labour  shortages  in  some  sectors, 
this is expected to hold back employment growth. 
in  Belgium 
The  unfavourable 
compared  to  the  euro  area  is  projected  to  narrow 
gradually.  

inflation  gap 

is  gradually 

the  relatively 

Budget  consolidation  could  have  been  more 
supportive 
structural  given 
macroeconomic  conditions.  From  its  trough  of  a 
deficit  of  4.1 %  of  GDP  in  2011,  the  structural 
balance  has 
improved  by  2.7 pps  of  GDP. 
However,  almost  half  of  the  improvement  stems 
from  the  low  interest  rates  environment,  which 
reduced 
the 
interest  payments.  According 
Commission’s 
forecast,  Belgium’s 
structural  deficit  is  expected  to  reach  1.4 %  of 
GDP in 2018. The gradual reduction of public debt 
is  projected  to  continue,  allowing  a  debt-to-GDP 
ratio of 98.7 % in 2020. 

autumn 

to 

Further  investment  in  transport  infrastructure 
and  energy  transition,  innovation,  education 
and  training  would  strengthen  Belgium’s  long-
term growth potential, while helping to address 
regional disparities. Total investment in Belgium 
is among the highest in the EU at 23.5 % of GDP 
in  2017.  The  relatively  good  performance  overall 
is  due  to  private  investment.  By  contrast,  low 
public  investment  has  led  to  a  decrease  in  the 
quality  of  the  national  infrastructure,  especially 
roads  and  railways.  The  renovation  of  the  old 
building  stock,  which  predates  the  introduction  of 
energy norms, will contribute to meet the 2020 and 
2030  emission  reduction  targets.  In  the  light  of 
Belgium’s  commitment 
to  fully  phasing  out 
nuclear energy by 2025, there is a  need for  major 
in  power  generation,  as  well  as 
investment 
interconnection  capacity,  smart  grids  and  storage. 
especially  of 
Addressing 
employees  with 
science, 
technology,  engineering  and  mathematics,  will 
require  investment  in  the  training  and  education 
system.  There  are  important  needs  in  terms  of 
social  infrastructure  (Early  Childhood  Education 
and Care, social  housing,  schools) and  workers in 
the  social  sector.  Digitalisation  of  public  services 
and justice, as well as the reinforcement of certain 
institutional 
regulators, 

shortages, 
backgrounds 

improve 

labour 

would 

in 

 
 
                                                           
governance.  Annex  D  identifies  key  priorities  for 
support  by  the  European  Regional  Development 
Fund and the European Social Fund Plus, building 
on the analysis of investment needs and challenges 
outlined in this report. 

Overall,  Belgium  has  made  limited (2)  progress 
country-specific 
the  2018 
in  addressing 
recommendations.  

There  has  been  some  progress  in  the  following 
areas.   

  Measures have been taken to tackle investment 

needs in existing transport infrastructure  

There  has  been  limited  progress  in  the  following 
areas. 

  Disincentives to work remain and there is still a 
need  to  strengthen  the  effectiveness  of  active 
labour  market  policies, 
for 
vulnerable groups.  

in  particular 

  Further  action 
efficiency 
expenditure. 

and 

is  needed 

to 
composition 

improve 

the 
public 

of 

  Sectoral  regulation 

is  still  high 

in  some 
professional  services,  which  remain  sheltered 
from  competition,  and  in  retail.  Addressing 
mobility issues remains a priority.  

the  Europe  2020  strategy, 

Regarding Belgium’s progress towards its national 
targets  under 
the 
employment  rate  target  of  73.2 %  is  still  out  of 
reach  despite  substantial  job  creation.  Belgium  is 
broadly  on  track  to  reach  the  targets  for  R&D 
intensity,  reducing  early  school 
leaving  and 
increasing 
tertiary  educational  attainment.  By 
contrast,  additional  efforts  are  needed  to  meet  the 
targets  for  greenhouse  gas  emissions,  renewable 
energy, energy efficiency and reducing the  risk of 
poverty. 

Belgium  performs  well  on  a  number  of 
indicators  of  the  Social  Scoreboard  supporting 
the  European  Pillar  of  Social  Rights,  whilst 

(2)  Information  on  the  level  of  progress  and  actions  taken  to 
address  the  policy  advice  in  each  respective  subpart  of  a 
country-specific  recommendation 
the 
overview table in the Annex. 

is  presented 

in 

Executive summary 

to 

challenges remain. It scores well on fair working 
conditions.  Nevertheless,  a  number  of  Pillar 
principles  merit  attention  (e.g.  employment  rate). 
Participation in adult learning is relatively low and 
educational outcomes show considerable variations 
linked 
the  socio-economic  status.  Some 
population  groups,  in  particular  people  with  a 
migrant  background,  could  be  better  integrated  in 
the  labour  market.  Compared  to  other  countries, 
persons with disabilities are more at risk of poverty 
or  social  exclusion.  Belgium  presents  good 
outcomes 
terms  of  gender  equality  and 
childcare.  

in 

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

in  several 

  The  concentration  of  innovation  in  a  few 
industries  and  barriers  to  competition  and 
investment  in  product  and  services  markets 
are  weighing  on  productivity  growth. 
Belgium  is  lagging  behind  its  neighbours  in 
terms  of  total  factor  productivity  growth. 
Among  the  explanatory  factors,  the  rate  of 
business  creation  and  failure  appears  to  be 
lower  than  in  peer  countries,  which  represents 
an obstacle to higher productivity growth, as it 
may lock resources in lower-productivity firms. 
Restrictions  to  competition  and  investment 
remain  high 
legal,  accounting, 
architectural, real estate and transport services; 
the 
this  has 
manufacturing  sector.  The  retail  sector  still 
faces  a  complex  operational  environment  that 
hinders 
discourages 
investment.  While  a  fourth  mobile  operator 
telecom  market, 
might  enter 
competition 
telecommunication  services 
remains  weak,  in  particular  in  fixed  networks, 
creating obstacles to bundled services. Another 
factor  weighing  on  productivity  growth  is  that 
high  R&D  spending,  partly  driven  by  tax 
incentives, are concentrated in a few industries 
and there is insufficient diffusion of innovation 
to the rest of the economy. 

implications 

the  mobile 

productivity 

adverse 

and 

for 

in 

legislative  complexity,  and 

  In  spite  of  efforts,  heavy  administrative 
burden, 
low 
digitalisation  of  public  services  weighs  on 
entrepreneurship  and 
investment.  The 
complexity  of  administrative  procedures  is 

4 

 
 
                                                           
Executive summary 

in 

an 

these  areas  hold  back 

entrepreneurship 
professionals  with 
knowledge 
the 
development  of  start-ups.  The  overall  level  of 
digital skills is good, but not improving. There 
are important needs in terms of re-skilling and 
up-skilling  the  labour  force  in  some  sectors. 
Adult  participation  in  education  and  training 
and  job  mobility  are  also  low.  Poor  linguistic 
skills  are  an  important  issue,  in  particular  in 
Brussels. 

  Reforms 

in 

to 

to 

reverse 
outcomes 

the  decline 
and 

in 
tackle 
educational 
disparities  are  progressing  slowly.  The 
decline in the educational performance and the 
existence  of  significant  disparities 
the 
education  systems  remain  a  concern.  The 
percentage of young people not mastering basic 
skills can be improved in all Communities, and 
in  particular  in  the  French  Community.  The 
early  school-leaving  rate  has  decreased,  but 
remains  high  in  Brussels  and  among  non-EU 
born  young  people  and  young  men  in  cities. 
Educational  inequalities  are  also  observed  in 
tertiary  education.  There  is  room  to  improve 
the cost-effectiveness of the education system.  

  Disincentives to work and weaker activation 
reduce  labour  market  participation.  Labour 
market participation is low for the young, older 
workers  and  the  low-skilled.  The  activity  rate 
of  low-skilled  is  significantly  below  the  EU 
average.  Youth  unemployment  is  well  above 
the  EU  average,  notably  in  Brussels.  Existing 
labour activation measures are less effective for 
persons  with  a  migrant  background.  Some 
concerns  emerged  about  the  full  enforcement 
of  the  principle  of  "active  availability"  by  the 
Regions,  and  the  potential  impact  on  federal 
and  local  public  finances.  Although  the  tax 
shift reduced the labour tax wedge (income tax 
plus employer and employee contributions) for 
very  low  wage  earners  (fifty  percent  of  the 
average wage), it remains the highest in the EU 
for 
tax 
disincentives  for  second  income  earners  – 
mainly  women  –  remain,  contributing  to  high 
part-time  employment  among  women.  For 
single  parents  there  is  little  financial  incentive 
to  take-up  full-time  employment.  Belgium 
remains 
in  which 
unemployment benefits are not limited in time, 

average  wage 

earners.  High 

country 

only 

the 

a 

costly 

property 

perceived by most firms as a problem for doing 
business. In particular, long delays for building 
permits, 
registration 
procedure and lengthy judicial proceedings are 
perceived  as  obstacles  hindering  business 
investment. The government is simplifying the 
company  code  and  its  tax  system.  However, 
some areas of taxation remain complex. Policy-
making still has room to benefit from improved 
analytical support. The quality of digital public 
services  for  business  is  low.  The  lack  of 
digitalisation  of  the  justice  system  remains  a 
serious challenge. 

in  Belgium  are  among 

  Deteriorating road infrastructure, distortive 
incentives  in  transport,  and  infrastructure 
bottlenecks also hinder productivity growth. 
Roads 
the  most 
congested  in  the  EU.  The  quality  of  road 
infrastructure is deteriorating after years of low 
public investment.  The  maintenance of a large 
and dense network does not seem cost-effective 
for  regions  and  local  authorities.  The  rail 
infrastructure is dense and of good quality, but 
it  is  congested  around  Brussels  and  in  the 
access  to  ports  (Antwerp,  Zeebrugge).  The 
quality  of  rail  services  is  low  and  there  is 
insufficient  urban  and  urban-rural  public 
transport.  Regulatory  barriers  to  competition 
and  investment  in  domestic  passenger  railway 
services,  intercity  coach  services  and  taxis 
constrain  the  supply  of  alternative  collective 
and  low-carbon  transport  services.  Important 
investments  are  planned 
in  suburban  rail 
infrastructure and signalling, but are being held 
back  notably  by  budgetary  allocation  rules 
across regions. 

professionals 

concern  mostly 

  Skills  mismatches  and  low  job  mobility 
hamper 
job  and  productivity  growth.  
Labour shortages are observed in many sectors, 
in 
and 
information  and  communication  technologies, 
and  workers  in  the  construction  and  health 
sectors.  Growth  of  the  construction  sector  is 
impacted  by  uneven  reforms  across 
also 
regions 
regulating  construction  and  craft 
professions.  Tertiary  education  attainment  is 
high, yet there are too few graduates in science, 
technology,  engineering,  and  mathematics, 
which are particularly important for innovation 
of 
growth. 
and 

Shortages 

economic 

5 

 
 
Executive summary 

though they gradually fall. In the context of the 
envisaged  ‘jobs  deal’  the  federal  government 
announced 
their 
degressivity. 

intention 

increase 

its 

to 

to 
adjustment  mechanisms 
structural 
economic 
demographic 
developments. Public debt is decreasing but its 
high level aggravate sustainability concerns. 

response 

or 

in 

  Policy  coordination  between  the  different 
government levels is complex and not always 
effective, weighing on public investment and 
the  efficient  delivery  of  certain  policies. 
Budget  coordination  between  entities 
is 
currently  not  sufficiently  flexible  to  create 
room  for  public  investment  in  large-scale 
projects. There is still no formal agreement on 
annual  targets  at  all  levels  of  government,  in 
spite  of  the  cooperation  agreement  signed  in 
2013,  complicating  budget  coordination.  The 
responsibility  for the  social protection systems 
is split between the federal and the sub-national 
to  coordination 
levels,  which  may 
in  climate, 
problems.  Policy  coordination 
is 
energy,  digital  and 
complex and not always effective.  

transport  policies 

lead 

Other key structural issues analysed in this report, 
which point to particular challenges for Belgium’s 
economy, are the following. 

  Economic  disparities  across  regions  and 
provinces in Belgium remain. While the GDP 
per capita is on average higher in Belgium than 
in the EU, there are important inter- and intra-
terms  of  revenue, 
regional  disparities 
in 
innovation. 
employment, 
Unemployment is high in Walloon cities and in 
Brussels,  where 
important 
revenue disparities.   

there  are  also 

education 

and 

intensity 

households 

  Although  Belgium  has  an  effective  social 
redistribution  system,  pockets  of  poverty 
remain.  The  at-risk  of  poverty  rate  for  low 
working 
increased 
significantly.  It  is  above  the  EU  average 
especially  for  households  with  children.  There 
are  strong  inequalities  in  health  access  and 
outcomes  by  socio-economic  status.  People 
strong 
with  disabilities 
challenges. In terms of long-term care, there is 
also a very large gap for unmet needs in formal 
home  care  services,  well  over  twice  the  EU 
average. 

face  particularly 

communities 

  The  composition  and  efficiency  of  public 
spending can be improved in order to create 
space  for  more  public  investment.  Primary 
expenditure  is  high.  At  the  same  time,  public 
investment,  which  is  mostly  carried  out  by 
regions, 
and  municipalities, 
remains relatively low. It has recently dropped 
level  notably  because  of  rising 
local 
at 
expenditure 
budgetary 
and 
constraints  imposed  by  the  regions.  While  a 
large portion of public spending is mandated by 
the 
permanent 
government's  ability  to  review  and  change 
spending priorities, the use of spending reviews 
and  policy  evaluations 
the 
efficiency of public spending is still limited.  

legislation, 

improve 

limiting 

trend 

tight 

to 

  The  extensive  use  of  tax  expenditures 
reduces  the  efficiency  of  the  tax  system, 
makes  it  complex  and  creates  economic, 
social  and  environmental  distortions.  While 
tax  expenditures  may  be  justified  to  correct 
market  failures,  streamlining 
them  would 
simplify  the  tax  system  and  would  allow  tax 
rates to be reduced. Taxes on rental income are 
low in Belgium. Revenues from environmental 
taxes remain among the lowest in the EU. The 
taxation framework for financial investments is 
also  relatively  complex  and  reduced  value-
added 
rates  create  economic 
distortions.  In  addition,  high  transaction  taxes 
on  immovable  property,  combined  with  the 
company car scheme, adversely affect mobility 
and the environment. 

(VAT) 

tax 

  In spite of recent  reforms, the  medium-long 
term  sustainability  of  the  pension  and  the 
long-term care systems remains a challenge. 
The  latest  projections  point  to  a  considerable 
increase  in  the  expected  cost  of  demographic 
ageing despite  the  measures  on long-term care 
and  the  positive  impact  of  recent  pension 
reforms, highlighting risks to the sustainability 
of  public  finances.  The  previously  envisaged 
introduction  of  a  credit-based  public  pension 
system is intended to improve long-term fiscal 
for  automatic 
sustainability  by  providing 

6 

 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

Economic growth 

Economic  growth  is  expected  to  largely  match 
developments  in  the  euro  area,  having  slowed 
down  to  1.4 %  in  2018.  Growth  is  expected  to 
have been driven by  still robust domestic demand 
and  positive  net  exports  in  2018.  However,  while 
household consumption growth is expected to have 
weakened  slightly  to  0.8 %,  investment  growth 
decelerated more markedly from 1.8 % in 2017 to 
1.4 %  in  2018,  while  government  consumption 
grew  moderately  (0.9 %).  Public  investment  is 
projected to have edged up to 2.3 % of GDP due to 
the  local  electoral  cycle.  The  contribution  of  net 
exports  is  expected  to  have  remained  largely 
positive  in  2018,  after  a  notable  increase  in  2017 
(see Graph 1.1).  

Graph 1.1: 

Breakdown of GDP growth 

Source: European Commission 

interim 

Economic growth is expected to ease to 1.3 % in 
2019  and  1.2 %  in  2020.  According  to  the 
Commission’s  2019  winter 
forecast, 
economic growth from 2018 to 2020 is expected to 
ease gradually to a level below the average growth 
of  1.6 %  over  the  previous  three  years.  As  the 
contribution from net exports is forecast to become 
neutral in 2019 and slightly negative in 2020, GDP 
growth  is  projected  to  be  driven  exclusively  by 
internal demand. Households' purchasing power is 
projected  to  increase  slightly  as  the  job  market 
to  develop  favourably  and  further 
continues 
income  tax  cuts  are  implemented.  Investment  by 
both  business  and  households  is  expected  to 

7 

infrastructure  works 

contribute  less  markedly  to  growth.  The  start  of 
major 
defence 
investments are forecast to drive public investment 
growth, particularly from 2020. Public investment 
is projected to account for 2.4 % of GDP in 2020.  

and 

and 

Domestic  demand  has  been  the  main  growth 
in  recent  years,  notably  thanks  to 
driver 
sustained  investment.  Since  2013,  household 
consumption 
investment  growth  have 
contributed  roughly  evenly  to  economic  growth, 
with  private  consumption  expected  to  become  the 
main  driver  until  2020.  Investment  has  held  up 
well in Belgium compared to other Member States, 
accounting  for  22.5 %  of  GDP  on  average  from 
2007 to 2017. It is expected to increase to 23.7 % 
of  GDP  in  2018-2020  on  average.  Investment 
growth  has  been  primarily  driven  by  business 
investment, especially in recent years.  

Household  consumption  is  expected  to  gain 
momentum  in  2019-2020 as  a  result  of  job  and 
wage growth. Private consumption growth slowed 
from 1.3 % per year in 2000-2011 to 1 % per year 
in 2012-2017. This stems from modest increases in 
real disposable income until 2016, reflecting wage 
moderation policies aimed at recovering part of the 
cost  competitiveness  lost  in  the  past.  Income 
growth  has  picked  up  since  2016,  with  the 
resumption  of  wage  indexation  and  of  real  wages 
increases, together with strong job creations, while 
income tax cuts have been made as part of the ‘tax 
shift’,  a  multi-year  tax  reform  lowering  the  tax 
pressure  on  labour.  A  sustained  improvement  in 
labour  market  performance  has  also  supported 
households’  purchasing  power,  as  employment 
grew  by  1.2 %  and  the  unemployment  rate  fell  to 
5.9 % in 2018. Overall, household consumption is 
estimated  to  have  grown  by  0.8 %  in  2018  and  is 
projected  to  rise  by  1.2 %  in  2019  and  1.6 %  in 
2020.  

from 

2019.  After 

Net  exports  are  no  longer  expected  to  support 
growth 
contributing 
significantly  to  growth  in  2017  and  2018,  net 
exports  are  forecast  to  provide  limited  support  in 
2019, and to start weighing on growth from 2020. 
This 
is  expected  for  several  reasons.  First, 
weakening  world  trade  is  likely  to  slow-down 
export  growth.  Second,  a  pick-up  in  internal 
demand  is  forecast  to  drive  up  imports.  Third, 
Belgium’s gains in export market share over 2012-

-4-3-2-10123409101112131415161718'19'20'%, ppsNet exportsConsumptionInvestment (GFCF)Inventories investmentReal GDP growth 
 
 
 
2017, based on improved cost-competitiveness, are 
expected to come to an end and to be followed by 
a slight deterioration over the coming years. 

Investment 

The  particularly  robust  business  investment 
seen  in  2016  and  2017,  supported  by  relatively 
favourable  financing  conditions,  high  capacity 
utilisation and rising profitability, slowed down 
in  2018.  Belgian  businesses  have  benefited  in 
recent years from historically low financing costs. 
Although capacity utilisation fell into line with its 
historical average at the end of 2018, its high level 
since  2016  has  supported  investment  growth. 
Meanwhile, measures taken to reduce labour costs 
have  contributed  to  a  steady  increase  in  profit 
margins. The slow-down in business investment in 
2018  came  after  sustained  growth  in  the  three 
previous  years,  in  a  context  of  weaker  final 
demand, deteriorating confidence and rising supply 
constraints in some segments of the labour market. 
Risks surrounding the outlook are mainly rooted in 
the  external  environment,  as 
illustrated  by 
indicators  regarding  order 
leading 
worsening 
expectations  and  business  climate.  A  gentle 
weakening  of  business 
is 
expected in 2019-2020. 

investment  growth 

Investment has also been supported by housing 
and  the  public  sector.  Low  mortgage  interest 
rates  and  low  yields  on  alternative  investment 
assets  played  a  role  in  the  sustained  real  estate 
investment growth seen since 2014, which slowed 
down  however  in  2017.  The  local  government 
investment cycle in the run-up to local elections in 
2018  drove  public 
investment  in  2017-2018, 
although to a lesser degree than in previous cycles. 
The  public  investment-to-GDP  ratio  of  around 
2.2 % is expected to edge up over 2018-2020 (see 
Graph 1.2), but to remain among the lowest in the 
EU. 

1. Economic situation and outlook 

Graph 1.2:  Composition of investment spending ( %GDP) 

Source: European Commission 

Potential growth 

estimates 

for  potential 

The  weaker  growth  outlook  is  consistent  with 
modest 
growth. 
Although,  the  estimate  for  potential  growth  has 
improved  since  2013,  it  has  remained  broadly 
stable  at  around  1.4 %,  which  is  significantly 
below  pre-crisis  levels  (see  Graph  1.3).  This 
subdued improvement reflects the long-term trend 
of  limited  gains  in  total  factor  productivity  (see 
Section  3.4),  as  well  as  the  declining  contribution 
of  labour  due  to  slow  growth  in  the  working-age 
population  and  a  fall  in  average  hours  worked. 
These factors have been offset by increased private 
sector capital accumulation and large job creations 
in recent years. The output gap(3) became positive 
in  2017,  from  a  trough  of  -1.2 %  in  2013.  The 
positive output gap is forecast to widen slightly in 
2018-2020  as  growth  remains  above  its  potential. 
Demographic  ageing,  which  is  projected  to  affect 
Belgium  and  almost  all  European  countries,  will 
increasingly  depress 
to 
potential growth. This means that potential growth 
is rather unlikely to return to the pre-crisis level. 

labour's  contribution 

(3)  Output  gap  as  calculated  according  to  the  Commonly 

Agreed Methodology. 

8 

10%15%20%25%30%0%5%10%15%20%00010203040506070809101112131415161718f19f20fHousing investmentBusiness investmentPublic investmenttotal investment (RHS) 
 
                                                           
1. Economic situation and outlook 

Graph 1.3: 

Breakdown of potential growth 

Graph 1.4: 

Real labour productivity growth (2010=100) 

Source: European Commission 

However, 

Productivity is among the highest in the EU, but 
it  has  grown  relatively  slowly  over  the  past 
decade.  The  high  level  of  productivity  is  notably 
due to large private capital accumulation, a highly 
skilled  workforce 
innovation 
and 
strong 
in  key  sectors  (pharmaceuticals, 
performance 
minerals, 
labour 
chemicals). 
productivity  growth  has  been  relatively  muted  in 
the  past  decade  (Graph  1.4).  This  can  largely  be 
the  growth  of  services,  which 
explained  by 
represent  more  low-skilled  professions.  This  was 
facilitated  by  policies  aimed  at  increasing  labour 
force  participation.  Analyses  at  industry  level 
(Dumont  and  Kegels,  2016)  also  suggest  that 
employment  shifted  from  industries  with  high 
productivity  growth  towards  lower-productivity 
sectors  (non-tradable  services  for  example).  Over 
the  factors  weighing  on 
term, 
the  medium 
productivity  growth  are  expected 
to  remain 
relevant  (such  as  the  growth  of  the  share  of 
services  and 
labour 
participation) or gain a stronger impact (population 
ageing). Therefore, policies to increase total factor 
productivity are expected to play an important role 
in  raising  productivity  growth  prospects  (see 
Section 3.4.1). 

the  efforts 

increase 

to 

Source: European Commission 

Regional disparities 

Disparities  in  economic  performance  between 
the various Belgian regions persist. The GDP of 
the  Brussels  capital  region,  which  accounted  for 
18 %  of  Belgium's  GDP  in  2016,  grew  by  0.2 % 
annually  from  2009  to  2016,  well  below  the 
national  average  of  0.8 %.  Over  the  same  period, 
GDP per capita grew in  line  with the EU average 
(1.2 %)  in  the  Flemish  provinces,  and  at  a  slower 
pace  in  Wallonia.  GDP  per  capita  increased  more 
slowly in Brussels than in the rest of Belgium from 
to  2016,  mainly  because  of  stronger 
2010 
demographic growth there. Nevertheless, Brussels’ 
GDP  per  head  remains  much  higher  than  the 
national  and  EU  averages  (Graph  1.5).  The 
contrast  in  GDP  per  capita  between  Brussels  and 
the rest of Belgium also stems from the fact that a 
large  commuter  population  works  in  Brussels  but 
lives  in  the  other  two  regions.  Although  labour 
productivity  (measured  in  volume)  is  higher  in 
Belgium  than  in  the  EU,  it  fell  by  0.5 %  in  the 
Brussels  region  and  by  0.7 %  in  Wallonia  from 
2010  to  2016  relative  to  the  EU.  In  2015,  the 
investment rate  was below the national average in 
Brussels,  in  one  Flemish  province  and  in  two 
Walloon 
only  Brussels 
provinces,  while 
underperforms relatively to the EU average. 

There  are  also  regional  disparities  in  terms  of 
labour  market  opportunities.  In  2017, 
the 
unemployment  rate  in  Flanders  (4.4 %)  was  well 

9 

0,00,51,01,52,02,5060708091011121314151617181920212223Contributions to y-o-y potential growth (pps)Capital Accumulation ContributionTotal Labour (Hours) ContributionTFP ContributionPotential Growth9597991011031051071092008200920102011201220132014201520162017EU28EABEDEFRNLUK 
 
 
 
1. Economic situation and outlook 

education 

below  the  EU  average  (7.6 %),  while  it  was 
substantially  higher  in  Brussels  (14.9 %)  and 
Wallonia  (9.7 %).  The  share  of  the  working-age 
varies 
tertiary 
population  with 
considerably across Belgium. In Wallonia, it varies  
from  57.1 % 
to  27.3 % 
(Walloon  Brabant) 
(Hainaut).  In  Flanders,  it  ranges  from  50.7% 
(Vlaams-Brabant) to 35.4% (Limburg). The rate of 
young  people  neither  in  employment  nor  in 
education  and  training  also  differs  widely,  from 
7.2 %  in  Flanders  to  11.6 %  in  Wallonia  and 
13.3 % in Brussels. 

Graph 1.5: 

Regional disparities in Belgium 

amounted 
to  0.6 pp.  (see  Graph  1.6).  This 
structural difference is driven among others by the 
more direct transmission of oil price fluctuations to 
Belgian  energy  prices,  by  fiscal  measures,  by 
relatively  weaker  competition  in  some  service 
sectors in Belgium (European Commission, 2018a) 
and by the automatic indexation of wages.  

Graph 1.6:  Consumer inflation 

Source: European Commission 

Labour market and social developments 

The  labour  market  continues  to  benefit  from 
economic  expansion  and  policies  to  reduce  the 
high  cost  of  labour.  Employment  growth  is 
expected  to  remain  positive  (1.2 %),  but  to  slow 
down  compared  to  2017  as  a  result  of  increasing 
labour  skills  mismatches  and  rising  labour  costs. 
Until  the  beginning  of  2017,  employment  growth 
was particularly significant in the public and non-
profit  sectors,  where  a  third  of  new  jobs  were 
created.  However,  since  the  second  half  of  2017, 
the  private 
in 
employment  growth 
sector 
intensified,  especially 
industry  and  non-
in 
tradeable  services  (Graph  1.7).  In  2018,  the 
unemployment  rate  continued  to  decrease  and 
reached 5.9 %. 

an 

overall 

improvement 

in 
Despite 
performance, the labour market remains highly 
segmented.  More  than  25 %  of  the  working  age 
population is not in the labour market. In 2017, the 
activity  rate  reached  73.7 %,  which  is  well  below 
the  level  in  neighbouring  countries  and  the  EU 
(78 %).  Labour  market  participation 
average 

Source: Eurostat, European Commission 

Inflation 

Headline  inflation  rose  to  2.3 %  in  2018  and  is 
expected  to  slow  down  by  2020.  Price  pressures 
in  2018,  reflecting  crude  oil  and 
persisted 
electricity  prices  developments 
rising 
processed  food  prices.  Although  energy  and  food 
prices are expected to grow at a slower pace from 
2019, rising labour costs are forecast to contribute 
to higher inflation in services. Headline inflation is 
projected  to  slow  down  gradually,  reaching  1.9 % 
and 1.7 % in 2019 and 2020, respectively.  

and 

Comparatively high inflation remains a feature 
of the economy. Between 2012 and 2018, headline 
inflation was on average 0.5 pp. higher in Belgium 
than in the euro area as a whole. For core inflation 
—  which  excludes  energy  and  unprocessed  food 
items  —  the  difference  over  the  same  period 

10 

406080100120140160180200220GDP per headGDP per head change(2010-2016)InvestmentratePopulation growth(2010-2016)Labour productivity levelIndex, EU 28=100EU28Non-capital regionsCapital regionMS average-1,5-1,0-0,50,00,51,01,52,02,53,03,5-3,0-2,0-1,00,01,02,03,04,05,06,07,0core inflation: BE vs. EA (pp.; right)overall inflation EA (%)overall inflation BE (%) 
 
 
 
 
1. Economic situation and outlook 

remains  particularly  low  for  specific  groups,  in 
particular older (55+) and low skilled workers and 
those  with  a  non-EU  immigrant  background  (see 
Graph  1.8).  Youth  unemployment  has  declined 
markedly  but  remained  above  the  EU  average  in 
2018 (16.6 % vs. 15.6 %).  

of  53.4 %  in  2017).  There  are  also  specific 
concerns  for  children  with  a  migrant  background. 
In  addition,  the  share  of  children  younger  than  6 
years  old  living  in  very  low  work  intensity 
households  remains  high  in  2017  at  13.3 % 
(against 8.1 % for the EU in 2017). 

Graph 1.7: 

Employment growth by sector (thousands, 
year-on-year changes) 

Graph 1.8:  Disparities in the employment rate for specific 

population groups (2017) 

Source: Eurostat 

Income  and  wealth  inequality  remain  stable 
and  below  the  EU  average.  In  2017,  the  income 
of  the  top  quintile  of  the  income  distribution  was 
3.8  times  larger  than  the  income  of  the  bottom 
quintile  (against  5.1  times  larger  for  the  EU  in 
2017).  Taxes  and  the  benefit  system,  especially, 
have a large impact on reducing income inequality 
(4). Compared to other euro area countries, wealth 
is relatively evenly distributed in Belgium.  

Nonetheless, 
children  with  disadvantaged 
backgrounds  face  inequalities  of  opportunity. 
The  variation  in  science  scores  of  the  2015 
Programme  for  International  Student  Assessment 
(PISA) 
explained  by  parental  background 
remained much higher than in other EU countries, 
indicating  a  lack  of  equal  opportunities  to  quality 
education. The gap in the risk of poverty and social 
exclusion  for  children  due  to  parental  educational 
background is high (62.1 % against an EU average 

(4)  Percentage reduction in the S80/S20 for taxes and benefits 
(2016):  benefits  56 %,  taxes  10.5 %  (EU  31.9 %  and 
12.4 %).  Percentage  reduction  in  the  Gini  for  taxes  and 
benefits  (2016):    Gini  benefit  23.21 %  taxes  8.13 %  (EU 
14.9 %, 7.4 %). 

(1) Note: The age group considered is 20-64, except for 
older workers (55-64). 
Source: Eurostat 

Competitiveness  

in  2013, 

Belgium’s  share  of  global  export  markets  has 
declined for most of the years since 2000. While 
the 
trend  ended 
the  downward 
accumulated  losses  remain  substantial:  21 %  (in 
nominal terms) of international market shares were 
lost between 2000 and 2017. Over the same period, 
the  export  market  shares  of  France  and  the 
Netherlands 
12.9 %  
respectively  while Germany's export  market share 
increased by 0.4 %. 

26.3 % 

and 

fell 

by 

The  downward  trend  in  export  market  shares 
was  driven  by  a  lower  export  performance  in 
goods, while export performance in services was 
broadly  stable.  The  less  favourable  geographical 
distribution  (Belgian  companies  export  mainly 
towards  countries  whose  import  growth  is  less 
dynamic  than  global  imports)  does  not  entirely 
explain the negative performance. Belgian exports 
tend  to  be  in  below-average  quality  goods.  This 
specialisation  has  been  stable  in  recent  years, 
according  to  estimates  (Vandenbussche,  2014). 

11 

-60-40-20020406080Non-tradeable servicesTradeable servicesConstructionIndustryAgriculturePublic and non-profit01020304050607080OverallLow-skilledOlder workersNon-EU bornBEEU28 
 
 
                                                           
 
1. Economic situation and outlook 

These  segments  could  be,  to  some  extent,  subject 
to  harsh  price  competition  and 
this  makes 
Belgium’  export  performance  more  dependent  on 
cost factors (see Section 3.4.1). 

in  2018  on  a  consolidated  basis,  compares 
favourably  to  the  euro  area  average,  suggesting 
that  deleveraging  needs  remain  relatively  modest. 
Household debt is dealt with in Section 3.2. 

Graph 1.9: 

Breakdown of current account balance 
( %GDP) 

Public finances 

According  to  the  Commission's  2018  autumn 
forecast,  drafted  prior  to  the  adoption  of  a 
provisional  budget 
in  December  2018,  the 
general  government  deficit  is  expected  to  have 
reached  1.0 %  of  GDP  in  2018.  Belgium's 
headline  deficit  has  steadily  decreased  in  recent 
years,  from  4.2 %  of  GDP  in  2012  to  0.9 %  of 
GDP  in  2017.  Expenditure,  as  a  share  of  GDP,  is 
expected  to  have  continued  on  a  downward  path. 
Revenues  were  positively  impacted  by  resilient 
social contributions, rising indirect taxes and by a 
measure  aimed  at  incentivising  ex  ante  corporate 
income 
tax  payments.  The  authorities  have 
postponed their objective of achieving a structural 
balanced general government budget from 2019 to 
2020.  Nevertheless, 
available 
information  points  to  a  better  fiscal  performance 
than  that  presented  in  the  authorities’  2019  Draft 
Budgetary Plan (-1.1 %) or the Commission's 2018 
autumn forecast. 

latest 

the 

tendering  of 

the  Prime  Minister’s 
The 
resignation in  December 2018 opens a scenario 
of  rolling  budgets  that  increase  uncertainty.  In 
the  absence  of  a  formal  budget,  Parliament  has 
approved  a  "current  affairs"  budget.  This  aims  to 
ensure appropriate resources  are  available  to keep 
the  state  running.  It  uses  a  percentage  of  the 
previous year's approved credits (generally granted 
for  periods  of  3-4  months,  strictly  used  on  a 
monthly basis) and can be adapted, to ensure that, 
at  a  minimum,  all  the  government’s  contractual 
and legal obligations are fulfilled. Policy initiatives 
outside the scope of the provisional budget need to 
be separately approved by Parliament. 

Public debt is forecast to have fallen to 101.4 % 
of  GDP  in  2018.  The  Commission  2018  autumn 
forecast predicts a further reduction in public debt, 
with  the  debt-to-GDP  ratio  falling  to  99.8 %  and 
98.7 %  of  GDP  in  2019  and  2020,  respectively. 
The  debt  of  rail  infrastructure  manager  Infrabel 
was consolidated within public debt in 2018, with 
retroactive  effect  from  2014.  The  most  recent 
budget  made  no  mention  of  future  disinvestments 
in  the  financial  sector,  to  which  the  Belgian  State 

(1) BPM5 methodology until 2007, BPM6 thereafter 
(2) 2016 based on data for first nine months 
Source: NBB 

External position 

In  2018,  the  current  account  is  expected  to 
record a small surplus for the second year in a 
row.  From an average deficit of 0.7 % of GDP in 
2011-2016,  it  improved  to  a  surplus  of  0.7 %  in 
2017 and to an estimated 0.2 % in 2018 (see Graph 
1.9).  The  recent  improvement  is  reflected  in  both 
the trade balance and the primary income. Exports 
of  goods  have  been  the  more  volatile  component, 
with  exports  of  services  recording  a  gradually 
decreasing surplus in recent years.  

Private indebtedness 

Corporate  leverage  remains  moderate  despite 
non-financial  companies'  high  gross  debt. 
Belgian  corporate  financial  assets  and  liabilities 
figures  are  inflated  by  widespread  intra-group 
lending, notably encouraged over the years by the 
notional 
interest  deduction,  an  allowance  for 
corporate equity within corporate income taxation. 
Therefore 
ratio 
provides  for  a  better  measure  of  companies' 
financial situation. This leverage measure, at 47 % 

the  debt-to-financial 

assets 

12 

-6-4-2024600010203040506070809101112131415161718*% of GDPSecondary incomePrimary incomeServicesGoodsTrade balanceCurrent account 
 
1. Economic situation and outlook 

Table 1.1: 

Key economic and financial indicators - Belgium 

Source: Eurostat and ECB as of 31-1-2019, where available; European Commission for forecast figures (Winter forecast 2019 for 
real GDP and HICP, Automn forecast 2018 otherwise) 

has a large exposure. Public finances are discussed 
in Section 3.1. 

13 

2004-072008-122013-1520162017201820192020Real GDP (y-o-y)2.90.61.11.51.71.41.31.2Potential growth (y-o-y)1.91.31.01.31.41.51.31.3Private consumption (y-o-y)1.51.20.81.71.1...Public consumption (y-o-y)1.31.50.5-0.20.6...Gross fixed capital formation (y-o-y)5.9-0.32.33.81.8...Exports of goods and services (y-o-y)5.61.73.27.65.0...Imports of goods and services (y-o-y) 5.72.13.38.54.3...Contribution to GDP growth:Domestic demand (y-o-y)2.30.91.01.71.1...Inventories (y-o-y)0.50.00.10.30.0...Net exports (y-o-y)0.1-0.2-0.1-0.50.6...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.50.50.30.50.50.50.40.3Capital accumulation (y-o-y)0.60.50.40.60.60.60.70.7Total factor productivity (y-o-y)0.80.40.20.20.30.30.30.3Output gap1.3-0.1-0.8-0.20.00.10.30.4Unemployment rate8.27.68.57.87.16.46.15.9GDP deflator (y-o-y)2.11.70.91.81.72.21.91.8Harmonised index of consumer prices (HICP, y-o-y)2.12.50.81.82.22.31.91.7Nominal compensation per employee (y-o-y)2.72.51.20.51.92.22.02.1Labour productivity (real, person employed, y-o-y)1.6-0.20.70.20.3...Unit labour costs (ULC, whole economy, y-o-y)1.12.60.40.31.61.71.21.3Real unit labour costs (y-o-y)-1.00.9-0.5-1.50.0-0.5-0.7-0.5Real effective exchange rate (ULC, y-o-y)0.30.3-0.70.21.91.2-1.1-0.8Real effective exchange rate (HICP, y-o-y)0.3-0.3-0.52.91.62.4-0.7-0.6Savings rate of households (net saving as percentage of net disposable income)9.08.34.83.94.0...Private credit flow, consolidated (% of GDP)9.313.06.223.0-1.5...Private sector debt, consolidated (% of GDP)124.6174.9172.3198.9187.0...of which household debt, consolidated (% of GDP)43.952.757.558.959.8...of which non-financial corporate debt, consolidated (% of GDP)80.7122.2114.8140.0127.2...Gross non-performing debt (% of total debt instruments and total loans and advances) (2)2.64.23.92.62.3...Corporations, net lending (+) or net borrowing (-) (% of GDP)1.92.51.92.11.61.92.42.8Corporations, gross operating surplus (% of GDP)24.824.724.926.526.626.927.528.1Households, net lending (+) or net borrowing (-) (% of GDP)2.52.80.90.10.20.3-0.1-0.3Deflated house price index (y-o-y)6.80.70.10.91.7...Residential investment (% of GDP)5.96.15.85.95.9...Current account balance (% of GDP), balance of payments0.0*-0.3-0.7-0.60.71.21.11.1Trade balance (% of GDP), balance of payments2.5-0.10.41.11.0...Terms of trade of goods and services (y-o-y)-0.5-0.50.40.6-0.90.20.00.2Capital account balance (% of GDP)-0.2-0.1-0.10.10.1...Net international investment position (% of GDP)35.557.447.657.052.4...NIIP excluding non-defaultable instruments (% of GDP) (1).63.855.552.345.0...IIP liabilities excluding non-defaultable instruments (% of GDP) (1).232.4193.8206.9194.6...Export performance vs. advanced countries (% change over 5 years)0.4-2.2-8.4-5.0-0.8...Export market share, goods and services (y-o-y)..-1.17.9-0.5...Net FDI flows (% of GDP)-2.0-3.52.0-6.46.1...General government balance (% of GDP)-0.7-3.8-2.9-2.4-0.9-1.0-1.1-1.3Structural budget balance (% of GDP)..-2.7-2.2-1.4-1.4-1.3-1.7General government gross debt (% of GDP)92.399.7106.5106.1103.4101.499.898.7Tax-to-GDP ratio (%) (3)45.345.747.646.446.946.646.446.3Tax rate for a single person earning the average wage (%)42.042.342.340.8....Tax rate for a single person earning 50% of the average wage (%)25.826.625.721.6....(1) NIIP excluding direct investment and portfolio equity sharesforecast(2) domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-controlled branches.(3) The tax-to-GDP indicator includes imputed social contributions and hence differs from the tax-to-GDP indicator used in the section on taxation 
 
 
 
 
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

of 

all 

48 % 

Since  the  start  of  the  European  Semester  in 
2011, 
country-specific 
recommendations  addressed  to  Belgium  have 
recorded at least ‘some progress' (5). 'Limited' or 
'no  progress'  has  been  made  on  52 %  of  these 
recommendations  (see  Graph  2.1).  Substantial 
progress has been achieved in improving the cost-
the  economy,  while  full 
competitiveness  of 
implementation  has  been  achieved 
the 
stabilisation of the financial sector. 

in 

Since 2011, Belgium has made some progress in 
strengthening  public 
finances.  However,  a 
significant  share  of  the  improvement  stemmed 
from a reduction in interest spending thanks to the 
low  interest  rates  environment.  A  more  structural 
budget consolidation could have been  undertaken. 
Meeting  the  target  of  a  structurally  balanced 
budget has been postponed to 2020. After peaking 
at 106.8 % of GDP in 2014 the public debt-to-GDP 
ratio  has  started  to  decline  though  remains  at  a 
high  level,  contributing  to  fiscal  sustainability 
risks.  

Measures have been introduced to increase the 
effective  retirement  age,  but  the  sustainability 
of the pension system remains a challenge. Since 
2012, age and career length requirements for early 
retirement  have  been  repeatedly  increased.  In 
2015,  an  increase  by  two  year  in  the  statutory 
retirement  age  was  legislated,  with  an  impact  in 
2025  and  2030.  In  addition,  the  option  of  leaving 
the labour  market prematurely through the  system 
of  unemployment  with  company  allowance  has 
been  progressively  tightened.  Smaller  pension 
reforms  concerned  civil  servant  pensions,  for 
example the reduction of preferential accrual rates 
and  the  way  years  of  study  are  taken  into 
consideration.  

In  spite  of  recent  improvements,  potential 
growth estimates remain below pre-crisis levels. 
The  subdued  improvement  reflects  the  declining 
contribution  of  labour,  due  to  the  slow  growth  in 
the working-age population and the fall in average 
hours  worked.  Between  2013  and  2017,  various 
wage  moderation  policies  were  implemented  to 
stimulate  job  creation,  including  a  real  wage 
freeze,  changes  to  parameters  of  the  indexation 

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

past, see in particular section 3. 

calculation  mechanism 
suspension of wage indexation agreements.  

and 

a 

temporary 

Measures  have  been  taken  to  reduce  the  tax 
wedge  on  labour.  Gradual  decreases  in  personal 
income  taxation  and  employers'  social  security 
contributions,  with  more 
than  proportional 
reductions  for lower  salaries  have been legislated. 
The targeting of low wages favours the young and 
the low-skilled, who tend to have lower wages, but 
also the lowest employment rates; thus it supports 
activation for some of the most vulnerable groups. 
Overall, estimates by the Federal Planning Bureau 
and 
the  National  Bank  of  Belgium  suggest 
additional  job  creation  of  45 000–65 000  jobs  by 
2021.  These  measures  will  also  contribute  to 
improving 
is 
gradually being eroded. 

the  cost-competitiveness,  which 

the 

further 

reinforce 

Recent  changes  to  the  corporate  income  tax 
system  will 
cost-
competitiveness  of  the  economy.  The  move 
towards  a  system  with  lower  statutory  rates  and 
fewer tax exemptions will also help to simplify an 
overall  complex  tax  system  and  to  increase  the 
attractiveness  of  the  Belgian  economy  for  doing 
business.  The  extension  of  the  tax  shelter  scheme 
to  SMEs  removes  one  of  the  constraints  to  the 
development  of  dynamic,  fast-growing  firms,  by 
providing easier access to financing.  

Graph 2.1:  Overall multiannual implementation of 2011-

2018 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 
2019 Country Report. 
Source: European Commission 

14 

6%43%17%31%3%No ProgressLimited ProgressSome ProgressSubstantial ProgressFull Implementation 
 
                                                           
 
 
2. Progress with country-specific recommendations 

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. 
Sustained  cutbacks  in  investment  budgets  have 
resulted  in  net  public  investment  averaging  zero 
since  the  1990s,  eroding  the  quality  of  public 
infrastructure  (see  Section  3.4).  The  political 
for  strategic 
agreement  on  a  national  pact 
investments, the announcement of an inter-federal 
energy  pact  in  2017  and  calls  to  agree  an  inter-
federal  mobility  strategy  could  provide  renewed 
impetus  for  investment,  including  in  energy  and 
transport infrastructure.  

the 

2018 

level,  despite 

the  high  needs 

limited  progress 

in 
Belgium  has  made 
country-specific 
addressing 
recommendations.  There  has  been 
limited 
progress  on  distributing  fiscal  targets  among  the 
various levels of government in a  way that can be 
enforced.  Limited  progress  has  been  made  on 
improving  the  composition  of  public  expenditure. 
No  spending  review  has  been  undertaken  at  the 
federal 
for 
expenditure  reprioritisation.  Meanwhile,  through 
the  National  Plan  for  Strategic  Investment,  an 
increase  in  infrastructure  investment  is  projected. 
There  is  also  limited  progress  on  vocational 
training,  quality  of  education  reforms  with  regard 
to  equity,  although  Communities  are  phasing  in 
major  education  reforms  (e.g.  reforms  covering 
several sectors in the Flemish Community and the 
French  Community's Pacte d'Excellence). There is 
limited  progress  on  labour  market  reforms  with 
regard  to  disadvantaged  groups.  Limited  progress 
has  been  made 
in 
knowledge-based capital, even if measures vary in 
scope  at  regional,  community  and  federal  level. 
Progress  on  sector  regulation  has  been  limited 
overall.  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, 
some  progress  has  been  made  in  improving 
mobility. 

professional 
continue 

certain 
restrictions 

investment 

fostering 

in 

15 

 
 
 
 
2. Progress with country-specific recommendations 

Table 2.1: 

Progress with the implementation of 2018 CSRs 

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

16 

Belgium Overall assessment of progress with 2018 CSRs:  Limited progress CSR 1: Ensure that the nominal growth rate of net primary government expenditure does not exceed 1.8 % in 2019, corresponding to an annual structural adjustment of 0.6 % of GDP. Use windfall gains to accelerate the reduction of the general government debt ratio. Pursue the envisaged pension reforms and contain the projected increase in long-term care expenditure. Pursue the full implementation of the 2013 Cooperation Agreement to coordinate fiscal policies of all government levels. Improve the efficiency and composition of public spending at all levels of government to create room for public investment, notably by carrying out spending reviews. Belgium has made limited progress in addressing the fiscal-structural part of CSR1(1):  Limited progress in pursuing the envisaged pension reforms.  Limited progress in containing the projected increase in long-term care expenditure.  Limited progress pursuing the full implementation of the 2013 Cooperation agreement.  Limited progress in improving the composition and efficiency of public spending, by carrying out spending reviews.  CSR 2: Remove disincentives to work and strengthen the effectiveness of active labour market policies, notably for the low-skilled, people with a migrant background and older workers. Pursue the education and training reforms, including by fostering equity and increasing the proportion of graduates in science, technology, engineering and mathematics.  Belgium has made limited progress in addressing CSR2  Limited progress in removing disincentives to work and strengthening the effectiveness of active labour market policies.  Limited progress in pursuing education and training reforms.  Limited progress in increasing the proportion of graduates in science, technology, engineering and mathematics. CSR 3: Reduce the regulatory and administrative burden to incentivise entrepreneurship and increase competition in services, particularly retail, construction and professional services. Tackle the growing mobility challenges, in particular through investment in new or existing transport infrastructure and reinforcing incentives to use collective and low emission transport.  Belgium has made limited progress in addressing CSR3  Limited progress in reduce the regulatory and administrative burden to incentivise entrepreneurship.  Limited progress in increasing competition in services, particularly retail, construction and professional services.  Some progress in tackling the growing mobility challenges, in particular through investment in new or existing transport infrastructure.  Limited progress in reinforcing incentives to use collective and low emission transport.    
 
 
 
 
2. Progress with country-specific recommendations 

Box 2.1: EU funds and programmes contribute to addressing structural challenges and to 
fostering growth and competitiveness in Belgium 

The  financial  allocation  of  the  European  Structural  and  Investment  Funds  (ESI  Funds),  aimed  to 
support  Belgium  in  facing  development  challenges,  amounts  to  up  to  some  EUR  2.7  billion  in  the 
current Multiannual Financial Framework,  with a national co-financing of EUR 3.3 billion. The total 
investment is around 0.2 % of the country’s GDP. As of the end of 2018, some EUR 2.27 billion (around 
83 % of the total) has already been allocated to specific projects. Competitiveness of SMEs, sustainable and 
quality employment, social inclusion, educational and vocational training as well as research and innovation 
were the main themes covered by ESIF Funds.  

About 28 % of the total ESI funds spent in Belgium aims to increase the competitiveness of SMEs. This 
is achieved by supporting innovation and research activities and stimulating the growth of the e-economy by 
developing  synergies  between  businesses,  R&D  centres  and  higher  education,  supporting  entrepreneurship 
and by improving skills of the workers. 

The European Social Fund has contributed to the improvement of the social situation at all levels. EUR 
1.1  billion  in  investment  will  contribute  to  the  development  of  human  capital  growth  and  improve  labour 
market  participation,  promoting  social  inclusion,  improving  the  outcomes  of  the  education  and  training 
systems  and  helping  the  most  vulnerable  groups  in  society  (in  particular  the  young  and  long-term 
unemployed) to find work. 

Over  the  period,  EUR  657  million  will  be  spent  to  shift  towards  a  low-carbon  economy  through 
investment in energy efficiency, by encouraging the sustainable and efficient use of natural resources. 
EUR 114 million will be spent on making buildings more energy efficient and improving district heating and 
high-efficiency cogeneration and EUR 64 million will be allocated to the move towards an energy-efficient, 
decarbonised transport sector. Investments will be made on the sustainability of fisheries and aquaculture as 
well as of agriculture practices and ecological management, alongside investments in new technologies. 

Belgium is among the top participating countries in the H2020 projects, being the 7th largest participant. 886 
SMEs participated in H2020 projects. 

EU funds have helped to address policy challenges identified in the 2018 CSRs. ESI Funds contributed in 
addressing  two  of  the  three  recommendations  of  the  2017  and  2018  reports,  namely  through  the  above 
mentioned investments in educational and vocational training as well as through research and innovation and 
support to SMEs. 

In addition, the Commission can provide tailor-made technical support upon a Member State's request 
via  the  Structural  Reform  Support  Programme  to  help  Member  States  implement  growth-sustaining 
reforms to address challenges identified in the European Semester process or other national reforms. 
Belgium, notably Flanders,  for example, is receiving support to carry out spending reviews to ensure better 
management  of  public  expenditure.  The  Commission  is  also  assisting  the  authorities  in  their  efforts  to 
improve traffic conditions in the Antwerp port area through better use of inland waterways. In addition, work 
will  soon  start  on  promoting  integrated  primary  care  in  Flanders  and  on  a  feasibility  assessment  for 
introducing advanced new technologies in customs procedures. 

In  Belgium,  the  overall  volume  of  approved  operations  by  the  European  Investment  Bank  with  European 
Fund for Strategic Investments (EFSI) backing amounts to EUR 1.8 billion, which is set to trigger a total of 
EUR 8.3 billion in additional private and public investments (February 2019). Belgium ranks 18th as to the 
overall volume of approved operations as a share of GDP. Under the Infrastructure and Innovation window, 
22 projects financed by the EIB with EFSI backing were approved, for a total of about EUR 1.6 billion set to 
trigger EUR 7.1 billion in total investment. On the SMEs side, 17 approved projects were financed by the EIB 
with EFSI  backing,  for approximately EUR 169 million in total financing set to trigger EUR 1.2 billion in 

17 

 
2. Progress with country-specific recommendations 

total investment with some 8 254 SMEs and mid-cap companies expected to benefit from improved access to 
finance. An EFSI-backed project in Belgium is "Northern Offshore Wind", for which the EIB is lending EUR 
450  million  to  build  the  Northest  wind  farm  off  the  Belgian  coast.  It  will  comprise  44  wind  turbines  and 
supply electricity to around 324 000 Belgian families. 

More information at: https://cohesiondata.ec.europa.eu/countries/BE 

18 

 
3.  REFORM PRIORITIES 

3.1.  PUBLIC FINANCES AND TAXATION 

3.1.1.  FISCAL POLICIES 

3.1.2.  COMPOSITION OF PUBLIC SPENDING 

to 

further 

increase 

to  1.1 %  of  GDP 

According 
the  Commission  2018  Autumn 
Forecast, the Belgian general government deficit was 
projected  to  remain  broadly  stable.  The  headline 
deficit was estimated to have increased from 0.9 % 
of GDP in 2017 to 1.0 % in 2018 and is projected 
to 
in 
2019.   Revenue  growth  is  expected  to  be  affected 
by  cuts  in  personal  income  taxation  and  social 
security  contributions  in  the  context  of  the  "tax 
shift",  a  multi-year  tax  reform  lowering  the  tax 
is 
pressure  on 
expected  to  remain  contained  by  lower  interest 
payments and by moderate growth in public sector 
wages  and  social 
in  kind.  These 
moderating  factors  are  expected  to  be  partially 
offset by an increase in public investment.  

labour.  Expenditure  growth 

transfers 

Budget consolidation is expected to have paused 
in  2018,  with  the  structural  balance  remaining 
broadly  unchanged.  From  a  deficit  of  -4.1 %  of 
GDP  in  2011,  the  structural  balance  improved  by 
2.8 pps  of  GDP.  However,  almost  half  of  the 
improvement stemmed from a reduction in interest 
rates 
the 
thanks 
spending 
environment.  A  more 
budget 
consolidation  could  have  been  undertaken,  given 
supportive  macroeconomic 
the 
the  caretaker 
conditions.  However,  due 
government, structural reform will most likely stall 
in 2019, slowing the consolidation effort.  

low 
structural 

relatively 

interest 

to 

to 

Public debt is on a declining trend, but its high 
level  is  a  source  of  vulnerability.  Debt  is 
projected  to  have  declined  to  101.4 %  of  GDP  in 
2018,  from  a  peak  of  107.6 %  of  GDP  in  2014. 
The gradual reduction of public debt is expected to 
continue,  allowing  a  debt-to-GDP  ratio  of  98.7 % 
in 2020 according to the Commission 2018 autumn 
forecast.  Combined  with  the  structural  budget 
deficit,  high  debt  limits  the  authorities’  scope  for 
new  or  countercyclical  policies  in  case  of  a 
downturn.  The  projected  increase  in  age-related 
spending, if left unaddressed, would amplify those 
risks  (see  Section  3.1.5).  Moreover,  Belgium  will 
have  to  cope  with  important  public  investment  in 
defence and infrastructure in the years to come. 

General government expenditure 

In  spite  of  a  recent  decrease,  total  expenditure 
as  a  share  of  GDP  in  Belgium  remains  among 
the highest in the euro area. This is still true even 
when  netted  out  from  interest  spending.  Primary 
expenditure (total public expenditure net of interest 
payments) stood at 49.8 % of GDP in 2017, down 
from  a  peak  of  52.5 %  of  GDP  in  2014,  but  still 
3.5  percentage  points  of  GDP  above  the  2009 
level.  Lower  interest  spending  played  a  leading 
role by in the  decrease in total public expenditure 
since 2014. At the same time, public investment is 
low at 2.4 % of GDP, representing less than 5 % of 
total primary spending (Graph 3.1.1). 

The  high  level  of  public  expenditure  suggests 
that  there  is  scope  for  a  more  spending-based 
fiscal  adjustment.  A  large  portion  of  public 
spending  is  mandated  by  permanent  legislation, 
which  limits  governments’  ability  to  review  and 
change  spending  priorities.  However,  integrating 
spending reviews on broad spending aggregates at 
each  level  of  government  could  support  such  a 
spending-based  fiscal  adjustment  and  medium-
term  expenditure  control  and  create  space  for 
much-needed investment.  

Spending  reviews  and  policy  evaluations  can 
improve  the  efficiency  of  public  expenditure. 
Spending  reviews  are  a  key  tool  for  reprioritising 
expenditure  towards  spending  outlays  to  better 
meet  a  country's  economic  and  societal  goals.  By 
unlocking  efficiency  gains,  they  can  generate 
savings  without  constraining  growth.  Most 
Member  States  have  embarked  on  spending 
reviews,  partly  prompted  by  the  2016  Eurogroup 
common  principles.  Belgium  has  so  far  not 
undertaken a  spending review at the federal level, 
despite 
expenditure 
reprioritisation. 

needs 

high 

the 

for 

19 

 
 
3.1. Public finances and taxation 

Graph 3.1.1:  Primary expenditure versus gross fixed capital 

formation in 2017 

indexation  of  wages  and  of  social 
generates unavoidable growth trends.  

transfers 

Belgium  spends  comparatively  more  than  the 
euro  area  average  on  public  wages,  private 
sector  subsidies  and  social  benefits  (Graph 
3.1.2).  The  public  wage  bill  represents  about  a 
quarter  of  public  expenditure  in  Belgium,  notably 
due to one of  the highest number of public sector 
workers as a share of the labour force (IMF, 2016). 
Additionally,  subsidies  have  doubled,  as  a 
percentage  of  GDP,  since  2000  as  they  include 
some  targeted  reductions  in  taxes  and  employer 
social  security  contributions,  as  well  as 
the 
subsidies  for  the  service  voucher  system.  Finally, 
social  benefits,  mainly  pensions,  healthcare  and 
elderly  care  services,  account  for  around  half  of 
public  expenditure  in  Belgium.  Due  to  population 
ageing, 
is 
expected to accelerate (see Section 3.1.5).  

the  growth  of  social  expenditure 

Given  the  high  level  of  public  expenditure,  the 
outcomes  of  certain  policies  and  the  quality  of 
certain  public  services  raises  questions  of 
cost-efficiency. The National Bank of Belgium has 
questioned  the  overall  efficiency  of  education, 
health  and  mobility  policies.  In  particular,  the 
quality  of  educational  outcomes  does  not  reflect 
the high spending on education in Belgium, though 
there  are 
important  regional  differences  (see 
Section  3.3.2).  Health  spending  increased  steadily 
over  the  past  10  years  and  is  higher  than  in  most 
EU  countries.  Although  the  healthcare  system 
performs  generally  well,  primary  care  and 
prevention  can  improve  and  there  are  important 
disparities  in  unmet  care  needs  by  income  group. 
The  provision  of  informal  care  is  above  the  EU 
average (see  Section 3.3.3). The  World Economic 
Forum  has  ranked  Belgium  41st  in  terms  of 
efficiency of railway services and 52nd in terms of 
quality of roads (see section 3.4.2).  

Source: European Commission 

in 

service 

interest 

Federal  and  regional  authorities  have  recently 
expressed 
integrating  spending 
review 
in  their  budgetary  mechanism.  At 
regional  level,  Flanders  is  working  to  incorporate 
spending reviews in its budgetary process with the 
support  of  the  Commission.  As  a  first  step,  the 
Flemish government is carrying out a pilot project 
on 
(dienstencheques/titres 
services)  to  be  finalised  in  spring  2019.  A  key 
ingredient for the success of such reviews is sound 
policy  evaluation.  Despite  the  apparent  consensus 
about  the  usefulness  of  such  a  system,  its  design 
and implementation are made more difficult by the 
fragmented  allocation  of  responsibilities  across 
different 
and  government 
services 
levels. (6)  

vouchers 

federal 

Spending  reviews  can  help  Belgium  prioritise 
expenditures.  A  selectivity  index  (which  is  equal 
to  0  when  all  fiscal  categories  grow  at  the  same 
pace)  shows  how  Belgium’s  spending  policy  has 
not been as selective as that of other EU Member 
States(7).  This 
likely  reflects  a  reliance  on 
expenditures 
containing 
across-the-board, 
targeted  measures.  In  addition, 
compared 

to 

(6)  A recent report from the Court of Audit concluded that the 
federal  government  did not properly  integrate  a  system  of 
public  policy  evaluation  related  to  government  budget, 
Cour  des  Comptes,  April  2018,  Capacité  des  services 
publics fédéraux à évaluer les politiques publiques.  

(7)  For  details  on  the  methodology,  see  Lorach  and  Sode 

(2015) and IMF (2016). 

20 

BEBGCZDKDEEEIEELESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISEUKEA-19EU-282030405060123456Primary expenditure (% of GDP)Gross fixed capital formation (% of GDP) 
 
                                                           
 
 
3.1. Public finances and taxation 

Graph 3.1.2:  Primary expenditure by type - % of GDP 

infrastructure  such  as  roads,  railways,  energy  and 
high-speed  data  has  a  positive  effect  on  the 
productivity  of 
the  private  sector.  In  2016, 
infrastructure  investment  in  Belgium  stood  at 
0.5 % of GDP compared to 0.6 % in the euro area 
and  more than 1 % in France and the Netherlands 
(Graph 3.1.3). 

that 

increasing 

An  increase  in  public  investment  or  even  a 
change  in  its  composition  would  positively 
impact  on  medium  to  long-term  economic 
growth.  Available  empirical  studies  (Biatour, 
Kegels,  Van  der  Linden  and  Verwerft,  2017) 
suggest 
investment 
permanently by 0.5 pp. of GDP would increase the 
economic  output  by  0.24  pp.  after  1  year  and  by 
2.77  pps  after  20  years.  Alternatively,  raising 
investment  by  0.5 %  of  GDP, 
infrastructure 
investment  unchanged 
keeping 
(implying  a 
in  non-infrastructure 
investment),  could  raise  GDP  by  more  than  1  pp. 
after 3 years and by more than 8 pps after 20 years. 

total  public 

reduction 

public 

Graph 3.1.3:  Government investment: breakdown by 
functional classification (average 2008-
2016),  % of GDP 

Source: European Commission 

Investment 

to 

the  economy's 

Public investment, commonly considered key in 
boosting 
long-term  growth 
potential,  remains  relatively  low.  Successive 
reduce  capital 
governments  have  chosen 
spending over current expenditure under budgetary 
constraints.  As  a  result,  public  investment  in 
Belgium  merely  compensated  for  the  depreciation 
of the existing capital stock in recent  years. Since 
1995,  the  public  net  stock  of  capital  has  declined 
by around 15 percentage points of GDP. Germany 
experienced  similar  evolution,  but  since  2006  the 
drop  halted.  By  contrast,  France  managed  to 
slightly  increase  its  capital  stock  over  the  same 
period. 
fixed  capital 
formation  expenditure  stood  at  2.2 %  of  GDP,  in 
line  with  Germany,  but  less  than  in  the  euro  area 
(2.6 %  of  GDP)  and  well  below  France  and  the 
Netherlands (both at 3.4 % of GDP). 

In  2017,  government 

investment  has 
The  composition  of  public 
changed  over  time,  with  the  share  of  public 
investment  in  infrastructure  on  a  declining 
path.  Infrastructure  investment  decreased  by  0.1 
percentage point of GDP between 2005 and 2016. 
Over the same period, investment in hospitals and 
schools  increased  by  0.4 %  percentage  point  of 
GDP  (Biatour,  Kegels,  Van  der  Linden  and 
Verwerft,  2017).  Investment  in  infrastructure  is 
supposed  to  have  a  larger  effect  on  economic 
growth than other types of government investment. 
This  is  because  public  investment  in  network 

Source: European Commission 

Most  public  investment  is  carried  out  by  the 
federated  entities  (regions  and  communities) 
and local authorities. Almost 90 % of total public 
investment  is  at  the  level  of  regions/communities 
and  local  governments  (Graph  3.1.4).  The  figures 
are even higher for infrastructure investment, with 
local  government  responsible  for  almost  all 
infrastructure  investment  carried  out  in  recent 
years. This reflects the distribution of competences 

21 

0,010,020,030,0Other capital expenditureOther current expenditureGross fixed capital formationSubsidiesIntermediate consumptionCompensation of employeesSocial benefitsEABE0,00,51,01,52,02,53,03,54,04,5EABEDEFRNLInfrastructureHospitals and schoolsPublic goodsRedistribution 
 
 
3.1. Public finances and taxation 

rising  staff  and  pension  costs,  have  also  put  a  lid 
on investment spending,  which is easier to reduce 
than operational expenditure.  

regions  decided 

Initiatives  have  been  taken  to  increase  the 
efficiency  of  local  public  spending.  To  achieve 
economies  of  scale  and  rationalise  operations,  the 
to 
Flemish  and  Walloon 
streamline the competencies of provinces and offer 
municipalities  incentives  to  merge.  In  Flanders, 
municipalities  and  the  CPAS/OCMW  will  merge 
their governance, budgetary planning and some of 
functions.  More  broadly, 
their  key  support 
increased collaboration across local government in 
some 
(public  works 
functions 
management,  financial  planning,  IT  platforms, 
public  procurement,  and  debt  management)  can 
yield  efficiency  gains  through  economies  of  scale 
and the spread of best practice. 

specific 

Graph 3.1.4:  Share of direct expenditure (net of intra-

government transfers) and investment by level 
of government 

Source: European Commission 

On  the  initiative  of  the  federal  government,  a 
committee  of  experts  outlined  a  National  Pact 
for  Strategic  Investment  identifying  public  and 
private 
investment  needs  and  addressing 
investment  recommendations  to  authorities  at 
all  government  levels.  The  report  recommends 
EUR  144-155  billion  additional  investments  by 
2030, coming from  both the public (45%) and the 
private sector (55%), as well as support measures. 
This  would increase the annual investment rate  to 
between 3 % and 3.5 % of GDP. Investment would 

across  the  different  levels  of  government,  where 
the  federal  administration  focused  its  investment 
on  public  goods  (mostly  defence  and  general 
public  services).  Regions  and  communities  are 
responsible  for  education  and  most  research;  they 
share  responsibility  for  the  road  network  with 
municipalities.  Local  government 
in 
transport  and  redistribution  (in  particular  social 
protection, recreation, culture and religion). 

invested 

Overall  investment  by  the  federated  entities 
(regions  and  communities)  and  by 
local 
authorities  has  remained  stable  since  2000, 
hovering  at  around  2 %  of  GDP,  but  over  this 
period  the  trend  has  diverged  among  them. 
Capital 
and 
by 
communities  increased  from  1.0 %  of  GDP  in 
2000 to 1.3 % in 2017. By contrast, investment by 
local government fell from 1.0 % of GDP to 0.7 % 
of GDP in 2017. It has also fallen from 16.5 % of 
total  local  government  primary  spending  in  2000, 
to 10.1 % in 2017.  

expenditure 

regions 

the 

Increased budgetary constraints explain most of 
the  drop  in  local  government  investment.  In 
2017,  wages  represented  around  60 %  of  local 
governments'  expenditure.  The  increase  in  social 
contributions  to  be  paid  stemming  from  the  2012 
reform  of  the  financing  system  of  their  statutory 
staff  pensions  is  expected  to  continue  to  push  up 
labour  costs  for  local  government  in  the  medium 
term.  Social  spending  is  also  increasing.  The 
"integration  income"  paid  by  the  local  public 
welfare  centres  (CPAS/OCMW)  accounted  for 
0.3 % of GDP in 2017, up from 0.1 % of GDP in 
2000. This notably reflects higher needs associated 
with  new  restrictions  on  unemployment  benefits 
and  the  limitation  in  time  of  the  "insertion 
allowance" for jobseekers.  

Budgetary  rules  to  which  municipalities  are 
subjected  are  rather  strict.  Municipalities  are 
requested  to  observe  the  principle  of  an  annual 
balanced  budget.  In  2002  the  monitoring  of  the 
local  public  finances  was  handed  over  to  the 
regions.  Since  then,  different  rules  governing  the 
budget of the local governments budget have been 
introduced at regional level.  However, on average 
the  framework  has  been  reinforced,  keeping  the 
principle of the annual balanced budget (which led 
to  an  overall  positive  balance  as  well  in  the 
European System of Accounts - ESA 2010 terms). 
It  is  likely  that  those  rules,  in  combination  with 

22 

01020304050607080901002000201720002017Expenditure as shareof primary expenditureInvestment as share oftotal investmentFederalSocial securityRegions/CommunitiesMunicipalities 
 
3.1. Public finances and taxation 

Programme 

Budgetary  coordination 
is  not  sufficiently 
effective yet, as the 2013 cooperation agreement 
has not been fully implemented. As described in 
the 2018 country report, Belgian federated entities 
and  the  federal  government  signed  a  cooperation 
agreement  in  2013  to  ensure  effective  budget 
coordination.  In  contrast  with  the  practice  of 
the 
previous  Stability  Programmes,  when 
Concertation  Committee  ‘took  note’  of  the  fiscal 
trajectory,  all  levels  of  government  approved  the 
overall  fiscal  trajectory  presented  in  the  2018 
Stability 
the 
achievement  of  the  fiscal  targets  by  2020  for  all 
government  levels.  Although  this  approval  added 
credibility  to  the  overall  trajectory,  there  was  no 
formal  agreement  on  the  annual  fiscal  targets  at 
each level of government. A lack of agreement on 
the  targets  at  each  level  of  government  may 
undermine  the  viability  of  the  overall  trajectory 
towards  the  medium-term  objective.  In  addition, 
sector  borrowing 
this  prevents 
requirements  section  of  the  High  Council  of 
Finance  from  effectively  monitoring  compliance 
with  these  targets  (see  High  Council  of  Finance, 
2018, pp 13-14). 

the  Public 

supported 

and 

3.1.4.  DEBT SUSTAINABILITY ANALYSIS AND 

FISCAL RISKS 

Short-term debt sustainability does not seem to 
give  cause  for  concern.  The  short-term  indicator 
S0 (9)  does  not  flag  significant  risks,  as  the 
identified short-term fiscal challenges are not acute 
enough  to  generate  overall  risks  of  fiscal  stress. 
The low short-term risk is consistent with the ‘AA’ 
rating  category  given  to  Belgian  government  debt 
by the three major rating agencies.  

In  the  medium  and  long  term,  Belgium  fiscal 
sustainability  faces  substantial  challenges.  Both 
the  S1 
the  debt  sustainability  analysis  and 
indicator (10) (4.3 pps of GDP) indicate high risk in 
the  medium  term.  This  is  mostly  due  to  the  high 
level  of  public  debt  and  to  a  lesser  extent  to  the 
in  age-related  expenditure. 
projected 
(full 
Adhering 

increase 
to 

the  existing 

fiscal 

rules 

target digitisation, cyber security, education, health 
care, energy and mobility.  

Due to the separation of competences, the Pact's 
implementation  will  require  close  coordination 
across  all  levels  of  government.  A  step  in  this 
direction  has  been  the  creation  of  an  inter-
ministerial  conference,  which  aims  to  facilitate 
coordination  across  all  government  levels  with 
regard  to  inter-federal  investment  projects  and 
associated regulatory barriers.  

incorporate 

A  global  agreement  on  an  enforceable 
distribution of fiscal targets among government 
levels  could 
investment  space, 
taking into account large-scale projects in every 
region  and  their  timing.  The  EU  budgetary 
framework of the Stability and Growth Pact (SGP) 
applies  to  Belgium  as  a  whole,  and  not  to  its 
individual  entities.  Under  the  2013  Cooperation 
agreement  (see  Section  3.1.3)  each  individual 
entity  has  a  commitment  to  achieve  a  balanced 
budget  in  the  medium  term.  Cooperation  between 
all entities could allow for greater flexibility, and a 
temporary  softening  of  the  budgetary  constraints 
for  an  entity  facing  substantial  investment  needs, 
without exceeding the limit imposed by the SGP at 
national level.  

3.1.3.  FISCAL FRAMEWORK 

as 

the 

The  autonomy  of  the  High  Council  of  Finance 
(HCF)  has  recently  been  reinforced.  The  Royal 
Decree of 23 May 2018 boosted the independence 
of  the  Public  Sector  Borrowing  Requirements 
section of the High Council (HCF-PB), which was 
independent  monitoring 
appointed 
institution  envisaged  by  the  TSCG (8).  The  royal 
decree  also  provided  the  section  with  additional 
staff  and  ensured  its  capacity  to  communicate 
freely.  The  authorities  also  signed  a  protocol  on 
the  free  exchange  of  information  between  the 
National  Accounts  Institute  and  the  HCF-PB. 
Progress has also been achieved in formalising the 
‘comply or explain’ principle, whereby the opinion 
of  the  HCF-PB  would  either  be  followed,  or  the 
government would explain why it departed from it. 

(8)  The  Treaty  on  Stability,  Coordination  and  Governance  in 
the  Economic  and  Monetary  Union  (TSCG)  was  formally 
concluded  on  2  March  2012,  and  entered  into  force  on  1 
January 2013. 

(9)  The S0 indicator aims at an early detection of fiscal stress 
stemming from risks within a one-year horizon, making use 
of the signalling power of its components 

(10)  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. 

23 

 
                                                           
                                                           
3.1. Public finances and taxation 

of  0.2  pp.  in  the  EU  (European  Commission, 
2018d).  The  bulk  of  this  increase  is  expected  to 
emerge  in  the  next  few  decades.  The  main  driver 
of this development is demographic ageing. Graph 
3.1.6  illustrates  the  impact  on  the  projections  of 
changes  in  the  underlying  assumptions.  Lower 
migration  or 
lower  employment  rates  would 
increase pension expenditure by around 0.5 pps of 
GDP  relative  to  the  baseline.  A  main  downward 
risk relates to the prospect of lower-than-assumed 
productivity  growth.  Also,  more  pronounced 
ageing (through greater gains in longevity or lower 
fertility)  risks  pushing  up  baseline  projections 
considerably.  Conversely,  increased  employment 
among  older  workers  or  higher  productivity 
growth would help contain ageing costs. The same 
holds  for  introducing  a  link  between  the  statutory 
retirement age and gains in longevity.  

Past government measures are projected to help 
raise  the  employment  rate  of  older  people  and 
lower  the  coverage  ratio (13).  The  average 
effective  age  of  exit  from  the  labour  market  is 
projected  to  increase  from  61.8  years  in  2016  to 
64.3 years by 2030 as a result of the tightening of 
early retirement conditions and the increase in the 
statutory  retirement  age 
in  2025  and  2030. 
Projections  show  an  increase  in  the  participation 
those  aged  55-64,  with  an  upward 
rate  of 
convergence in female participation. However, the 
lower coverage ratio is partly offset by the  rise  in 
the benefit ratio (14) until 2040, which is currently 
below the EU average of 43.5 % (Federal Planning 
Bureau, 2018).  

The average length of retirement is projected to 
increase  considerably.  According  to  the  2018 
Ageing  Report  projections,  life  expectancy  would 
increase  faster  than  the  effective  retirement  age. 
The  outgoing  government  planned  to  lay  the 
groundwork  for  revising 
the  public  pension 
scheme  from  a  defined  benefit  system  to  a  point 
system,  with 
introducing 
stabilisation  mechanisms.  However,  plans  were 
delayed and eventually abandoned. The envisaged 

the  prospect  of 

the 

requirements  of 

compliance  with 
the 
preventive  arm  of  the  SGP  and  convergence  with 
the  medium-term  objective)  would  significantly 
reduce the public debt over GDP ratio compared to 
a  baseline  scenario  of  unchanged  fiscal  policy 
(Graph  3.1.5). 
the  S2 
the 
indicator (4.3  percentage  points  of  GDP)  (11) 
points  to  medium  sustainability  risk.  However, 
vulnerabilities  linked  to  the  high  debt  burden,  as 
captured  by 
the  debt  sustainability  analysis, 
indicate high sustainability risks overall in the long 
term (12). 

term, 

long 

In 

Graph 3.1.5:  Public debt medium-term projection and 

scenarios ( % of GDP) 

Source: European Commission 

3.1.5.  PENSIONS AND LONG-TERM CARE  

Pension system  

The  sustainability  of  the  pension  system  is 
expected  to  worsen  in  the  medium  term.  At 
12.1 %  of  GDP  in  2016,  pension  expenditure  in 
Belgium  was  above  the  EU  average  of  11.2 %  of 
GDP.  Public  pension  expenditure  is  projected  to 
increase by 2.9 percentage points of GDP between 
2016  and  2070,  compared  to  an  average  decrease 

(11)  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 
population. 

(12)  For  a  detailed  discussion  of  the  approach  to  the  overall 
long-term  sustainability  challenges  see  the  2018  Fiscal 
Sustainability Report (European Commission, 2019b). 

(13)  The  coverage  ratio  effect  is  defined  as  the  number  of 
pensioners of all ages to the population over 65 years. The 
analysis  of  the  coverage  ratio  provides  information  about 
how  the  developments  of  the  effective  exit  age  and  the 
share  of  the  population  covered  by  the  pension  system 
influence pension spending. 

(14)  The  benefit  ratio  is  the  average  pension  as  a  share  of  the 

economy-wide average wage. 

24 

99,975,5105,37580859095100105110BaselineSGP scenarioHigher interest rate scenarioLower GDP growth scenario 
 
 
                                                           
                                                           
3.1. Public finances and taxation 

below the EU average (18.2 %), but higher than in 
France and the Netherlands (both 10.0 %). 

Long-term care 

increase  up 

to  steadily 
to 

There are challenges to the  fiscal sustainability 
of  long-term  care,  both  in  the  medium  and  in 
the long term. With demographic changes, public 
spending  on  long-term  care,  at  2.3 %  of  GDP 
(above  the  EU  average  of  1.6 %  in  2016)  is 
projected 
to  4.0 % 
according 
the  "Ageing  Working  Group 
reference  scenario"  and  up  to  5.8 %  according  to 
the "Ageing Working Group risk scenario", which 
accounts for additional cost drivers to demography 
and  health 
care 
expenditure  will  add  to  pressure  on  the  budget, 
contributing 0.2 pp. of GDP to the S1 indicator for 
the medium term and 1.3 percentage point of GDP 
to  the  high  long-term  fiscal  sustainability  risk 
indicator S2. 

status.  Higher 

long-term 

care 

long-term 

Spending  on 
is  almost 
exclusively  devoted  to  in-kind  services.  In-kind 
services  (15)  accounted  for  99.7 %  of  long-term 
care  spending  in  2016  (EU  average:  84.4 %).  In-
kind  benefits  are  more  often  provided  as 
institutional  care  rather  than  home-care.  As  the 
cost of institutional care appears relatively high in 
Belgium compared to that of home care, long term 
care  provision  may  gain  in  efficiency  by  further 
focusing  on  home  care,  even  if  Belgium  relies 
already  on  home  care  for  43.7 %  (EU  average: 
33.7 % 
in  2016)  (Commission  services-EPC, 
2019). The provision of informal care in Belgium 
is above the EU average (see Section 3.3.3). 

The devolution to the regions of long-term care 
does not appear to question the fundamentals of 
the  current  system,  but  it  is  too  early  to  assess 
its  impact.  This  transfer  of  responsibilities  might 
render  the  organisation  of  an  already  complex 
system  more  challenging.  However,  despite  the 
risk  of  regional  divergence,  there  seems  to  be  a 
consensus  on  giving  priority  to  in-kind  benefits, 
keeping the role of cash allowances limited, rolling 
out  a  new  long-term  care  insurance  scheme,  and 
using sickness funds in the new insurance scheme. 

(15)  In-kind services are care services directly provided by care 
institutions  without  direct  payment  from  the  beneficiary, 
whereas  cash  benefits  allow  the  beneficiaries  to  purchase 
services directly. 

"credit-based  public  pension  system"  could  have 
contributed  to  the  sustainability  of  the  public 
pension  system  by  adjusting  to  life  expectancy  or 
the dependency ratio. 

Graph 3.1.6:  Increase in pension expenditure - selected 

scenarios – percentage points of GDP 

Source: European Commission 

Considerations  related  to  the  definition  of 
‘arduous jobs’ might slow down the increase in 
the  effective  retirement  age.  An  agreement  was 
reached between the authorities and labour unions 
on  public  sector  jobs  that  could  be  considered 
arduous; about half of all public sector jobs would 
fall under the scheme. The same guiding principles 
were  meant  to  apply  to  private  sector  jobs. 
However,  following  extensive  negotiations,  social 
partners  failed  to  reach  an  agreement  on  the 
criteria for arduous work in the private sector. As a 
result,  it  is  unclear  whether  the  new  scheme  will 
still  start  in  2020  and,  if  so,  which  jobs  will 
qualify.  A broad  application  of the  ‘arduous jobs’ 
notion  risks  undoing,  at  least  partially,  the  impact 
of earlier reforms on the effective retirement age.  

Poverty  risks  among  pensioners  are  projected 
to  decrease.  The  increasing  employment  rate,  the 
higher  average  exit  age  and  especially 
the 
increasing  activity  rate  of  women  are  expected  to 
translate  into  higher  pension  benefits.  In  2016, 
16.4 % of people aged 65 or over were "at risk of 
poverty  and  social  exclusion"  (AROPE).  This  is 

25 

-2,00,02,04,06,0baselinelower employment 20-64lower migrationlower TFPlower fertilityhigher life expectancyhigher empl. 55-74higher migrationhigher TFPChange 2016-2040Change 2040-2070 
 
                                                           
3.1. Public finances and taxation 

the  outdated  cadastral 

Taxes  on  rental  income  are  low  in  Belgium. 
When  immovable  property  is  rented  out  for 
housing  purposes,  it  is  not  the  rental  income 
income 
received  but 
(indexed  value  of  1975  estimated  income)  that  is 
included  in  the  personal  income  tax  base.  Using 
the  actual  rental  income  received  as  the  tax  base 
and  granting  a  tax  deduction  for  related  expenses 
would make the tax system more asset-neutral and 
less  distortive.  A  Commission  study  (European 
Commission,  2019a)  estimated  that  taxing  net 
rental  income  would  have  a  positive  budgetary 
impact  of  0.3 %  of  GDP.  This  additional  revenue 
could  be  used  in  a  more  growth-friendly  way,  for 
example  to  further  reduce  the  tax  burden  on 
labour. Moreover, making all rental expenses fully 
tax-deductible could  stimulate the building  sector, 
improve 
the  housing  stock 
(encouraging energy-saving investments) and help 
reduce the informal economy. Any reform should, 
however,  be  carefully  considered  against  the 
background of (rental) housing market policies and 
of its budgetary impact. 

the  quality  of 

Graph 3.1.7:  Tax wedge on labour, single earner, average 

wage (2017) 

Whether  devolved  long-term  care  management 
proves  more  efficient,  and  thereby  has  an  impact 
on fiscal sustainability, will largely depend on the 
quality of governance at regional level. 

3.1.6.  TAXATION 

Labour is highly taxed as a factor of production 
in Belgium. The recent ‘tax shift’ (16) reduced the 
tax  wedge  for  the  lowest  income  earners.  In 
particular,  the  labour  tax  wedge  for  those  earning 
50 %  of  the  average  wage  fell  by  4.7  pps  from 
2015  to  2017.  Nevertheless,  for  those  earning  a 
low  wage  (67 %  of  the  average  wage)  or  average 
wage, the tax wedge remains the highest in the EU 
(Graph  3.1.7).  This  high  tax  burden  on  labour  is 
due to narrow personal income tax brackets. Even 
average  income  earners  are  subject  to  the  highest 
income  tax  rate.  Broadening  the  tax  base  by 
reducing  tax  expenditures  could  generate  the 
necessary  revenue  to  broaden  tax  brackets.  In 
addition,  the  ceiling  for  claiming  the  ‘marital 
quotient’, applied in the  personal income tax, is a 
high disincentive to work for second earners.(17)  

in  most 

The  extensive  use  of  tax  expenditures  reduces 
the  efficiency  of  the  Belgian  tax  system.  The 
tax 
tax  expenditure 
proportion  of 
categories  is  high (18)  and  this  leads  to  economic 
distortions.  For  instance,  reduced  VAT  rates, 
widely  used  in  Belgium,  are  not  an  efficient 
redistribution  mechanism,  as  they  do  not  allow 
targeting 
tax 
expenditures  may  be  justified  to  correct  market 
failures, streamlining  their  use  would simplify the 
tax  system  and  generate  the  necessary  revenue  to 
reduce tax rates. 

low-income  households.  While 

(16)  Taxes  on  labour,  including  social  contributions,  are  being 
reduced  in  several  steps  between  2016  and  2020,  while 
others,  mainly  consumption  taxes,  have  been  increased, 
partially compensating for the labour tax cuts. 

(17)  This  feature  of  the  personal  income  tax  calculation  for 
couples  assigns  part  of  taxable  income  from  the  partner 
with  the  highest  income  to  the  partner  without  an  income 
of their own, or with a limited own income. However, the 
couple  can  no  longer  benefit  from  the  marital  quotient 
when the partner earns more than 30 % of the couple's total 
earned income. 

(18)  23.1 %  of  personal  income  tax  receipts  (excluding  tax 
expenditures  through  the  company  car  system  which 
amounts  to  some  EUR  1.5  billion)  more  or  less  half  of 
which related to replacement income; 13.4 % of corporate 
income  tax  receipts;  32.3 %  of  value-added  tax  (VAT) 
receipts (Belgian tax expenditures report, 2017). 

Source: European Commission 

Transaction  taxes  on 
immovable  property 
remain  high  in  Belgium,  hindering,  amongst 
other  negative  effects,  labour  mobility.  These 
taxes are among the highest in the EU at 2.3 % of 
GDP  (1.0 %  average  in  the  EU)  in  2017 (19). 
According  to  the  World  Bank  Ease  of  Doing 

(19)  Other  taxes  on  property.  Taxation  trends  in  the  European 

Union, 2019, forthcoming 

26 

0510152025303540455055BEDEITFRATSIFILVSKPTLTELESEENLLUIEMTEUEAOECDIncome taxEmployer contributionsEmployee contributionsEU average 
                                                           
 
                                                           
3.1. Public finances and taxation 

transaction 

Business  report,  the  process  of  transferring  a 
property  has  become  the  second  most  expensive 
among  the  EU  Member  States  at  12.7 %  of  the 
taxes  on 
property  value.  High 
immovable property hamper the functioning of the 
real estate market, increase commuting and appear 
to  have  an  effect  on  labour  mobility.  Moreover, 
reliance  on  transaction  taxes  generates  a  more 
volatile 
revenue  stream.  The  Walloon  and 
Brussels-Capital  regions  increased  the  transaction 
tax  deduction  for  first  dwellings  in  2017,  while 
keeping  the  tax  rate  at  12.5 %.  Flanders  reduced 
the transaction tax rate for the purchase of the first 
dwelling  from  10 %  to  7 %  in  2018.  Further 
shifting  away  from  transaction  taxes  towards 
recurrent property taxes would maintain a constant 
reducing  economic 
revenue  while 
level  of 
distortions and commuting congestion. 

The  company  car  scheme  adversely  affects 
mobility  and  the  environment  and  makes  the 
tax system complex. In 2018, the so-called 'cash-
for-car'(20)  was  introduced  as  alternative  to  the 
company  car  scheme.  Rather 
than  having  a 
company car as part of their remuneration package, 
certain employees can choose to give up the car for 
additional  net  pay.  As  the  extra  pay  is  often  not 
high enough to match the private use of a company 
car,  the  alternative  schemes  are  expected  to  have 
only a limited impact on congestion and pollution. 
Moreover, the new schemes adds to the complexity 
of the Belgian tax system and favour a subgroup of 
the working population. 

Revenues  from  environmental  taxes  remain 
among  the  lowest  in  the  EU  (21).  Environmental 
taxes accounted for 2.2 % of GDP in 2017 against 
a EU average of 2.4 %. These include energy taxes 
amounting in 2016 to 1.5 % of GDP against an EU 
average of 1.8 %. In 2017, the federal Ministry for 
Energy  and  Environment  launched  a  national 
debate  on  carbon  pricing,  which  ended  in  June 

(20)  The  so-called  ‘mobility  budget’,  which  would  extend  the 
company  car  scheme  to  other  means  of  transport,  has  not 
yet  been  adopted,  despite  the  political  agreement  of  July 
2018. Its introduction is foreseen for March 2019. 

(21)  Excise  duty  rates  on  diesel  are  being  increased  to  align 
with  those  on  petrol.  Moreover,  from  1  April  2016  the 
three  Belgian  Regions  started  levying  a  kilometre  charge 
for heavy goods vehicles with a maximum authorised mass 
of more than 3.5 tonnes. The annual revenue from this levy 
was put at EUR 700 to 900 million, which is a significant 
increase  on  the  revenues  for  environment  related  taxes  in 
Belgium. (Green Budget Europe 2017). 

that 

final 

report  concluded 

2018.  The 
the 
introduction of a budget-neutral carbon price in the 
building  and 
is  particularly 
transport  sectors 
promising and manageable if the proceeds are used 
to compensate for the potential adverse effects, and 
provided  there  is  successful  coordination  between 
the different authorities. (22)  

towards 

Belgium  is  implementing  a  reform  to  simplify 
its  corporate  income  tax  system.  The  2017 
reform  provides  for  a  move 
lower 
statutory 
fewer  exemptions  and 
rates  and 
deductions. The statutory tax rate has been lowered 
from  33.99 % 
austerity 
surcharge)  to  29.58 %  in  2018  and  should  be 
reduced  to  25 %  in  2020  (and  the  austerity 
also 
surcharge 
introduced  amendments  to  ease  taxation  on  start-
ups and small companies. 

cancelled). (23)  The 

(including 

a  3 % 

reform 

the  notional 

The corporate income tax reform also adjusted 
the  application  of 
interest 
deduction,  limiting  the  risk  of  aggressive  tax 
planning.  In  addition,  in  August  2018,  Belgium 
introduced  a  specific  anti-abuse  rule  to  further 
limit the potential abuse of the Notional Interested 
Deduction  scheme  for  Aggressive  Tax  Planning 
purposes (anti-cascading measure). 

The taxation of financial income is complex and 
creates economic distortions. Financial income is 
excluded  from  the  personal  income  tax  base  and 
subject  to  a  final  withholding  tax  rate  of  30 %  in 
Belgium. However, reduced rates apply to several 
types  of  investment,  distorting  resource  allocation 
and  potentially  generating 
tax-induced  over-
investment  in  certain  types  of  assets.  Moreover, 
differentiated tax rates add to the complexity of the 
system and are rarely the most cost-efficient means 
of  achieving  given  economic  and  social  policy 
goals.  For  instance,  the  new  tax  of  0.15 %  on 
securities  accounts  exceeding  EUR  500  000  is 
likely  to  create  distortions,  given  the  number  of 
products  excluded  from  its  scope  (life  insurance, 
pension  products,  nominal  shares,  term  saving 

(22)  Vehicle  taxation  was  identified  as  the  largest  potential 
source of tax revenue in the Eunomia study. The suggested 
increase in vehicle taxation could account  for  EUR  3.25  
billion  in  additional  revenue  by 2030 (real 2015  terms),  
equivalent  to 0.63 % of GDP. 

(23)  For SMEs, 20.4 % (20  %+ 2 % austerity surcharge) on the 
first EUR 100.000 for the fiscal  years 2019 and 2020 and 
20%  (abrogation  of  the  2%  austerity  charge)  as  from  the 
fiscal year 2021). 

27 

 
                                                           
                                                           
3.1. Public finances and taxation 

option,  liquidity).  More  details  on  this  can  be 
found in last year’s Country report. 

28 

 
3.2.  FINANCIAL SECTOR AND HOUSING 

The  financial  sector  appears  relatively  sound, 
but  its  profitability  is  under  pressure.  Bank 
solvency  is  good;  the  capital  adequacy  ratio  was 
stable  at  18.4 %  in  June  2018.  Credit  quality  is 
high,  with  low  non-performing  loan  ratios.  Banks 
remain  relatively  profitable,  with  return  on  equity 
ratio  close  to  9 %  in  2017  (above  the  euro  area 
average of 5.6%), but slightly weakening since the 
beginning  of  2018.  The  challenges  for  banks 
remain  largely  the  same  as  last  year:  a  high  cost-
to-income  ratio,  a  relatively  high  banking  tax,  the 
obligation to pay a minimum interest rate (0.11 %) 
on  regulated  savings  accounts  (which  puts  net 
interest  margins  under pressure  in the current low 
interest 
digitalisation, 
environment), 
compliance costs, clients changing preferences and 
the  delayed 
intense  competition.  In 
privatisation  of  Belfius,  state  ownership  remains 
substantial.  Dexia  still  represents  a  sizeable,  but 
relatively  stable  contingent  liability  of  EUR  33.5 
billion (7.4 % of GDP) for the Belgian state. 

light  of 

rate 

The  contributions  to  the  Belgian  Deposit 
Guarantee Scheme (DGS) are not invested in a 
segregated,  diversified  portfolio  of  low-risk 
assets.  As  explained  in  previous  country  reports, 
the absence of a ring-fenced and autonomous DGS 
is  not  optimal 
stability 
from  a 
perspective.  Contributions  to  the  Belgian  DGS 
(around  EUR  3.4  billion  altogether  in  December 
2017)  directly  enter  the  federal  budget  as  tax 
revenues  and  contribute  to  reducing  the  deficit.  If 
the  DGS  needs  to  intervene  and  compensate 
depositors, Belgium will have to finance the entire 
cost of the intervention from the budget.  

financial 

traditional 

Insurers’ solvency has been broadly stable, even 
insurance  business 
life 
though 
continues  to  suffer  from  the  low  interest  rate 
environment. Insurers’ average solvency ratio has 
improved slightly from 176 % in 2016 to 192 % in 
2017.  As  in  other  Member  States,  this  ratio 
sometimes  benefits  significantly  from  particular 
adjustments of the  Long-Term Guarantee  package 
of  EU  measures.  Life  insurance  slowly  moves 
from  traditional,  guaranteed  interest  rate  contracts 
to  unit-linked  contracts.  Some  insurers  have  also 
taken  measures  to  accelerate  the  transition  to  a 
more  sustainable  business  model,  including  by 
selling part of their legacy portfolio (see European 
Commission,  2018a).  Finally, 
insurance 
premiums  are  taxed  more  than  contributions  to 
(‘SICAV  de 
accumulating 

investment 

funds 

life 

capitalisation’), limiting the asset-neutrality of the 
tax system. 

Access to finance 

the 

has 

Small  and  medium-sized  enterprises  (SMEs) 
continue  to  have  good  access  to  finance 
relatively 
situation 
although 
deteriorated.  Belgium  is  performing  well  in 
equity  funding  and  professional  ‘business  angel’ 
funding  for  new  and  growing  firms.  Belgian 
corporates  tend  to  be  significantly  less  dependent 
on  loans  from  the  financial  sector  than  their  EU 
peers.  This  relative  (albeit  decreasing)  preference 
for  equity  over  debt  might  be  partly  due  to  the 
former  Belgian  regime  of  "notional 
interest 
deduction".  The  market  capitalisation  of  Belgian 
quoted  non-financial  corporations  reached  67.3 % 
of  GDP  in  2017,  higher  than  the  EU  average 
(54.2 %  of  GDP)  confirming  the  preference  for 
equity. The borrowing cost for small loans relative 
to  large  ones  is  half  the  average  cost  in  the  EU. 
However,  the  number  of  rejected  SME  loan 
applications has increased marginally. This finding 
is  in  line  with  the  13.6 %  of  respondents  to  the 
SAFE  survey  who  indicated  that  banks  were  less 
willing  to provide loans  in 2017, against 9.7 % in 
2016.  Meanwhile,  access 
to  public  financial 
support appears to improve, with only 9.7 % those 
respondents  indicating  a  drop  in  2017,  against 
14.2 % in the previous year. 

growth 

require 

and  will 

environment, 

Lending  to  non-financial  corporations  has 
accelerated 
specific 
monitoring. Because of the persistent low interest 
rate 
remains 
credit 
substantial.  In  particular,  the  year-on-year  growth 
of  loans  to  non-financial  corporations,  corrected 
for  sales  and  securitisation,  is  the  highest  in  the 
euro  area  (10.1 %  in  October  2018,  against  2.8 % 
in 
to  be  closely 
are 
monitored.  While 
supported by a broad-based trend, specific one-off 
factors  also  played  a  role,  like  merger  and 
acquisition  operations  and  advance  payments  of 
taxes  by  non-financial  corporations.  Households’ 
indebtedness 

the  euro  area)  and  needs 

credit  developments 

in 

The  increase  in  households'  debt  since  2005 
line  with  fundamentals,  while 
remains 
substantial.  Belgian  households’ 
indebtedness 
overtook  the  euro  area  average  in  2015  and 
reached 59.8 % of GDP in 2017, against 56.9 % of 

29 

 
 
3.2. Financial sector and housing 

Table 3.2.1:  Domestic banking groups and standalone banks, foreign (EU and non-EU) controlled subsidiaries and foreign 

(EU and non-EU) controlled branches 

(1) Annualised data 
Source: ECB - CBD2 - Consolidated Banking data - European Commission 

GDP  in  the  euro  area.  By  contrast,  indebtedness 
has started to decline on average in the euro area in 
the  wake  of  the  financial  crisis.  Households'  debt 
remains  however  close  to  the  level  suggested  by 
economic  fundamentals.  Households'  private  debt 
norm (24)  points  to  limited  deleveraging  needs  for 
Belgium (around 10 %) according to the prudential 
threshold.  

the 

latter 

Belgium  house  prices  currently  present  limited 
signs of overvaluation. After a period of dynamic 
growth  between  1998  and  2008  (5 %  average 
annual increase) house prices have risen by 2.2 % 
on  average  annually  in  nominal  terms  since  2008 
and  by  0.7 %  per  year  in  real  terms.  Steadily 
increasing house prices explain part of the increase 
is  mostly 
in  households'  debt,  as 
mortgage-based.  Traditional  indicators  (price  to 
income,  i.e.  affordability  and  price-to-rent  i.e. 
dividend)  signal  a  potential  15 %  overvaluation 
gap  of  Belgian  house  prices.  However,  a  more 
sophisticated indicator developed by the European 
Commission,  which  takes  into  account  housing 
demand and supply fundamentals like interest rates 
shows  no  evidence  of  overvaluation,  whereas  the 
National  Bank  of  Belgium  valuation  model  only 
finds a slight overvaluation (6.5 %) (National Bank 
of Belgium, 2018). 

aimed  at  addressing  several  risks,  including  loose 
credit standards, rising households indebtedness, a 
substantial  share  of  vulnerable  households,  a 
relatively high banking exposure to mortgages and 
the  possibility  of  a  future  correction  in  real  estate 
prices.  By 
to  a 
downturn in the mortgage market, this measure has 
achieved its primary objective. At this (still early) 
stage,  it  does  not  seem  to  have  affected  mortgage 
interest rates or credit growth.  

increasing  banks’  resilience 

The  generally  favourable  wealth  position  of 
households  is  considered  as  a  positive  factor 
further  softening  sustainability  concerns  about 
households  debt.  Belgium  households  hold  more 
assets  on  average  than  euro  area  households  and 
have  positive  net  assets  positions.  Nevertheless, 
the distribution of assets and debt points to pockets 
of vulnerability. 3 % of outstanding mortgage debt 
is  held  by  households  that  have  a  mortgage  loan-
to-value  above  80 %  and  pay  more  than  half  of 
their  income  in  debt  service.  Moreover,  5.9 %  of 
debt  is  held  by  households  that  have  a  mortgage 
loan-to-value above 80 % and do not have enough 
liquid  assets  to  serve  more  than  2  months  of  debt 
payments. It implies that, because financial wealth 
is  unequally  distributed,  a  severe  unemployment 
shock with income loss could hurt many mortgage-

In  April  2018,  a  macroprudential  measure 
addressing  risks  in  the  residential  mortgage 
market  entered  into  force. (25)  The  measure 

(24)  Bricongne, J. C., L. Coutinho and N. Philiponnet, 2018. 
(25)  The  measure  is  based  on  two  components.  The  first 
consists of a flat 5  percentage point risk weight add-on to 
the microprudential risk weight for mortgage exposures for 

banks  using  the  internal  ratings-based  approach  to  capital 
requirements for credit risk. The second is a more targeted 
component that would increase risk weights in line with the 
risk profile of the bank's mortgage portfolio by applying an 
additional  macroprudential  risk  weight  add  on  equal  to 
33%  of  the  microprudential  risk  weight,  which  is  to  be 
applied  to  each  (IRB)  bank's  (residential)  mortgage 
portfolio.  The  measure  takes  the  form  a  Royal  Decree 
adopted on 4 May 2018. 

30 

2016q22016q32016q42017q12017q22017q32017q42018q12018q2Non-performing loans3,53,43,22,92,82,72,72,52,4o/w foreign entities2,82,72,62,42,32,32,32,12,0o/w NFC & HH sectors4,54,44,24,14,03,93,63,53,4o/w NFC sector5,35,24,84,74,84,74,34,24,0o/w HH sector3,83,83,73,63,43,33,03,02,8Coverage ratio43,543,343,743,944,344,342,744,844,9Return on equity(1)9,79,88,98,010,29,58,86,78,3Return on assets(1)0,70,70,60,60,70,70,70,50,6Total capital ratio18,318,518,818,618,518,319,018,418,4CET 1 ratio15,215,415,715,515,615,716,215,515,3Tier 1 ratio15,715,916,216,116,116,216,916,416,3Loan to deposit ratio90,387,788,085,683,383,890,285,886,6 
                                                           
                                                                                   
 
 
 
3.2. Financial sector and housing 

indebted households involving a significant part of 
total outstanding mortgage debt (Du Caju, 2017).  

31 

 
3.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

3.3.1.  LABOUR MARKET  

The  labour  market  continued  to  improve,  in  a 
context  of  sustained  economic  growth.  In  2017, 
employment  grew  the  fastest  since  2009  (1.4 %). 
More  than  4.7  million  people  were  employed, 
which is the  highest level in the past ten years. In 
particular,  there  is  a  growing  number  of  older 
workers  (55-64)  due  to  the  combined  effect  of 
longer  working  lives  and  the  ageing  of  the 
population.  It  resulted  in  a  steady  increase  in  the 
employment rate  to 69 % in the second quarter of 
2018,  still  below  the  EU  average  (73.2 %).  The 
activity rate (20-64) remains low (73.7 % in 2017), 
well  below  the  EU  average  of  78 %,  having 
increased only moderately (less than 1 pp) over the 
last  ten  years.  The  unemployment  rate  declined 
(5.5 %  in  Q3  2018),  and  is  now  below  the  2018 
level of structural unemployment. 

in  unemployment  rates 
Large  differences 
persist  between  regions.  Regional  disparities  are 
the  highest  for  unemployment.  Unemployment  is 
particularly  high  in  Brussels  (14.9 %  in  2017,  5.2 
pps  higher  than  in  Wallonia  and  10.5  pps  higher 
than 
in  Flanders).  This  can  only  partly  be 
explained  by  the  urban  context.  The  difference 
with  Wallonia  disappears  when  only  urban  areas 
are considered, but with Flanders an important gap 
remains  (Graph  3.3.1).  A  similar  pattern  can  be 
observed for long-term unemployment.   

time, 

The  inactivity  rate  is  among  the  highest  in  the 
EU  and  an  increasing  share  of  the  inactive  are 
sick  or  have  disabilities.  In  2017,  the  inactivity 
rate  (25-64)  was  23.4 %,  well  above  the  EU 
average  of  20.4 %.  While  the  inactivity  rate  has 
the  reasons  for 
remained  stable  over 
inactivity have changed considerably. The inactive 
population  between  25  and  64  years  that  self-
report  to  be  sick  or  to  have  disabilities  increased 
from 16 % in 2007 to 30 % in 2017. The increase 
is found across all regions, ages and skill levels but 
is  particularly  large  for  women,  middle-aged  (35-
54) and older (55-64)  workers (Graph  3.3.2). It is 
linked  to  increased  labour  participation  of  older 
workers, 
and 
psychological  diseases  and  low  levels  of  re-
integration into the labour market.  

in  muscular 

increase 

an 

2018  Q3)  is  amongst  the  highest  in  the  EU 
(average  2.2 %)  and  is  higher  in  Flanders  (4.1 %) 
than in Brussels (3.3 %) or Wallonia (2.8 %). The 
gap  between  the  employment  rates  of  low-, 
medium-, and high-skilled workers remains among 
the  widest  in  the  EU  in  all  three  Regions  (see 
Graph  3.3.2  in  European  Commission,  2018a). 
Skills  mismatches  are,  among  other  factors, 
associated with high labour costs and taxation, low 
transitions to employment and low job mobility. 

Graph 3.3.1:  Unemployment rate by region and level of 

urbanisation ( % of active population) 

Source: European Commission 

Graph 3.3.2:  Reasons for inactivity by age (2007-2017) 

Source: Eurostat 

Low labour market participation coincides with 
a  high  vacancy  rate,  suggesting  a  high  level  of 
skills  mismatches.  The  vacancy  rate  (3.6 %  in 

32 

0%5%10%15%20%25%200620082010201220142016BXLFLFL - citiesWLWL - cities0%10%20%30%40%50%60%70%80%90%100%2007201720072017200720172007201725-3435-4445-5455-64Disability or illnessDiscouragedEducationCare and other family respOther, including retirement 
 
 
 
 
 
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 is  designed  as  a compass for  a  renewed process  of convergence 
towards  better  working  and  living  conditions  in  the  European  Union. (1)  It  sets  out  twenty  essential 
principles  and  rights  in  the  areas  of  equal  opportunities  and  access  to  the  labour  market;  fair  working 
conditions; and social protection and inclusion.  

Belgium  performs well on a  number of indicators  of the Social Scoreboard supporting the  European 
Pillar of Social Rights. The labour market improved driven by sustained economic growth. It is becoming 
increasingly tight in spite of a relatively low employment rate. The vacancy rate is amongst the highest in the 
EU (3.5 % vs. an EU average of 2.1 %). The high vacancy rate and the increasing skills shortages contrast 
with high inactivity  and unemployment for some  groups, notably the low skilled and the young. Resolving 
these  issues  will  require  addressing  remaining  financial  disincentives  to  work  (also  for  second  earners), 
increasing job mobility and participation in lifelong learning and upskilling. Furthermore, employment rates 
are low for third country immigrants and this affects to some extent as well their descendants. Promoting their 
labour market integration would contribute to increasing labour supply and productivity.   

Inequalities  of  opportunities  persist  between 
different  population  groups.  The  income  gap 
between  persons  with  low  and  high  educational 
attainment is amongst the highest in the EU for the 
working  age  population.  Educational  inequalities 
limit  social  mobility.  There  are  strong  inequalities 
in  the  health  system.  Self-reported  unmet  medical 
needs  are  low  on  average  but  high  for  the  lower 
income quintile. 

The  effectiveness  of  social  transfers  in  reducing 
poverty  is  at  EU  average  level.  It  has  been 
however  declining  since  2005  for  the  working  age 
population.  Income  inequality  remains  stable  and 
below the EU average (S80/S20 of 3.8 against 5.1), 
due  to  the  combination  of  an  intermediate  level  of 
market 
highly 
redistributive 
tax  and  benefit  system.  Though 
wealth is evenly distributed compared to other euro 
area countries, pockets of poverty persist as part of 
the population lacks access to the labour market.  

inequality  with 

income 

a 

(1)  The European Pillar of Social Rights was proclaimed on 17 November 2017 by the European Parliament, the Council 

and the European Commission. 

Labour shortages are observed in most sectors, 
in particular because of lack of adequate skills. 
The  vacancy  rates  in  almost  all  sectors  are 
significantly above the EU and euro-area averages. 
Analyses  by  the  Public  Employment  Services 
(PES)  show  that  the  list  of  occupations  most  in 
demand  is  relatively  stable,  including  health  care 

information 

workers, 
communication 
technologies    analysts  and  certain  occupations  in 
the  construction  sector. (26)  Many  of  them  require 

and 

(26)  Labour  shortages  of  health  professionals  concern  in 
particular doctors (European Commission/OECD/European 
Observatory  of  Health  Systems  and  Policies,  2017).  To 
address  this  problem,  the  government  has  substantially 

33 

 
 
 
 
 
 
                                                           
3.3. Labour market, education and social policies 

reinforced  cooperation  between  the  Walloon  and 
Flemish  public  employment  services  (respectively 
FOREM  and  the  VDAB,  the  improvement  of 
linguistic skills and campaigns. 

Graph 3.3.3:  Transition rate from unemployment/inactivity 

to employment, 2014-2017 ( % total inactive or 
unemployed) 

secondary  training  and  not  always  a  tertiary 
degree. (27)  Employer  surveys  point  to  a  lack  of 
applicants  with  appropriate  experience  and  skills 
as  the  most  important  driver  of  labour  shortages 
(Manpower  Group,  2018).  In  particular,  shortages 
are  linked  to  the  lack  of  graduates  in  science, 
technology,  engineering  and  mathematics  and 
more  broadly  digital  skills  (see  Section  3.3.2). 
Poor language skills are also an important issue, in 
Brussels  for  instance,  where  only  27 %  of  the  job 
seekers declare an average/good knowledge of the 
other national language. Finally, some sectors also 
face image problems or working conditions are not 
sufficiently  attractive  (e.g.  in  accommodation  and 
food service activities).  

inactivity 

unemployment 

from  unemployment  or 

Despite  increasing  labour  demand,  transitions 
from 
to 
or 
employment  are  low,  in  particular  for  the  low-
skilled.  Participation  in  Active  Labour  Market 
Policies (ALMPs) is among the highest in the EU. 
In  2016,  67 %  of  those  wanting  to  work  were 
enrolled  in  an  ALMP.  Nevertheless,  transition 
rates 
to 
employment  remain  well  below  the  EU  average 
(Graph  3.3.3).  Transitions  to  employment  are  in 
particular  low  for  low  skilled  (6 %  vs.  11 %  for 
medium skilled and 19 % for high skilled). For all 
skills levels, transitions in Wallonia are lower than 
in Flanders and Brussels. In addition, job mobility 
(i.e. the willingness of employees to change work) 
is  low,  which  may  limit  productivity  growth (28). 
Low  job  mobility  is  among  others  linked  to 
seniority  pay,  long  notice  periods,  and  low  levels 
of adult learning. 

inactivity 

the 

inter-regional  differences 

Given 
in 
unemployment  rates,  inter-regional  mobility  of 
workers has room for improvement.  According 
to  FOREM,  11 %  of  Walloon  workers  work  in 
Brussels, but only 4.4 % work in Flanders, despite 
regions 
higher  vacancy 
compared to Wallonia. In February 2018, Flanders 
and  Wallonia  have  developed  an  action  plan  to 
through 
ease 

labour  mobility, 

inter-regional 

these 

rates 

two 

in 

increased  the  numerus  clausus  of  medical  graduates  and 
has extended the role of other professionals. 

(27)  For example, in 2017 only 38 % of the vacancies registered 
by  the  Flemish  public  employment  service  specifically 
required  a  tertiary  degree,  while  40 %  of  the  vacancies 
required  low  education  or  no  educational  level  was 
specified.  This  vacancy  rate  persists  despite  more  than 
40 % of unemployed being low-skilled. 

(28)  ACERTA (2018) Talent Pulse 

The transition rate is calculated as a share of employed 
individuals in year T who were unemployed or inactive in T-1 
in the total number of unemployed or inactive in year T-1 
Source: European Commission 

Important  financial  disincentives  to  take  up 
employment  remain.  Although  the  tax  shift 
reduced  the  labour  tax  wedge  (income  tax  plus 
employer  and  employee  contributions)  for  very 
low  wage  earners  (fifty  percent  of  the  average 
wage), it remains the highest in the EU for average 
wage earners. Moreover, Belgium remains the only 
country  in  which  unemployment  benefits,  though 
degressive,  are  not  limited  in  time  (29).  High  tax 
disincentives for second earners – mainly women – 
remain, contributing to high part-time employment 
among  women  (40.9 %)  (European  Commission, 
2018a).  There  are  also  financial  disincentives  for 
beneficiaries of sickness and disability schemes to 
take up full-time employment. In particular, single 
parents  (and  to  a  lesser  extent  couples  with 
children)  face  limited  financial  incentives  to  take 
up (full-time) employment due to a combination of 
costs and withdrawal of benefits (Hufkens, T., and 

(29)  According  to  the  benchmarking  exercise  in  the  area  of 
unemployment  benefits  and  active  labour  market  policies 
conducted  within  the  EMCO  Committee.  See  the  Draft 
Joint  Employment  Report  2019,  European  Commission, 
2018 for details 

34 

0%5%10%15%20%25%ROELWALITBEFLHRPLBXLSIBGATSKCZHUMTPTESFRCYDKNLLUEELT20172014 
                                                                                   
 
 
                                                           
3.3. Labour market, education and social policies 

announced  in  Summer  2018  cover  training,  wage 
costs,  career  end,  activation  and  the  interaction 
between  federal  and  sub-national  measures.  The 
political  situation,  with  the  federal  care-taker 
government, may complicate the adoption of these 
measures. In addition, several of these would need 
concrete  agreements  between  social  partners  or 
with  the  Regional  Governments.  If  implemented, 
the  impact  of  the  reform  of  the  degressivity  of 
unemployment benefits on the unemployment trap 
as a function of the salary level would need careful 
assessment.(30)  The  measure  allowing  for  EUR 
for 
tax-free  professional 
6 000  of 
employees working at least 80 % of a full-time job 
equivalent,  self-employed  and  pensioners  became 
effective  in  July.  As  approximately  166 000  self-
employed  declared  less  than  EUR  5 000  per 
year (31), the uptake and the budgetary impact will 
need to be monitored.  

income 

Labour market situation of vulnerable groups 

rate 

participation 

Labour  market 
remains 
particularly  low  for  specific  socio-economic 
groups.  There  are  large  differences  in  inactivity 
and  unemployment  rates  as  a  function  of  age, 
educational  attainment,  and  origin  (see  European 
Commission,  2018a).  The  activity 
is 
particularly  low  for  the  young,  older  workers  and 
the low-skilled. The activity rate of the low-skilled 
of  all  age  cohorts  is  significantly  below  the  EU 
(Graph  3.3.4).  The  Socio-economic 
average 
the  Federal  Public  Service 
monitoring  of 
Employment and the latest report from the Higher 
Council for Employment also point to the very low 
activity and employment rates among third country 
immigrants  and  their  descendants  (FOD  WASO, 
2017). 

(30)  The initial level of the unemployment benefit is calculated 
as  a  share  of  the  gross  wages.  Low  wages  holders  benefit 
from  a  number  of  schemes  to  increase  net  wages,  for 
instance the work bonus. The result is that the replacement 
income is low in comparison to the net wages. This is not 
the case for people of medium wages. The risk is therefore 
to create high unemployment traps.  

(31)  NAR (2017) Advies 2.065 - Verenigingswerk, occasionele 
diensten van burger tot burger en deeleconomie via erkend 
platform – Ontwerp van wet en koninklijk besluit – Gevolg 
rapport nr. 107 over digitalisering en deel-economie. 

others,  2016).  This  effect  is  particularly  strong  in 
case  beneficiaries  start  working  at  a  lower  wage 
than in previous employment. 

The  responsibility  for  the  social  protection 
systems  is  split  between  the  federal  and  sub-
national levels, which may lead to coordination 
problems.  The  unemployment  benefits  and 
invalidity  allowances  are  administered  at  the 
federal level (representing 1.8 % of GDP in 2016), 
while  social  assistance  is  partly  financed  by  the 
municipalities,  whose  finances  are  strained  (see 
Section  3.1.4).  Target  group  activation  measures 
and  the  control  of  availability  are  run  at  the 
regional  level.  The  data  from  the  monitoring 
frameworks  applied  by 
the  Regional  Public 
Employment  Services  are  not  directly  comparable 
any more. This complicates the analysis of “active 
availability”, which implies that unemployed have 
to actively look for employment and respond to the 
offers of the Public Employment Service, set in the 
federal  normative  framework.  Current  figures 
might  indicate  that  the  control  obligations  are  not 
fully met by all Regions. This may have an impact 
on federal and local public finances. 

At  regional  level,  governments  have  reformed 
and  simplified  the  employment  incentives  and 
the  monitoring  and  guidance  activities  of  their 
respective  public  employment  services  (PES). 
The  situation  on  the  regional  labour  markets  and 
the  functioning  of  the  regional  PES  remain  very 
different. This is reflected in their reform agendas. 
Regional  governments  and  PES  have  concluded 
ambitious  management  contracts  for  2017  –  2022 
with  challenging  objectives  for  each  of  the  PES. 
But  their  capacity  to  carry-out  the  necessary 
monitoring  and  act  on  the  information  generated 
seems  uneven.  In  Wallonia,  Forem  has  started  an 
ambitious  reorganisation  project  to  improve  its 
efficiency and effectiveness. In Brussels, Actiris is 
working  on  improving  quality,  efficiency  and 
effectiveness  of  services.  The  Flemish  Region 
aims to improve employment performance through 
a  new  policy  approach  called  'Focus  on  Talent', 
which  provides  bespoke  guidance  to  jobseekers 
and  inactive  people.  It  is  also  focussing  on  career 
security  for  all  citizens  and  a  new  approach  to 
employers.  

At  the  federal 
level,  major  reforms  were 
announced to improve incentives to work in the 
  The  28  measures 
so-called 

'Jobs  Deal'. 

35 

 
                                                           
3.3. Labour market, education and social policies 

Graph 3.3.4:  Activity rate by age and educational 
attainment (20-64, %) 

Source: Eurostat 

(15-24)  not 

rate  of  young  people 

Youth  unemployment  remains  above  the  EU 
average.  In  the  last  quarter  of  2018,  it  further 
decreased  to  15.4  % %.  However,  there  are 
substantial  regional  disparities,  ranging  between 
33.2 % in Brussels and 12.8 % in Flanders in 2017. 
In  addition,  there  are  large  regional  disparities  in 
the 
in 
employment  nor  in  education  or  training  (NEET). 
The  NEET  rate  was  13.3 %  in  Brussels  in  2017, 
lower in Wallonia (11.6 %) and substantially lower 
in Flanders (7.2 %). The federal government aims 
to  address  this  issue  by  lowering  the  statutory 
minimum  wage  for  young  workers.  However, 
based  on  an  evaluation  of  the  repeal  of  the  youth 
minimum  wage  in  2015,  the  impact  on  youth 
employment  is  likely  to  be  limited  (European 
Commission, 2017). 

Past  reforms  have  incentivised  longer  careers 
and  resulted  in  higher  activity  rates  for  older 
workers.  The  gap  in  the  activity  rate  of  workers 
between  55  and  59  years  relative  to  the  EU 
average decreased from 9.6 pps in 2008 to 4.0 pps 
in  2017.  On  the  other  hand,  the  gap  with  the  EU 
average  for  those  older  than  60  years  is  even 
diverging,  despite  the  increase  in  the  activity  rate 
(Graph 3.3.5). This can be partly explained by the 
presence of transitional measures for older workers 
with  long  employment  histories.  Until  2015,  the 
activity rate of older workers increased faster than 
the employment rate pointing to an increase in the 
rate  of  older  workers.  This 
unemployment 

underlines  the  importance  of  targeted  activation 
measures 
(European 
Commission, 2018b). 

older  workers 

for 

Graph 3.3.5:  Activity rate for older workers ( %) 

Source: Eurostat 

People  with  a  migrant  background  and  their 
descendants  have  particularly  unfavourable 
labour market outcomes. These groups represent 
an important share of the workforce with nearly a 
million persons (14.0 % of the population aged 18-
64).(32),(33)  Controlled  for  differences  in  age  and 
educational  attainment,  the  gaps  in  labour  market 
outcomes  of  non-EU  immigrants  with  native-born 
individuals  are  among  the  highest  in  the  EU,  in 
particular for women.(34) 

lower 

The employment premium for tertiary educated 
is 
for  persons  with  a  migrant 
background.  This  is  especially  true  for  those 
having  qualifications  obtained  abroad.  In  the 
Brussels  Capital  Region, 
in  2016,  43%of 
unemployed  job-seekers  had  not  been  granted 
equivalence  of  the  education  level  that  they  had 
received abroad.(35) Also for the native born with a 
migrant  background, 
labour 
market situation can only to some extent be related 
to  lower  educational  outcomes  (see  European 
Commission,  2018a;  OECD,  2017c).  Immigrants 

the  unfavourable 

(32)  These  numbers  do  not  cover  the  persons  originating  from 
an EU  Member State. They represent an additional 15.6 %. 

(33)  FOD WASO (2017) ibid. 
(34)  Conseil Supérieur de l'emploi (2018), Les immigrés nés en 
dehors  de  l’Union  européenne  sur  le  marché  du  travail  en 
Belgique. Rapport 2018 

(35)  Conseil Supérieur de l'emploi (2018), ibid 

36 

010203040506070809010020-2425-2930-3435-3940-4445-4950-5455-5960-64BE - LowEU28 - LowBE - MediumEU28 - MediumBE - High010203040506070802008200920102011201220132014201520162017BE - 55 to 59 yearsEU28 - 55 to 59 yearsBE - 60 to 64 yearsEU28 - 60 to 64 years 
 
 
 
                                                           
3.3. Labour market, education and social policies 

tailored  approaches  have  recently  been  adopted, 
such  as  the  “Integration  through  work”  (2016-18 
action  plan)  in  Flanders.  Despite  some  new 
limited  coordination 
initiatives, 
between  various  policy  domains  (i.e.  social, 
employment, educational) and levels of power. 

is  still 

there 

There is no systematic  application of the policy 
to  promote  diversity  of  origins  in  the  public 
sector.  In  Flanders,  the  'Equal  Opportunities  and 
Diversity  Plan',  consisting  of  workforce  diversity 
targets  for  municipalities,  was  discontinued  and 
replaced  by  the  approach  "Focus  on  Talent".  The 
Brussels-Capital  Region  introduced  in  2018  a 
"tutor  premium"  and  a  "youth  bonus"  to  support 
dual  training,  replacing  earlier  federal  measures. 
Regions  have  action  plans  against  discrimination 
(for  instance  Action  Plan  to  combat  work-related 
discrimination 
in  Flanders,  Plan  et  Charte 
Diversité  in  the  Walloon  public  administration); 
however they most often rely on awareness raising 
and self-regulation in sectors. 

3.3.2.    EDUCATION, TRAINING AND SKILLS 

The  overall  good  educational  performance  has 
been worsening and disparities related to socio-
economic and migration backgrounds are high. 
The issues highlighted in previous country reports 
remain a concern (European Commission, 2018a). 
(38)(39) The equity gap in educational outcomes due 
to  socio-economic  and  migration  background  is 
high.  Belgium  continues  to  display  significant 
socio-economic 
educational 
inequalities 
outcomes.(40)  The  reading  performance  gap  by 
socio-economic  status  increased  from  13.7 %  in 
2000  to  17.1 %  in  2015  (OECD,  2018).  Half  of 
students  from  disadvantaged  background  are 
concentrated 
as 
schools 
disadvantaged. 

characterised 

in 

in 

The  percentage  of  young  people  not  mastering 
basic skills can be improved in all Communities 
(and  in  particular  in  the  French  Community). 
In  the  Flemish,  French  and  German-speaking 
Communities,  the    percentage  of  low-achieving 
15-years old students in the three domains science, 

(38)  UNIA (2018) Baromètre de la diversité – Enseignement. 
(39)  Chzhen Y. et al. (2018). 
(40)  OECD  (2018)  Equity  in  Education  –  Breaking  down 

barriers to social mobility. 

and  their  descendants  tend  to  also  be  relatively 
more  in  lower  quality  jobs  with  more  precarious 
contracts,  and  to  experience  in-work  poverty  or 
over-qualification.(36) These are generated, among 
others,  by  lack  of  networks  and  role  models, 
limited  access  to  jobs  in  the  public  sector  even 
when  holding  Belgian  citizenship,  as  well  as 
(direct)  discriminatory  practices  and  stereotypes 
that  limit  diversity  in  the  workplace.  The  self-
employment  rate  of  non-EU  citizens  is  also  low. 
While 
strong 
entrepreneurial  cultures  and  entrepreneurship 
could  be  used  to  help  these  groups  integrate  into 
society,  very  little  entrepreneurship  support  has 
been  implemented  for  them  so  far  (EU/OECD, 
2017). 

immigrants 

often 

have 

lower  exit 

Current  activation  measures  are  less  effective 
for  persons  with  a  migrant  background.  A 
recent  analysis  of  critical  success  factors  for  the 
activation of immigrants in Flanders revealed that 
jobseekers  with  a  non-EU 
second-generation 
background  have  a 
from 
unemployment  than  jobseekers  with  two  Belgian-
born  parents  (Vandermeerschen  et  al.,  2017). 
Other research (37) suggests that targeted strategies 
should  be  developed  for  this  specific  group. 
Flanders  and  Wallonia  set  up  integration  schemes 
that  guide  this  group  toward  the  appropriate 
employment  related  services  on  the  basis  of  their 
needs, including language training. 

rate 

The  inflows  of  asylum  seekers  and  the  need  to 
adapt  the  integration  measures  available  are 
driving a number of policy changes with regard 
to  third-country  immigrants.  Recognition  of 
qualifications has been simplified and made free in 
the  Flemish  Community,  though  it  remains  an 
important obstacle to be tackled to facilitate labour 
market  integration.  Employers  are  encouraged  to 
describe  their  vacancies  in  terms  of  competences 
required, while government subsidies to employers 
to hire these groups still require proof of diplomas 
or certificates. Mandatory integration programmes 
–  covering  a  variety  of  aspects  in  a  particular 
language - are now in place in Flanders, Wallonia 
and the German-speaking Community. However, it 
is  unclear  whether  these  programmes  can  be 
sufficient  to  improve  employability.  Beyond  the 
mainstream  access  to  general  measures,  more 

(36)  OECD-EU Settling in 2018, forthcoming. 
(37)  De Cuyper P., Havermans N., Vandermeerschen H. (2018). 

37 

 
                                                           
                                                           
3.3. Labour market, education and social policies 

schools,  80 %  of  pupils  have  delayed  education, 
mostly due to grade repetition, against 20 % in the 
best-performing 
2018), 
(Lafontaine, 2017).  

(OECD, 

schools 

Measures  are  taken  to  further  reduce  early 
school  leaving.  The  French  Community  aims  to 
reduce early school leaving and grade repetition by 
50 %  by  2030.(43)  From  2019,  as  part  of  the  new 
school  governance  regulation,  schools  must  adopt 
a  plan  to  reduce  school  failure,  grade  repetition 
and early school leaving. The ‘School contract’ in 
the  Brussels  Capital  Region  funds  projects  to 
improve  relationships  between  young  people, 
schools 
and  neighbourhoods.  The  Flemish 
Community intends to strengthen pupils’ guidance 
and  support,  while  its  ‘Strategy  for  literacy’  aims 
to  raise  literacy  levels  among  pupils  at  risk  of 
dropping  out.  The  full  roll-out  of  dual  vocational 
education and training in 2019 also aims to reduce 
increasing  students’ 
early  school 
motivation.  

leaving  by 

Teachers  need  more  support  to  deal  with 
diversity. Belgium is one of the few EU countries 
where  school  principals  report  that  the  quality  of 
teacher  resources  in  disadvantaged  schools  is 
worse  than  in  the  others.(44)  Considering  the 
shortages in some subjects and geographical areas, 
the  ageing  teacher  population,  the  high  leaving 
rates from the profession, especially among young 
teachers,  and  the  growth  in  the  pupil  population, 
measures are needed to make the profession  more 
attractive,  such  as  by  providing  effective  support 
and 
both 
teachers’ 
Communities,  the  reforms  to  improve  the  quality 
of and to adapt the initial teacher education to the 
more  demanding  school  environment  have  been 
adopted  and  will  be  rolled  out  from  September 
2019 onwards in the Flemish Community and as of 
2020 in the French Community.   

enhancing 

status. 

In 

Comparing  Belgium’s  spending  and  education 
outcomes  with  other  EU  countries  with  similar 
characteristics  suggests  that  better  outcomes 
in  the  French 
are  possible, 
Community.    Public  expenditure  in  education  is 
one  of  the  highest  in  the  EU  (6.4 %  of  GDP  in 
Belgium compared to 4.6 % in euro area in 2016), 

in  particular 

(43)  National Reform Pogramme (2018) 
(44)  OECD (2018), Effective Teacher Policies — insights from 

PISA. 

reading and maths represent, respectively, 10.9 %, 
14.9 % and 8.8 %. By failing to meet the minimum 
standards required in three essential subjects, these 
students are most likely to face serious problems in 
their  future  education,  on  the  labour  market  and 
later in life(41). 

fastest 

lingering 

the 
groups, 

growth 
especially  with 

Participation  in  early  childhood  education  is 
very  high,  despite 
challenges 
concerning low income and immigrant families. 
Despite a  high participation rate  of 98 % in 2016, 
the  early  childhood  education  system 
faces 
challenges to reach families in poverty and to deal 
with  the  multi-cultural  context.  The  population  of 
3-year-old  children  reached  an  all-time  high  in 
2018,  with 
among 
an 
disadvantaged 
immigrant  background.  Enrolment  and  regular 
attendance gaps remain significant and may affect 
language  skills.  The  Flemish  Community  has 
enhanced  the  staff-to-child  ratio  and  supports 
increased  enrolment  and  attendance  by  granting  a 
premium  to  schools  for  each  child  of  non-Dutch 
speaking  parents  to  improve  the  child’s  language 
skills.  It  also  trains  future  pre-primary  teachers  in 
how to deal with deprivation and diversity.(42) The 
French  Community  has  been  increasing  staff-to-
child resources but shortages remain. The Pact for 
the  quality  of 
to  reinforce 
Excellence  aims 
childcare 
for  educational 
success. There will be also free pre-primary school 
as of September 2019. 

including 

support 

Belgium  has  reduced  the  early  school  leaving 
(ESL) rate, but it remains high in Brussels and 
among  non-EU  born  young  people  and  young 
men  in  cities.  The  ESL  rate  in  2017  was  8.9 %, 
below  the  10.6 %  EU  average  and  the  national 
Europe 2020 target of 9.5 %. However, disparities 
remain  high  between  regions  (Flanders  7.2 %, 
Wallonia 10.5 %, Brussels Capital Region 12.9 %) 
and population groups. ESL is particularly high for 
non-EU  born  young  people  (16.7 %),  and  for 
young men in cities (14.4 %). ESL is correlated to 
early 
and 
grade 
track/school/course  changes,  particularly  in  urban 
vocational 
disadvantaged 
and 
neighbourhoods.  Belgium  has  a  high  share  of 
repeaters  in  primary  and  secondary  education.  In 
the  French  Community’s  worst-performing 

repetition 

tracking, 

schools 

in 

(41)  PISA (OECD), 2015, table B2.I.46. 
(42)  National Reform Pogramme (2018) 

38 

 
                                                           
                                                           
3.3. Labour market, education and social policies 

to  a 

resulting  in  a  high  education  expenditure  per 
student.  It  is  highly  skewed  towards  staff  costs 
(78 %  of  overall  expenditure),  to  the  detriment  of 
study  
capital  expenditure.  According 
(Cornille,  D.  and  other,  2017),  there  are  however 
important  regional  differences  in  efficiency,  as 
Flanders  performs  almost  as  efficiently  than  most 
efficient  education  systems  like  Germany  and 
Finland  in  the  ratio  between  outcomes  and  the 
level of expenditure (45).   Studies (Canton E., and 
others,  2018)  (46)  which  benchmark  the  spending 
on  education  and  the  achieved  outcomes,  suggest 
that  more  efficiency  gains  can  be  achieved  which 
will better support both equity and excellence. The 
Communities are developing  and/or implementing 
some  reforms  in  this  direction.  Challenges  related 
to  demography,  digitisation,  inequalities  and  the 
implementation  of  recent  education  reforms  are 
also projected to require high-quality investments.  

Given  the  already  high  spending  levels  on 
education, reforms will need to be implemented 
with  a  stronger  focus  on  increasing  efficiency, 
effectiveness, 
competences 
future-oriented 
(science,  technology  engineering,  mathematics 
and digital skills) and labour  market relevance 
of the education system. For example, the cost of 
delayed  progress  linked  to  grade  repetition  in  the 
French  Community  was  estimated  at  10 %  of  the 
education  budget.(47)  In  third  level,  high  drop-out 
rates are costly. The French Community also does 
not  systematically  measure  completion  nor  drop-
out  rates.  In  both  Communities,  there  is  no 
systematic  use  of  graduate  tracking  to  channel 
information  on  graduates’  careers  into  higher 
education policy planning. 

The implementation of the 'Pact for Excellence', 
the French Community’s flagship school reform 
to  improve  basic  skills,  efficiency,  governance 
and  tackle  inequalities,  is  progressing  slowly. 
From 2019, there will be a gradual increase in the 
budget  for  individualised  child  support  to  reduce 
grade  repetition  and  school  failure.  New  quality 
assurance and school governance measures as well 
as  the  recently  adopted  reform  of  the  initial 
teachers'  education  aim  to  improve  educational 

(45)  The percentage of education expenditure (% of GDP) and a 
composite  indicator  covering  results  of  the  Programme  of 
International Student Assessment (PISA) test and the share 
of population with a secondary or tertiary diploma. 

(46)  Education and Training Monitor 2018 
(47)  Fédération Wallonie-Bruxelles, 2017 

to 

and 

reduce 

performance 
inequalities. 
Nevertheless, major reforms are still pending, such 
as the extension of the common multi-disciplinary 
curriculum  to  the  9th  grade  and  the  new  working 
organisation of teachers.    

The Flemish Community is implementing some 
reforms in secondary education as of 2019/2020. 
Measures  include  a  new  toolkit  of  validated  end-
of-primary-education  test  and  a  new  classification 
of  the  study  offer  to  help  pupils  make  the  right 
choices. Differentiation and remediation in the first 
stage,  and  easier  transition  to  higher  education  or 
the labour market should contribute to more equal 
opportunities.  However,  early  tracking  of  pupils 
remains  a  concern.  Higher  attainment  targets  for 
first stage secondary education will be rolled out as 
of 2019/2020, to be followed in the next years for 
the second and third stage. 

linked 

(47 %). 

Inequalities 

Educational  inequalities  are  also  observed  in 
tertiary  education.  The  tertiary  attainment  rate 
(45.9 %  in  2017)  is  close  to  the  national  2020 
target 
to  socio-
economic  status,  family  and  migrant  background 
persist.  While  48.8 %  of 
the  native-born 
population  aged  30-34  has  completed  tertiary 
education,  only  29.5 %  of  the  non-EU  born 
population  has  done  so.(48)  The  attainment  gap 
between people with disabilities and those without 
far  exceeds  the  EU  average  (25.5 pps  against 
13.2 pps).(49)  

technology, 

engineering 

few  graduates 

in 
innovation  and  growth, 

Tertiary education attainment is high, but there 
sectors  most 
are 
too 
like 
supportive  of 
science, 
and 
mathematics  (STEM).  In  2016,  Belgium  ranked 
26th in the EU for tertiary graduates in STEM (50) 
education (see Graph 3.3.6) with a low rate of new 
entrants  to  related  tertiary  education  fields  (51),  in 
particular  for  women. (52)  In  2017,  the  proportion 
of young Belgians aged 16/24 with basic or above 
basic digital skills' levels (78.8 %) was lower than 
the  EU  average  (81.9 %).  Belgium  rate  of 

(48)  Source Eurostat. Online data code: edat_lfs_9912. 
(49)  EU-SILC 2016. 
(50)  Science, Technology, Engineering and Mathematics 
(51)  Natural  sciences,  mathematics  and  statistics,  Information 
and  Communication  Technologies  (ICT),  engineering, 
manufacturing and construction, OECD (2018) 

(52)  The  proportion  of  female  graduates  in  IT  is  among  the 

lowest in international comparison (OECD, 2018). 

39 

 
                                                           
                                                           
3.3. Labour market, education and social policies 

graduates  (1.8  per  1000  inhabitants)  are  low 
notably  vis-à-vis  France  (2.4)  and  Germany  (3.0) 
(Joint  Research  Centre,  2018).  The  overall 
implementation  of  the  “STEM  Action  Plan  2012-
2020”  shows  progress,  but  the  number  of  STEM 
secondary  graduates  in  technical  and  vocational 
paths  has  stagnated  since  2010 (53).  The  French 
Community  has  no  STEM  action  plan  and  still 
needs to implement its recently adopted “Strategy 
for Digital Education” plan for schools. 

Furthermore,  many  graduates  are  still  not 
familiarised  enough  with  the  mind-set  of  a 
“knowledge  entrepreneur”.    They  are  often  not 
provided  with  the  skills  required  to  generate  and 
implement  new  ideas  through  new  ventures  (St-
Jean,  É.  and  other,  2017).  Flanders  is  currently 
implementing 
enhance 
entrepreneurial  skills  in  higher  education  and 
establish  being  an  entrepreneur  as  a  true  career 
choice for students. 

reforms 

furthers 

to 

Graph 3.3.6:  Graduates in STEM (ISCED  5--8) as a 
percentage of total graduates (2016) 

Source: Eurostat, own calculations 

Dual  learning  and  apprenticeship  training  are 
being  promoted.  Initiatives  were  undertaken  in 
recent  years  to  improve  the  work-based  learning 
component  in  vocational  and  educational  training 
(VET)  (see  European  Commission,  2018a).  The 
Flemish  Community 
the  dual 
learning  system  as  a  new  secondary  education 
pathway,  while  higher  VET  is  transferred  from 
to  higher  education 
adult  education  centres 

is  rolling  out 

(53)  STEM Monitor 2018. 

notably 

through 

training, 

institutions. The French Community is reinforcing 
practical 
the 
experimental  implementation  of  certification  by 
units  in  formal  IVET  programmes.  It  also  offers 
the possibility to follow, in some areas, a bachelor 
or  a  master  degree  in  a  dual  learning  system  in 
both  Higher  Education  and  Adult  Education 
School. 

Adult participation in education and training is 
low, reflecting weak incentives. The participation 
rate in adult learning increased in 2017 but remains 
below  the  EU  average  (8.5 %  against  10.9 %). 
There are strong regional differences, as Brussels’ 
participation  rate  (12.6 %)  is  nearly  twice  that  of 
Wallonia  (6.7 %)(54).  It  decreases  with  age  and 
increases  with  skill  levels.  Belgium  performs 
better  in  training  within  companies,  with  a  higher 
share  of  provision  by  companies  (12 %  vs  EU 
average of 9.5 %) and a higher than average share 
of  employee  participation.  Training  by  companies 
focuses more on technical, practical or job specific 
skills  than  in  most  Member  States.  This  suggests 
there  are  insufficient  incentives  for  up-and  re-
skilling. 

3.3.3.  SOCIAL POLICIES 

Belgium’s  social  protection  system  prevents 
poverty  from  becoming  a  major  problem.  The 
at-risk  of  poverty  (AROP-)  rate  was  15.9 %  in 
2017, below the EU average of  16.9 %. However, 
before  social  transfers,  the  AROPE  rate  was  of 
26.3 %, higher than in Germany and France (both 
24.1 %).  Pockets  of  poverty  persist  while  part  of 
the population lacks access to the labour market.   

The  efficiency  of  social  transfers  to  reduce 
poverty  is  high,  though  it  has  been  declining 
since 2005 for the working age population. The 
at-risk of poverty (AROP) rate for people living in 
quasi-jobless  households  increased  significantly 
(70 %  in  2017).  It  is  above  the  EU  average 
especially  for  households  with  children.  While 
unemployment  benefits  are  not  limited  in  time, 
they  decline  to  about  a  level  of  social  assistance 
after a period of 14 to 48 months, depending on the 
number  of  previous  years  in  employment.  The 

(54)  The  French  Community  does  not  participate  in  the 
Programme  for  the  International  Assessment  of  Adult 
Competencies (PIAAC) survey. 

40 

0510152025303540DEATFIPTROGREESEUKEU28FRHRIESLCZESLTITPOHUSKLVDKBGLTLUBECYNLEngin., manuf and constrICTNatural sciences, maths and statistics 
 
                                                           
                                                           
3.3. Labour market, education and social policies 

the  necessary 

care,  but 
inter-governmental 
collaboration is challenged by the sharing of health 
responsibilities  between  the  federal  level  and 
federated  entities. (56)  The  role  of  primary  care 
within the larger health system is relatively weak.  

The  provision  of  informal  care  is  higher  than 
the  EU  average.  This  is  particularly  the  case  for 
persons  providing  around  10  hours-or-less  of 
weekly informal care (65 % against an EU average 
of  59 %  in  2016).  Belgium  has  a  higher  than  EU 
average  share  of  persons  providing  informal  care 
between  10  to  19  hours  per  week  (19.2 %  and 
17.2 %  respectively).  The  recent  European  Social 
Protection  Network  report  notes  that  the  Belgian 
system of residential care, though well developed, 
faces  challenges  in  sustainability  and  access,  in 
particular in view of an ageing population.  

People with disabilities face particularly strong 
educational 
regarding  poverty, 
challenges 
attainment  and  employment.  The  employment 
rate for people with disabilities is much lower than 
the EU average (40.5 % vs. 48.1 %). The transition 
from  the  traditional  disability-welfare  approach 
towards  a  rights-based  approach  (considering 
persons with disabilities as active citizens needing 
access 
is  slow. 
Considering  the  diversity  of  fields  to  address 
(work,  education,  services,  social  benefits,  etc.), 
the 
lack  of  a  de-institutionalisation  strategy 
concerted  between  federal  and  federated  entities 
(in line  with the UN Convention on  the Rights of 
Persons with Disabilities) makes the situation more 
difficult to tackle. 

to  all  community  services) 

In  Belgium, 

in  social  housing. 

In  parallel,  there  are  important  investment 
the 
needs 
percentage  of  social  housing  compared  to  total 
housing  market  is  rather  weak  (6.5 %  of  all 
dwellings),  in  particular  in  comparison  to  the 
Netherlands  (34 %)  and  France  (18.7 %).  All 
regions  are  affected,  in  particular  Brussels  where 
the demand would be double to the offer. 

Investment 

Significant  investments  are  necessary  to  increase 
tackle 
activity 

employment 

rates, 

and 

to 

(56)  European  Commission/OECD/European  Observatory  of 
Health Systems and Policies (2017), State of Health in the 
EU. 

adequacy  of  social  benefits  for  the  working  age 
population is above the EU average (55), but below 
the  poverty  threshold  for  a  range  of  family 
situations.  Lower-income  families  have  a  poorer 
access  to  health  care  services  than  in  the  EU 
average. 

Some  workers  have  limited  social  protection. 
Not all self-employed workers have formal access 
to  unemployment,  accident  and  occupational 
injuries' benefits. Apprentices below the age of 19 
do  not  enjoy  the  right  to  unemployment  benefits, 
(European 
sickness,  maternity  and  pensions 
Commission, 2018c). 

is 

pronounced 

There  are  strong  inequalities  in  health  access 
and outcomes by socio-economic status. The gap 
in health outcomes between the poorest and richest 
quintiles 
(European 
Commission/ESPN,  2018).  At  age  50,  Belgian 
men with the lowest level of education can expect 
to  live  about  six  years  less  than  those  with  the 
highest  education 
life 
expectancy  between  provinces  (78.8  years  in 
Hainaut  and  82.9  years  in  Vlaams  Brabant)  are 
mainly explained by socio-economic status. There 
are also disparities in unmet needs for medical care 
by  income  group.  In  fact,  the  gap  between  the 
the  most 
richest  quintiles 
poorest  and 
pronounced of all western European countries.   

level.  Differences 

in 

is 

neighbourhood 

Effectively  reaching  out 
to  disadvantaged 
groups remains a challenge. General practitioners 
and  multidisciplinary 
health 
centres  can  play  an  important  role  in  tackling 
health  differences  due  to  socio-economic  status. 
The  suspension  of  new  community  health  centres 
has been lifted and the sector can continue to grow. 
Flanders  launched  a  reform  of  integrated  primary 
care  –  with  technical  support  from  the  European 
Commission  –  to  create  over  60  multidisciplinary 
primary care zones. 

Greater  prevention  requires  stronger  primary 
care.  Some  health  inequalities  could  be  remedied 
cost-effectively  by  better  health  promotion  and 
disease  prevention, 
including  early  detection 
amongst risk groups. This requires strong primary 

(55)  According  to  the  benchmarking  exercise  in  the  area  of 
minimum  income  schemes  conducted  within  the  Social 
Protection  Committee.  See  the  draft  Joint  Employment 
Report 2019. 

41 

 
                                                           
                                                           
3.3. Labour market, education and social policies 

the 

labour  market 

competences).School 

inequalities  of  opportunities,  and  to  improve  the 
performance  and  outcomes  of  the  education  and 
training  systems.  High  levels  of  skills  shortages 
and  mismatches,  especially  among  some  groups, 
point to the need to invest more in targeted support 
on 
(activation  measures, 
training, re-/up-skilling, etc.) and in better aligning 
programmes  to  labour  market  needs  (including 
science, technology, engineering, mathematics and 
future-oriented 
digital 
equipment and infrastructure should also be among 
the  priorities.  Inequalities  of  access 
to  and 
completion  of  education  and  training  should  also 
be  tackled. Strong investment are also required in 
social inclusion, in particular so as to ensure equal 
and 
(including 
healthcare and long term care), full participation of 
the people with disabilities in society and to better 
include third country nationals (addressing notably 
discrimination).  Investments  in  these  areas  should 
in  matching 
be  backed  up  by 
to 
infrastructure.  Attention  should  be  paid 
geographical  disparities,  as  well  as 
the 
to 
repartition  of  competences  between  federal  and 
federated entities. 

inclusive  access 

to  services 

investments 

42 

 
3.4. COMPETITIVENESS AND INVESTMENT 

3.4.1.  COMPETITIVENESS, PRODUCTIVITY AND 

INNOVATION 

Competitiveness and productivity 

Labour  productivity  growth  has  slowed  down 
more  in  Belgium  than  in  its  neighbouring 
countries and in the euro area on average since 
2000. Productivity growth started to pick up again 
in  2015  in  the  euro  area  and  in  neighbouring 
countries,  but  this  productivity  revival  has  been 
less  pronounced  in  Belgium.  The  main  reason  for 
this  was  low  productivity  growth  rates  in  the 
services  sector  in  the  context  of  a  particularly 
labour-intensive  growth.  Job  creation  has  been 
higher  in  services  with  low  added  value  such  as 
accommodation  and  food  services,  transportation 
and  storage,  wholesale  and  retail.  Productivity 
growth  in  manufacturing,  by  contrast,  has  proved 
more resilient (Biatour and Kegels, 2017). 

Graph 3.4.1:  Distribution of labour productivity growth, 

selected countries, 2014 

productivity  gains  may  point  to  obstacles  in  the 
diffusion of innovation (see infra).  A recent study 
(Dhyne  et  al.,  2018)  estimates  that  differences  in 
technologies 
information  and  communication 
investment  could  explain  up  to  17 %  of  the 
productivity dispersion at firm level.  

Productivity tends to be higher in firms directly 
integrated  to  global  value  chains.  The  share  of 
Belgian  firms  that  export  or  import  directly  is 
small, as in other advanced economies (Dhyne and 
Duprez,  2017).  However,  almost  two  thirds  of 
businesses  are  directly  or  indirectly  connected  to 
foreign demand. Recent empirical results showing 
the productivity of Belgian firms according to their 
proximity  to  foreign  markets  highlight  that  the 
firms least connected to international markets tend 
to  lag  behind  in  terms  of  technological  efficiency 
(cf. Dhyne and Duprez, 2017).  

Restored  productivity  growth  is  essential  to 
preserve  external  competitiveness  and  ensure 
future  economic  growth  in  the  context  of  an 
ageing  population.  The  evolution 
in  cost 
competitiveness  (in  terms  of  nominal  unit  labour 
cost (57) compared 
to  neighbouring  countries), 
which  benefited  largely  from  wage  moderation 
(after  the  wage  norm  reform)  and  the  tax  shift,  is 
set to be less positive in 2019 because of expected 
rising  domestic  wage  costs.  However,  with  a 
slightly improved productivity growth, the increase 
in  labour  costs  per  unit  produced  is  expected  to 
remain lower than the wage cost in 2019 and 2020 
(De Mulder J., Godefroid H., 2018). 

Source: Compnet, own calculation 

firms 

The productivity gap between the most and the 
least productive firms is large and widening (see 
Graph  3.4.1).  As  in  other  advanced  economies, 
Belgium's  most 
display 
productive 
significantly  higher  productivity  growth  than  the 
rest. This dispersion is however more important for 
Belgium  than  its  major  neighbouring  countries, 
notably France and Germany. It has been estimated 
that the productivity gap increased by 29 pps from 
1996 to 2016 (De Mulder J., Godefroid H., 2018). 
The fact that only a few firms drive most aggregate 

Belgium  is  lagging  its  neighbours  in  terms  of 
Total  Factor  Productivity  (TFP)  growth.(58)  
During  the  post-crisis  recovery,  Belgian  TFP 
accelerated at a slower pace than in the rest of the 
EU and stagnated in recent years. The deceleration 
of the aggregate TFP growth is mainly attributable 
to  a  lower  productivity  growth  within  firms  (De 
Mulder  J.,  Godefroid  H.,  2018),  suggesting  a 
slowdown 
internal  TFP  growth. 
Moreover, between-firms reallocation of resources 
increased importantly after the crisis, becoming the 

firms’ 

in 

(57)  Nominal  unit 

a  key  measure  of 
cost, 
competitiveness, is determined by the evolution of nominal 
wages in relation to productivity developments. 

labour 

(58)  Total  Factor  Productivity  is  defined  as  the  part  of  output 
that  is  not  explained  by  the  amount  of  inputs  (e.g.  labour 
and  capital)  used  in  the  production  process,  and  therefore 
captures the efficiency in the use of inputs. 

43 

020406080100120BEFRDENLMedian90th percentile10th percentileMean 
 
 
                                                           
3.4. Competitiveness and investment 

Belgium  has  recently  adopted  a  law creating  a 
National Productivity Board (60). The Boards are 
meant to be independent institutions whose aim is 
to inform the debate on productivity-related policy 
challenges  and 
reforms.  National 
Productivity  Boards,  as  referred  to  in  the  Council 
Recommendation  of  September  2016,  can  help 
facilitate the debate on country-specific needs and 
share good practices. 

structural 

Investment 

largest  positive  component  of  the  overall  TFP 
growth.  This  is  mainly  due  to  a  more  efficient 
resources  allocation  between  firms  of  the  same 
sector, notably in industry, and may point to some 
cleansing  effect  of  the  crisis,  which  pushed  less 
productive  firms  out  of  the  market.  On  the  other 
hand,  TFP 
sectors 
reallocations,  especially  from  industry  towards 
expanding  services  sectors,  remain  weak  as  the 
latter  are  characterised  by  a  more  limited  internal 
TFP growth. 

between 

gains 

from 

by 

business 

hampering 

A number of factors are behind the evolution of 
productivity growth. In addition to the impact of 
an  ageing  population    (Ariu  and  Vandenberghe, 
2014),  an  increasing  share  of  the  services  sectors 
in the economy, common to most of the developed 
countries,  seems  to  weigh  more  on  the  aggregate 
TFP  growth  deceleration  in  Belgium  than  in  the 
neighbouring countries (IMF, 2018). This points to 
country-specific  factors  influencing  the  aggregate 
trends.  Unnecessary  barriers  to  competition  and 
investment in the product and service markets (see 
section 3.4.2) as well remaining rigidities in labour 
market  (see  section  3.3)  weigh  on  productivity 
growth 
dynamics, 
resources  reallocation  and  diminish  workers'  and 
firms' incentives to invest in skills  (e.g. IMF 2018, 
Duval et al., 2017). Despite higher R&D spending 
than  in  the  EA  (2.5 %  against  2.1 %  of  GDP, 
respectively), 
the  Belgian  economy  does  not 
perform proportionately better in terms of patents, 
innovative products creation and high-tech exports 
(Basselier  et  al.,  2017).  These  rigidities  may  also 
partly  explain  a  larger  share  of  less  productive 
“zombie firms” than in neighbouring countries (59) 
accounting  for  around  10 %  of  all  Belgian 
companies compared to 2 % in France (De Mulder 
J.,  Godefroid  H.,    2018).  Although  this  group  of 
firms remains heterogeneous with some presenting 
good  characteristics,  their  survival  crowds  out 
for  more  productive 
growth  opportunities 
enterprises.  Moreover,  in  Belgium  the  declining 
quality  of  infrastructure  resulting  from  years  of 
insufficient public investment (see section 3.1) has 
likely  contributed  to  depress  productivity  growth 
(Biatour,  Kegels,  Van  der  Linden  and  Verwerft, 
2017).  

(59)  According to the definition adopted by the OECD, a firm is 
considered a zombie firm if it is aged at least 10 years and 
it  had  an  interest  coverage  ratio  less  than  one  for  three 
consecutive years (Adalet McGowan et al., 2017). 

and 

needs 

investment 

innovation 

congestion.  R&D 

limited.  Public  support 

Focussing  investment  in  transport  and  energy 
infrastructures 
would 
strengthen  the  long-term  growth  potential  of 
Belgium, while contributing to address regional 
disparities.  In  spite  of  a  relatively  high  level  of 
investment (61), 
remain 
investment 
significant.  A  protracted  low  level  of  public 
investment has led to a deterioration in the quality 
of road infrastructure and public transport services, 
increasing 
is 
concentrated  in  a  few  sectors,  while  innovation 
diffusion  remains 
to 
research and innovation is uneven among Regions 
and  Communities. 
light  of  Belgium’s 
In 
commitment  to  fully  phase-out  nuclear  energy  by 
2025, there is a need for important investments in 
power  generation  and  interconnection  capacity, 
smart  grids  and  storage.  Renovating  the  existing 
building  stock  is  necessary  to  meet  the  2020  and 
2030  emission  reduction  targets.  Digitalisation  of 
the 
public  services  and 
reinforcement  of  certain  regulators  (see  Section 
3.4.4),  would  improve  institutional  governance 
The analysis carried out by the national authorities 
in  the  context  of  the  National  Pact  for  Strategic 
Investment (see Section 3.1) broadly identifies the 
same  sectors as those  where investment needs are 
more important.  

justice,  as  well  as 

(60)  The NPB has 12 members: 6 members representative of the 
federal level and 6 members representative of the regional 
level (2 for each Region). At the federal level, all members 
are  nominated  by  the  King,  2  of  them  on  the  proposal  of 
the Secretariat of the Economic Council, 2 of them on the 
proposal of the National Bank of Belgium (NBB) and 2 of 
them  on  the  proposal  of  the  Federal  Planning  Bureau 
(FPB). 

(61)  Total  national  investment  in  Belgium  remains  relatively 
high  at  23.5 %  of  GDP  in  2017.  Total  investment 
(measured as gross fixed capital investment) was above the 
EA  average  (20.6 %  of  GDP)  and  of  each  of  its  main 
trading partners, France, Germany and the Netherlands 

44 

 
                                                           
 
                                                           
3.4. Competitiveness and investment 

Box 3.4.1: Investment challenges and reforms in Belgium 

Section 1. Macroeconomic perspective 

At  23.5 % of  GDP  in 2017  total  investment  in  Belgium  (measured  as  gross  fixed  capital  investment)  was 
above  the  euro  area  average  (20.6 %  of  GDP)  and  that  of  each  of  its  neighbouring  countries,  France, 
Germany and the Netherlands. Investment in Belgium has proved rather resilient to the crisis and in 2017 the 
level  of  overall  investment  was  higher  than  in  2007;  by  contrast  in  the  euro  area  as  a  whole  and  in 
neighbouring  countries  the  current  level  of  investment  was  still  below  its  pre-crisis  level.  The  relatively 
overall good performance is due to private investment, while the level of public investment remains low.  

Section 2. Assessment of barriers to investment and ongoing reforms 

Progress has been made to reduce barriers to private investment in Belgium, for instance substantial progress 
has been made in reducing the labour cost handicap. Nevertheless, more ambitious liberalisation of regulated 
professions  and  business  services  is  key  in  light  of  the  increasing  importance  of  services  as  input  for  the 
manufacturing  sector  (see  section  3.4.2).  Relatively  low  labour  participation  and  job  mobility  and  a  high 
degree of skill mismatches result in job vacancy rates among the highest in the EU, and job offers for critical 
occupations taking longer to fill (see section 3.3). Regional disparities are also important (see section 3.4.3) 

Selected barriers to investment and priority actions underway 

1.  The  fragmentation  of  competencies  regarding  investment  between  multiple  layers  of  government 
complexifies the investment decision-making process. Combined to the need to pursue fiscal consolidation, 
this has led to a low level of public investment for a protracted period of time (see section 3.1). The latter is 
reflected in the deteriorating quality of the country's public infrastructure, weighing on the competitiveness 
of the country. The complexity of procedures and delays in obtaining permits further hamper the realisation 
of major infrastructure projects (see section 3.4.2). 

Reflecting the federal structure of Belgium, promotional banks and agencies have been set up at federal (1) 
and regional (2) levels to support private sector initiatives and implement specific sectoral policies, through a 
range of loan and guarantee products using both own resources as well as EU financial instruments.  

(1)  Société Fédérale de Participation et d’Investissement / Federale Participatie- en Investeringsmaatschappij 
(2)  Société  Régionale  d’Investissement  de  Bruxelles,  Société  Régionale  d’Investissement  de  Wallonie/SOWALFIN, 

Participatie Maatschappij Vlaanderen 

45 

Regulatory/ administrative burdenCSRTaxationPublic 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 ConstructionCSRWages & wage settingDigital Economy / TelecomEducation CSREnergyTransportCSRLegend:No barrier to investment identifiedSome progressCSRInvestment barriers that are also subject to a CSRSubstantial progressNo progressFully addressedLimited progressPublic administration/ Business environmentFinancial Sector / TaxationR&D&ISector specific regulationLabour market/ Education 
 
 
Overview  of  the  business  environment  and 
business dynamics  

of 

spite 

efforts, 

(ranking  1st)  and 

the 
government 
In 
administrative  burden  on  firms  remains  heavy 
and weighs on entrepreneurship. Belgium is one 
of  several  leading  EU  Member  States  where  only 
three  procedures  are  required  to  start  a  business 
according to the 2019 World Bank Ease of Doing 
Business  report.  It  also  scores  best  in  trading 
across  borders 
insolvency 
(ranking  8th).  However,  overall  it  only  ranks  45th 
out  of  190  assessed  economies,  with  long  delays 
for  building  permits  (212  days,  hence  ranking 
168th),  notably  because  of  appeals  (see  Section 
3.4.4)  and  poor  performance 
registering 
property (ranking 143). The process of transferring 
a property is the third slowest in the EU at 56 days 
(see Section 3.4.4) and the second most expensive 
among  the  EU  Member  States  at  12.7 %  of  the 
property  value.  Finally,  Belgium  also  lags  behind 
in  terms  of  social  protection  of  self-employed 
people (see Section 3.3.3).  

in 

Belgium  plans  a  reform  of  its  company  law 
code, which is expected to enter into force in the 
first  half  of  2019.  It  reduces  the  number  of  legal 
forms  of  companies  from  17  to  4,  removes  the 
minimal  capital  requirements  for  setting  up  a 
company,  abolishes  the  unlimited  liability  of 
administrators  and  allows  e-mail 
to  replace 
registered letters.  

taxation  on 

start-ups  and 

Entrepreneurship  is  being  boosted  by  lower 
taxation and support for disadvantaged groups. 
The  reform  of  the  Corporate  Income  Tax  law 
alleviates 
small 
companies  (see  Section  3.1.6).  The  Brussels  and 
Walloon  regions  also  provide  additional  support 
for entrepreneurship, particularly to disadvantaged 
groups  and  women.  In  Flanders,  a  monthly  gross 
premium  is  now  available  to  unemployed  people 
over  45  years  old  who  wish  to  start  their  own 
business. 

Innovation and business dynamics 

Belgium  is  a  strong  innovator  thanks  to  an 
excellent  public  science  base  and  very  good 
interlinkages  between  public  research  and 

In 

the 

Innovation  Scoreboard(62), 
industry. 
Belgium  is  in  the  same  group  as  Germany  and 
France,  but  behind  innovation  leaders  like  the 
Netherlands.  The  excellence  of  its  public  science 
base,  the  linkages  between  public  research  and 
industry  and  the  presence  of  a  number  of  R&D 
centres of  multinational companies are among the 
strong points of its research and innovation system. 
Belgium benefits from adequate public and private 
infrastructures. Regions are participating in 16 out 
of  28  partnerships  in  the  Smart  Specialisation 
Thematic  Platforms.  However,  differences  exist 
among provinces. 

intensity  (from  1.28 % 

Private R&D intensity is high, but public R&D 
intensity  can  improve  and  is  mostly  driven  by 
R&D  tax  incentives.  Belgium’s  overall  R&D 
intensity  increased  remarkably,  from  1.84 %  in 
2007  to  2.58 %  in  2017,  mostly  thanks  to  growth 
in  business  R&D 
to 
1.76 %).  Public  R&D  intensity  increased  too,  but 
remains  below  that  of  most  other  Member  States 
with  a  similar  level  of  economic  development. 
Public R&D undertaken in Flanders is higher than 
for  Belgium  as  a  whole  (Debackere  et  al,  2018), 
suggesting  that  public  research  is  likely  to  be 
in  other 
below 
Regions/Communities.  Nevertheless, 
indirect 
public support for business R&D is high (see Box 
3.4.2), without any bias against small and medium-
sized enterprises (SMEs). 

the  EU  average 

(0.7 %) 

in 

(mainly 

few  business 

As  Belgian  R&D  investment  is  concentrated  in 
a 
the 
sectors 
pharmaceutical industry – see previous country 
reports),  public  authorities  have  been  pushing 
for  R&D 
in  other  areas.  The  share  of 
environmental inventions in total patents has risen 
very  substantially  since  the  early  90s,  as  in  many 
countries,  but  still  lags  the  OECD  average  by 
around 30 % on a per-capita basis (OECD, 2017b). 
The National Pact for Strategic Investment aims to 
boost coordination of investment in R&D in cross-
cutting  areas  like  digitalisation  (cybersecurity,  e-
health),  health,  mobility, 
transport 
systems  and  energy.  Belgian  regions  have  had  a 
consistent  policy  of  supporting  the  emergence  of 
new  industries,  in  particular  in  the  low-carbon 

intelligent 

(62)  According  to  the  European  Innovation  Scoreboard  2018, 
at: 

available 
https://ec.europa.eu/growth/industry/innovation/facts-
figures/scoreboards_en 

46 

 
 
                                                           
3.4. Competitiveness and investment 

of 

the 

country.  This 

avenue to boost productivity and the innovation 
capacity 
requires 
investments  in  digital  infrastructure  and  human 
capital as well as an accelerated take-up of digital 
technology,  in  particular  by  those  firms  that  have 
been  lagging  behind  so  far,  and  by  the  public 
sector.  There 
is  an  overall  mixed  picture 
concerning  the  digitalisation  of  public  services  in 
Belgium (see Section 3.4.4). 

technology, 

engineering 

The  ongoing  digital  transformation  of  the 
Belgian  economy  requires  more  graduates  in 
and 
science, 
mathematics (‘STEM’) as well as a major effort 
to  re-skill  and  up-skill  the  labour  force  (see 
Section 3.3). The level of digital skills is good but 
stagnating  and  more  than  one  third  of  the  labour 
force has insufficient digital skills. According to a 
report, up to 584 000 open vacancies could remain 
unfilled  by  2030  if  no  decisive  action  is  taken 
while 310 000 workers would need to be retrained 
for a new job (Agoria, 2018a).   

Belgium  is  doing  well  when  it  comes  to  the 
integration  of  digital  technology  by  companies. 
There  are  several  complementary  strategies  in 
place  to  further  digitalise  Belgian  businesses.  The 
challenge is now to motivate companies with a low 
level of digitalisation to catch up.  

of 

the 

broadly, 

lack 
important  barriers 

Scarce availability of a high-skilled labour force 
and  regulatory  barriers  in  services  markets 
hamper  business  dynamism.  The  shortages  of 
professionals  in  sciences  and  engineering  and, 
‘knowledge 
more 
entrepreneurs’  are 
to 
developing  start-ups  in  Belgium  (e.g.  ICT  start-
ups)  and  will  ultimately  dent  Belgian  growth 
prospects  (see  Section  3.3.2).  Similarly,  several 
barriers in services markets also impact churn rates 
and  the  spread  of  innovation  (see  Section  3.4.2). 
Job mobility is low,  which  may limit productivity 
growth (see Section 3.3.2). 

two 

3.4.2.  MARKET INTEGRATION 

Services sector 

economy, 
specialisation’.(63)  

notably 

through 

‘smart 

to 

efforts 

funding 

The  renewal  of  the  Belgian  economy  as 
measured by entry and exit firm ratio is slower 
than in peer countries. This occurs despite a good 
access 
to  boost 
and 
entrepreneurship. Start-ups can be found in several 
sectors, notably in financial technology, media and 
healthcare.  Belgian  start-ups  are  also  quick  to 
venture  into  international  markets  and  are  very 
much 
business-to-business 
on 
connections.  However,  Belgium  ranks  23rd  in 
terms  of  employment  in  high-growth  innovative 
enterprises (2.7 %, while the EU average is 4.8 %). 
According  to  the  2018  Digital  Transformation 
Scoreboard,  there  has  been  a  downward  trend  in 
the  number  of  newly  created  information  and 
communication technologies start-ups for the last 5 
years and in 2018, with regional variations. 

focused 

Graph 3.4.2:  Public R&D intensity (government plus higher 
education) and GDP per capita (PPS) - 2016 

Source: European Commission 

Digitalisation  

Reinforcing  the  digitalisation  of  the  Belgian 
economy  has  been  identified  in  the  National 
Pact  for  Strategic  Investment  as  a  promising 

(63)  In  the  area  of  low-carbon  technologies,  Flanders  has 
notably  large  clusters  in  for  instance  eco-innovation  and 
sustainable  chemistry,  while  Wallonia  has  a  Competitive 
Cluster in green chemistry, environmental biotechnologies 
and innovative materials (as well as private clusters). 

47 

EU28EA19BEBGCZDKDEEEIEELESFRHRITCYLVLTHUMTNLATPOPTROSISKFISEUK0,000,200,400,600,801,001,20102030405060Public R&D intensity (as % of GDP)GDP per capita (PPS) 
 
                                                           
3.4. Competitiveness and investment 

Box 3.4.2: R&D tax incentives 

Belgium has one of the highest worldwide indirect public support to business R&D – as share of GDP. 
In  Belgium,  in  addition  to  direct  support  from  the  regions,  firms  can  benefit  from  several  tax  benefits  in 
support  of  R&D,  introduced  by  the  federal  government  from  2005  onwards.  According  to  OECD  data, 
Belgium has the higher worldwide of indirect public support to Business R&D (0.30 % of the GDP in 2015).  

An innovation box has replaced the old Belgian patent box. The new regime - approved by the Code of 
Conduct  Group on  Business  Taxation  -  requires  a  stronger  link  between  the  intellectual property  (IP)  that 
can benefit from the regime, and the R&D that created this IP. As a reminder, the economic evidence on the 
effectiveness of patent/innovation boxes as a means to encourage R&D remains limited and it may be used 
as a tax competition tool. 

Belgian tax incentive schemes do not target a particular category of enterprises. Four schemes of partial 
exemption  of  advance  payment  of  the  withholding  tax  on  wages  of  R&D  personnel  exist,  along  with  tax 
deduction  or  tax  credit  for  investment  in  R&D  fixed  assets  that  aim  to  develop  new  products  or  patents. 
Most  schemes  do  not  target  particular  categories  of  enterprises,  but  incentivise  indifferently  SMEs  or  big 
enterprises,  firms  that  make  profits  or  losses  (OECD,  2017a).  For  instance,  the  absence  of  a  profit 
requirement for eligibility, implies no bias in favour of incumbents (Acemoglu, 2013) 

Combination of different measures decreases the effectiveness of public support to business R&D in 
Belgium.  Recent  studies  (Dumont  2017,  Teirlinck,  Spithoven  and  Bruneel  2018)  give  indications  that  the 
combination  of  different  measures  decreases  the  effectiveness  of  public  support  to  business  R&D  in 
Belgium, pointing out the need to account for all schemes when assessing additionality of the public support 
in the country and inviting for a coherent approach between federal R&D tax support schemes and regional 
government level R&D direct subsidies. 

These studies give robust evidence that tax benefits based on the wages of researchers are effective in 
building  R&D  capacity  in  enterprises,  with  a  higher  impact  for  smaller  (Bronzini  2016,  Dumont, 
Spithoven and Teirlinck 2016) and less R&D intensive firms. However, no indication of additionality for the 
public support through corporate income taxation (tax credit for R&D investment and tax deduction of 80 % 
of patent income) were found in these studies (Dumont 2017). This is in line with a comparative study of all 
the R&D tax schemes in the EU (EC 2015) which highlighted tax benefits based on the wages of researchers 
as a best practice among the various types of R&D tax incentives. In particular, the economic evidence on 
the effectiveness of patent/innovation boxes as a means to encourage R&D remains limited. 

Assessing  the  whole  tax  incentives  to  business  R&D  system  in  the  framework  of  a  spending  review,  as 
indicated  by  the  Country  Specific  Recommendation  1/2018,  could  lead  to  measures  to  improve  the 
efficiency  and  composition  of  public  spending,  to  reduce  the  complexity  of  the  taxation  system  and  the 
erosion of taxable bases in order to create room for investments (see Section 3.1, supra).  

Restrictions 
in  services  sectors  negatively 
impact  manufacturing,  through  value  chains. 
Estimates  show  that  more  than  43 %  of  the  value 
added  included  in  overall  gross  exports  by  the 
Belgian  manufacturing  sector  originates  in  the 
services  sector. (64)  In  this  context,  the  lagging 
performance  of  the  services  sector  has  negative 
implications for the manufacturing sector. 

(64)  OECD  TiVa  statistics  (latest  available  estimation  from 

2014). 

Regulated professions 

are 

substantial 

restrictions 

the  Belgian 

to 
There 
competition  and  investment  in  several  business 
services  (see  previous  country  reports).  The 
Commission  restrictiveness  indicator (65)  shows 
for 
that 
accountants, tax advisors, architects and real estate 
agents is considerably more restrictive than the EU 
average. Key obstacles include mandatory training 
requirements,  mandatory  chamber  membership 
and 
requirements, 

requirements 

framework 

regulatory 

insurance 

(65)  COM(2016) 820 final. 

48 

 
                                                           
                                                           
3.4. Competitiveness and investment 

structure 

requirements 

corporate 
restricting 
investment. A recently adopted law has introduced 
new  requirements  in  terms  of  title  protection, 
mandatory  chamber  membership  and  compulsory 
insurance  for  patent  agents.  Although    notaries 
seem to have a similar degree of regulation to that 
the 
of  many  other  Member  States  (except 
the 
throughout 
Netherlands)  and  are  present 
territory, 
their  regulated  fees  for  real  estate 
transactions  are  at  the  very  high  end  of  the  scale, 
adding  to  the  high  registration  taxes  (see  Section 
3.1.6).  

the 

than 

productive 

In  addition, 

Barriers  to  competition  and  investment  in 
several  business  services  hamper  growth  and 
productivity. Entry rates of new service providers 
are  significantly  below  the  EU-average  (66).  In 
addition, profit rates are above the EU-average, in 
line with the results of the market screening by the 
Price  Observatory  showing  that  the  price  cost 
margins  for  several  business  services  are  well 
above  the  national  average  (Price  Observatory, 
2018a). 
resources  are  heavily 
concentrated in small service providers (67) despite 
that  fact that they are on average  more  than 20 % 
less 
sector-average 
productivity  level.  The  Federal  Planning  Bureau 
estimates  that  an  ambitious  reduction  of  the 
legal 
in 
regulatory 
representation,  notaries,  bailiffs),  accounting  (e.g. 
accounting, 
and 
architectural  services  (e.g.  construction  architects, 
interior architects, landscape and garden architects) 
would  increase  Belgian  labour  productivity  by 
0.23 %, wages by 0.26 % and GDP by 0.29 % after 
only  three  years,  partly  through  spill-over  effects 
to other sectors (Ingelbrecht, Kegels and Verwerft, 
2018).   Furthermore,  a  recent  analysis  by  the 
Belgian  Price  Observatory  found  no  obvious  link 
between  the  level  of  regulation  and  the  Belgian 
consumers’  satisfaction  with  the  business  services 
provided (Price Observatory, 2018b).   

bookkeeping, 

auditing) 

burden 

legal 

(e.g. 

Reform  progress  in  business  services  is  limited 
and many obstacles remain. Although insolvency 
procedures for liberal professions will be eased by 
the reform of the company law, the action plan for 

(66)  Belgium  6.1 %  vs.  EU  10.7 %  (unweighted  average), 

Eurostat (2016). 

(67)  Here  defined  as  fewer  than  10  persons  employed.  In 
Belgium  they  capture  63 %  of  overall  employment, 
compared to 49 % at EU-level (NACE rev 2 M – Eurostat, 
2015/2016). 

the 

the  modernisation  of 
legal  professions 
(lawyers,  company  lawyers,  bailiffs  and  notaries), 
which was announced for the summer of 2018 has 
not  been  published  yet.  Belgium  carried  out  a 
specific 
and 
proportionality  of  specific  restrictions  imposed  on 
legal  persons  providing  professional  services.  No 
reforms seem to be planned currently as a  follow-
up to this analysis.  

analysis 

need 

the 

for 

of 

certain 

imposing 

profession 

Regions  have  unevenly  reformed  crafts  and 
trades professions. In Flanders, the establishment 
specific 
act 
competence  requirements  no  longer  applies  to  a 
number  of  professions  in  the  area  of  crafts  and 
trade  (as  of  January  2018).  In  addition,  the 
requirement for all service providers to prove basic 
competence  in  company  management  was  also 
abolished.  Reforms  in  other  regions  are  more 
limited.  In  Wallonia  qualification  requirements 
have  only  been  removed  for  five  craft  and  trade 
professions 
(as  of  December  2018),  while 
evaluation is still ongoing for 22 other professions 
and  the  general  proof  of  basic  competence  in 
company  management.  Brussels  has  announced 
limited reforms focused on replacing a  centralised 
theoretical  exam  by  a  practical 
test.  This 
divergence in reforms between the regions  creates 
doubts as to the free flow of these services across 
the regions.    

Retail sector  

sector 

The  retail 
faces  operational 
still 
restrictions  that  hinder  its  productivity  and 
discourage  investment.  The  productivity  of  this 
important  sector  employing  over  300 000  people 
the  past  years.  The 
has  been  falling  over 
supermarket sector displays a sub-optimal level of 
competition, mainly due to high concentration and 
low entry and exit dynamics.(68) According to the 
Retail Restrictiveness Indicator (69), Belgium is the 
sixth most restrictive Member State as regards the 
operational  environment  for  retailers.  Rules  on 
shop  opening  hours,  sales  promotions,  discounts 
and  distribution  channels  for  non-prescription 
medicines  contribute  to  this  score.  Moreover,  the 
co-existence  of  different  collective  agreements 

(68)  Price Observatory (2018a). 
(69)  See  Communication  from  the  Commission  ‘A  European 
retail  sector  fit  for  the  21st  century’,  Brussels,  19.4.2018, 
COM(2018)219  final  and  Commission’s  SWD(2018)236 
final of 19.4.2018, p. 101. 

49 

 
                                                           
                                                           
field  between 

creates  a  more  complex  operational  environment, 
with e.g. different working conditions, resulting in 
an  uneven  playing 
retailers. 
However,  Belgium  has  recently  taken  action  to 
allow  flexibility  in  night  work  in  e-commerce. 
Additionally, although rules on establishment have 
been reformed in the three regions and Belgium is 
not  among  the  most  restrictive  Member  States 
according  to  the  Retail  Restrictiveness  Indicator, 
attention  should  be  given  to  ensuring  that  the 
ongoing further reforms achieve their objectives.  

of 

prices 

territorial 

Restrictions and labour rigidities, together with 
possible  problems 
supply 
of 
constraints,  ultimately  dent  the  purchasing 
power 
in 
consumers.   Retail 
supermarkets  remain  higher  than  in  neighbouring 
Member  States.  According  to    a  recent  report 
(Price  Observatory,  2018c),  in  2017  goods  in 
Belgian supermarkets cost on average 13.4 % more 
than  in  Germany,  12.9 %  more  than  in  the 
Netherlands  and  9.1 %  more  than  in  France. 
Taxation  differences,  accumulation  of  regulation, 
commercial strategies of the main retail chains (70) 
as  well  as  a  small  scale  of  the  market  and  high 
purchasing  costs 
listed  as 
underlying reasons. High purchasing costs may be 
explained  in  part  by  territorial  supply  constraints 
applied by suppliers. As a result, wholesale prices 
for identical products may differ between Belgium 
and its neighbours. A study carried out recently by 
the Benelux Council confirmed that such practices 
exist  (71).  A  Benelux  working  group  has  been  set 
up  to  examine  possible  ways  to  tackle  this 
phenomenon. Lower prices on the other side of the 
border encourage  many Belgians to  shop over the 
border.  This  represents  a  significant  turnover  loss 
for domestic retailers.   

retailers  are 

for 

Construction  

The  sector  is  growing  thanks  to  robust  private 
investment,  mostly  in  real  estate,  but  total 
factor  productivity  is  on  a  downward  trend. 
While  contractors’  productivity  gains  have  risen, 

(70)  Only  one  major  market  player  has  a  price-following 
strategy; the other big retail chains do not have incentives 
to compete on price and concentrate on services offered to 
consumers. 

(71)  Territorial supply constraints in the retail trade in Belgium, 
the  Netherlands  and  Luxemburg.  Consequences  for  the 
Benelux 
the 
Benelux Union, February 2018. 

internal  market.  General  Secretariat  of 

3.4. Competitiveness and investment 

in other parts of the value chain (e.g. architects and 
engineers)  seen  no  growth  or  have  even  declined 
(e.g.  real  estate).  The  construction  sector  has  a 
crucial role to play in reaching the 2030 target for 
reducing  greenhouse  gas  emission 
through 
renovation works (see Section 3.4.3),  and demand 
for new energy and transport infrastructure.  

suggesting 

suggesting 

construction 

providers (73), 

are  barriers 
sector 

Business dynamism in the construction sector is 
to 
low, 
there 
competition.  The 
is 
characterised  both  by  a  low  share  of  high-growth 
enterprises (72)  and  by  low  entry  rates  of  new 
service 
little 
competition.  The  Price  Observatory  has  identified 
dredging  services  and  construction  equipment 
among  its  sectors  to  monitor.  The  sector  suffers 
from 
times  for 
payments above the EU average;  the time and cost 
of building permits is also high (see Section 3.4.4). 
introduced  an 
the  government 
In  addition, 
insurance  requirement  related 
the  10-year 
to 
liability  regime  of  structural  works  by  service 
providers.  While 
additional 
safeguards  to  consumers,  it  is  likely  to  increase 
prices of construction services. 

late  payment,  with  waiting 

provides 

this 

in 

to 

invest 

sector 

The growth of the sector is also held back by a 
lack  of  skills,  labour  shortages  and  uneven 
reforms  in  construction  professions,  prompting 
the 
training  and 
attractiveness. Belgium faces a shortage of about 
20 000  construction  workers  every  year.  Posted 
workers account for up to 20 % of the construction 
workforce.  In  Flanders,  the  establishment  act  no 
longer  applies  to  11  professions  in  the  area  of 
construction 
(as  of  January  2019).  Service 
providers carrying out activities such as those of a 
general  contractor,  structural  works  and  electro-
technical  activities  no  longer  need  to  prove 
profession  specific  competences.  In  Wallonia  and 
the  area  of 
Brussels  no  similar  reforms 
undertaken.  The 
been 
construction 
construction 
several 
is 
initiatives  dedicated  to  construction  skills  with 
Regions  and  Communities,  notably  through  on-
the-job education.  

have 
sector 

undertaking 

in 

(72)  Share of high growth enterprises measured in employment: 
number of high growth enterprises divided by the number 
of active enterprises with at least 10 employees – Belgium 
6.4 % vs. EU 8.7 % (Eurostat, 2015/2016). 

(73)  Belgium  6.9 %  vs.  EU  10.7 %  (unweighted  average), 

Eurostat, 2016. 

50 

 
                                                           
                                                           
3.4. Competitiveness and investment 

Digital infrastructure and services  

Transport services and infrastructure 

require 

level  of 

networks  will 

As  regards  its  digital  infrastructure,  Belgium 
has  a  good 
fixed  and  mobile 
connectivity,  for  which  it  ranks  5th  in  the 
EU.(74) The key challenge is to move to very-high 
capacity  networks,  which  are  crucial  for  the 
delivery  of  new  services  both  to  citizens  and 
businesses.  The  deployment  of  these  very-high 
capacity 
important 
investments  and  the  right  regulatory  framework 
conditions.  In  fixed  networks,  this  concerns  the 
in  mobile 
deployment  of  more 
communications,  the  rollout  of  5G  networks. (75) 
Tests for 5G are underway and operators as well as 
public authorities are preparing the  ground for 5G 
deployment,  for  example  by  adapting  norms  for 
electromagnetic radiation. Differences between the 
three  regions 
telecoms 
to  grant  permits 
operators  are  significant.    Moreover,  the  federal 
level, the communities and the regions still have to 
agree on the framework for the introduction of 5G, 
which is essential for a timely development of this 
key technology in Belgium.   

fibre  and 

to 

The telecoms market is characterised by a high 
level  of  concentration  (further  accentuated  by 
recent takeovers) and weak competition (BIPT, 
2018).  This  is  also  illustrated  by  relatively  high 
prices  for  services  compared  to  peer  countries.  In 
fixed  networks,  the  retail  market  is  characterised 
by a duopoly of the incumbent and cable network 
operators.  This  may  create  obstacles  for  the 
provision  of  bundled  service  by  other  operators.  
The arrival of a 4th mobile operator on the market 
is planned. 

Belgium  is  performing  less  well  in  mobile 
broadband.  Despite  4G  coverage  increasing  to 
97 %,  mobile  broadband  take-up  remains  among 
the  lowest  in  Europe  with  only  73  subscriptions 
per 100 people. Several measures have been taken 
to  improve  the  poor  broadband  coverage  in  rural 
areas.  For  example,  the  Belgian  regulator  has 
introduced  an  innovative  measure  to  roll  back 
regulation if operators invest. 

(74)  Digital Economy and Society Index (DESI) 2018, available 

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

(75)  Take-up of fast broadband (30 Mbps and above) increased 
to 67 % and ultrafast broadband (100 Mbps and above) to 
42 %. 

is 

suffering 

Belgium 
from  chronic  road 
congestion,  affecting  the  environment  and  the 
access  to  Brussels  and  to  the  port  of  Antwerp. 
The  average  number  of  hours  per  year  spent  in 
traffic jams in Belgium rose from 35.8 in 2014 to 
39.1 in 2017, making the country one of the three 
worst  performers  in  the  EU  after  Malta  and  the 
United Kingdom(76). In urban  agglomerations, the 
delay  per  driver  even  amounted  to  48.8  hours  in 
2017(77). The cost of traffic congestion was spelled 
out  in  the  2017-2020  stability  programme,  stating 
that  assessments  by  the  Commission,  the  OECD 
and the IMF put the likely costs at 1-2 % of GDP 
or EUR 4.3-8.6 billion (2017)(78). Road congestion 
generates additional fuel consumption, contributes 
to air pollution and complicates access to the port 
of  Antwerp,  which  is  responsible  for  7 %  of  EU 
imports. 

The  quality  of  road  infrastructure  is  relatively 
low  and  very  costly  for  regions  and  local 
authorities.  Belgium's  road  infrastructure  ranks 
35th  in  the  composite  indicator  of  the  World 
Economic Forum. However, for the quality of the 
roads  alone,  Belgium  ranks  only  52nd  worldwide 
(WEF,  2018).  Belgium's  extensive  road  network 
and  high  traffic  density  makes  road  maintenance 
more expensive and increases the cost of transport 
on  a  national  basis  (National  Bank  of  Belgium, 
2017).  The  road  system  is  mostly  toll-free  for 
passenger  vehicles  and  relies  on  increasingly 
constrained  regional  and  local  funds,  differently 
from  Member  States  that  have  privatised  their 
motorways (79). Finally, the share of running costs 
(including  staff  wages)  represents  in  Belgium  a 
larger share than in the neighbouring countries.  

to 

incentives 

contribute 

Distortive 
road 
congestion.  The  increasing  congestion  is  partly 
explained by the continuous increase of passenger 
cars since 2007, incentivised by toll-free roads, the 
company car tax deduction (see Section 3.1.6) and 
low environmental taxation. In 2018, Belgium had 
approximately  5.85  million  passenger  cars  in  use, 

(76)  European  Commission,  Hours  spent  in  road  congestion 

annually. 

(77)  European  Commission,  JRC,  based  on  TomTom  data, 

2018. 

(78)  Het stabiliteitsprogramma van België — Le Programme de 

Stabilité de la Belgique, 2017-2020, p. 48. 

(79)  Kilometre  charge  tolls  exist  in  some  primary  roads  for 

heavy-duty vehicles. 

51 

 
                                                           
                                                           
3.4. Competitiveness and investment 

out of which 8 % were company cars, representing 
16 % of all passenger-km. Of key importance will 
be  the  follow-up  given  to  the  road  pricing  study 
the  Flemish  government 
commissioned  by 
covering, inter alia, a passenger km charge, due to 
be completed in May 2019. 

in  signalling  with 

infrastructure,  important  investments  are  taking 
place 
the  deployment  of 
European  Rail  Traffic  Management  System 
(‘ERTMS’)  with  a  target  to  finish  by  2022,  and 
improving accessibility to Antwerp and Zeebrugge 
ports.  

in  Antwerp, 

Belgium  has  invested  and  is  planning  to  invest 
in  additional  infrastructure.  Important  projects 
are  on-going  such  as  the  completion  of  the 
Oosterweel  road  connection 
the 
Brussels  Regional  ExpressNet  and  the  Seine-
Scheldt  canal  (cf.  infra).  The  National  Pact  for 
Strategic  Investments  identified  a  need  for  an 
estimated  EUR  22-27bn  of  additional  transport 
related 
investments  by  2030.  Wallonia  has 
foreseen  EUR  640  million  over  the  period  2016-
2019  for  the  modernisation  of  its  roads  and 
waterways,  half  of  which  is  financed  by  the 
revenues from the heavy-duty vehicle road charge 
in place nationally since April 2016.   

are 

ongoing 

investments 

Important 
in 
waterways  in  Antwerp  Port  hinterland.  Work 
on  the  Seine-Scheldt  link  in  both  Flanders  and 
Wallonia  is  progressing  and  should  be  completed 
in  2025.  Other  projects  are  ongoing  on  the 
country’s inland waterway network and on several 
sea and inland locks, supported by the Connecting 
Europe Facility (Albert Canal and Terneuzen). The 
Price  Observatory  has  however  noted  the  lack  of 
competition in area of dredging (see Section 3.4.2). 
Investments  are  also  ongoing  to  bundle  smaller 
flows  into  larger  one  and  collaboration  with  the 
Netherlands  is  taking  place  on  freight  timetabling 
for Antwerp-Rotterdam.  

Railways  have  an  important  role  to  play  to 
alleviate  road  congestion,  but  infrastructure  is 
also  congested  around  Brussels  and  the  two 
major  ports  (Antwerp,  Zeebrugge)  The  two 
major  bottlenecks  for  rail  are  the  Brussels  North-
South  connection  (through  which  a  third  of  all 
trains run) and freight transport around the port of 
Antwerp 
the  petrochemical 
for 
industry)  and  between  Gent  and  Zeebrugge.  The 
Belgian  rail  freight  network  suffers  from  lack  of 
slots, as most capacity is devoted to passenger rail. 
A  upgrade  of  the  railway  connection  Rhine-Ruhr 
(3RX) is planned, notably to improve connections 
for  the  chemical  industry  between  Antwerp,  the 
Netherlands  and  Germany.  To  cope  with 
congestion  and  increase  capacity  on  existing  rail 

(important 

The  completion  of  the  Regional  ExpressNet  
around  Brussels  suffers  from    delays,  some 
which  can  be  attributed  to  the  60/40  allocation 
rule. (80)  The  completion  of 
the  Regional 
ExpressNet    has  been  severely  delayed  through 
lack  of  finance,  an  adequate  needs  assessment 
(60/40  allocation  key  between  Flanders  and 
Wallonia  that  does  not  match  the  real  investment 
needs)  and  a  lack  of  global  mobility  vision  at  the 
time  when  it  was  first  conceived,  delays  with 
building  permits  and  their  appeals  (see  Section 
3.4.4).  Initially,  expected  to  be  finished  in  2012, 
full  completion  of  the  network  is  now  expected 
only  by  2030.  In  January  2019,  Regions  have 
agreed  to  a  multi-annual  60/40  allocation  key  for 
the Regional ExpressNet.  

for 

that 

improvement 

in  particular 

Economic 
confirm 

the  World 
surveys 

The quality of rail services is low and the supply 
of  urban  and  urban-rural  public  transport  has 
room 
in 
Wallonia.  The  efficiency  of  railways  (frequency, 
punctuality, speed and price) in Belgium is ranked 
41st 
Forum. 
by 
Eurobarometer 
the 
satisfaction  of  passengers  with  punctuality  and 
reliability  of  rail  services  in  Belgium  is  below 
average. Costs of public transport in Wallonia are 
structurally  important  because  of  a  lower-density 
of  population.  Lack  of  multi-annual  expenditure 
planning  and  transport  disruptions  complicate  the 
tasks  of  TEC,  the  main  regional  and  urban 
transport provider. Access to employment areas is 
a  major  difficulty  for  job  seekers  (according  to  a 
survey  of  the  employers’  organisation  Union  des 
Classes Moyennes, only 68 % of businesses parks 
in Wallonia are reachable by public transport). (81) 
In  Brussels, 
the  Regional  Government  has 
approved  a  multi-annual  investment  programme 
for public transport till 2025 of EUR 5.2 billion. 

(80)  The unwritten 60-40 budgetary rule on splitting every year 
rail  investments  between  Wallonia  and  Flanders  has 
contributed to further delays of the RER project  (Court of 
Auditors, 2017). 

(81)  Annual 

report 

available 
of 
https://rapportannuel.groupetec.be/srwt/#mot-de-la-
direction 

TEC, 

at: 

52 

 
                                                           
3.4. Competitiveness and investment 

Energy infrastructure and services  

The  recent  unavailability  of  several  nuclear 
power  stations  emphasises  the  importance  of 
regional cross-border cooperation and of a well-
functioning European interconnected electricity 
market.  The  situation  has  led  to  an  increased 
dependence of Belgium on electricity imports from 
neighbouring  countries  (especially  during  winter 
when  weather  conditions  can  lead  to  increased 
peak  load  combined  with  reduced  availability  of 
interconnection  capacity  and  limited  production 
from  domestic  solar  power  generation  facilities). 
In  response,  Belgian  authorities  have  taken  a 
number  of  safeguards  measures 
to  preserve 
security  of  power  supply  in  November  and  in  the 
winter,  bringing  additional  capacity  back  to  the 
market. At the same time, Belgium has called upon 
its neighbouring countries to provide assistance to 
ensure the availability of import capacity and help 
in  close 
reduce 
cooperation with the European Commission.   

load  shedding, 

the  risk  of 

to 

incumbent 

competition  and 
Regulatory  barriers 
investment 
in  domestic  passenger  railway 
services  and  intercity  coach  services  constrain 
the  supply  of  alternative  collective  and  low-
carbon  transport  services.  The  share  of  the 
passenger transport which is provided under public 
service  obligations  (PSO)  remains  very  high  in 
Belgium;  98.2 %  in  2016  was  provided  by  the 
State-owned 
railway  undertaking 
NMBS-SNCB  under  a  directly  awarded  contract. 
Private  bus  operators  are  not  allowed  to  operate 
intercity  coach  services,  although  Flanders  has 
expressed the intention to prepare a decree to open 
intercity  coach  services  by  April  2019.  Taxi 
regulations 
authorities, 
among 
restricting  notably  the  access  to  Brussels  airport. 
On  the  other  hand,  competition  in  the  rail  freight 
sector  in  Belgium  has  significant  increased  in 
recent years. This has resulted in Belgium ranking 
among the top five Member States in terms of the 
market share of non-incumbent freight operators in 
2016 (almost 50 %).(82)  

local 

vary 

Although  Regions  have  developed  their  own 
mobility  plans,  complex  coordination  still  lies 
ahead  to  develop  a  consistent  mobility  vision 
within Belgium, and possibly with border cities 
and  regions.  Coordination  is  complex,  as  it 
requires  coordination  between  the  federal  level, 
responsible  for  rail,  and  the  Regions,  responsible 
for  other  means  of  transport.  The  Executive 
Committee  of  Ministers  for  Mobility    has  been 
the  Regional 
its  handling  of 
criticised  of 
ExpressNet  project  (Court  of  Auditors,  2017), 
which  lacked  an  assessment  of  needs  within  a 
broader 
strategy. 
inter-regional  mobility 
Additionally,  lack  of  agreement  on  the  type  of 
passenger  car  road  charging  to  be  implemented 
could  further  complicate  reaching  a  shared  vision 
on mobility within Belgium. Furthermore, because 
of the split of competences between the federal and 
the  kilometre 
revenues  from 
regional 
charging of heavy-duty  vehicles cannot contribute 
to  financing  railways.  Finally,  there  are  important 
cross-border  exchanges  on  borders  (OstBelgien-
Aachen,  Lille-Tournai-Mouscron,  Antwerp-Zuid 
Nederland, Luxembourg-Arlon). 

level, 

Belgium is committed to fully phase out nuclear 
energy by 2025, a move that requires important 
investments in new capacity. The interconnection 
level of Belgium as regards electricity was 19 % of 
installed  generation  capacity  in  2017  and  it  is 
expected  to  increase  to  around  30 %  in  2020 
through  the  completion  of  the  Nemo  Link  and 
Alegro projects, which are both under construction 
currently.  In  addition,  the  removal  of  internal 
bottlenecks and construction  of new  internal grids 
are also in the pipeline, strengthening the European 
transmission  grids  and  electricity  flows  in  the 
region. Along investment in interconnection, there 
is  a  need  for  important  investments  in  power 
generation capacity. Belgium is currently working 
on  a  capacity  remuneration  mechanism  to  ensure 
that the necessary investments in power generation 
capacity will be made operational by 2025, in view 
of the country's nuclear exit. Transmission system 
operator  Elia  has  indicated  that  Belgium  would 
need  3.6  Gigawatts  (GW)  of  new  capacity  by 
2025. 

Measures  to  support  energy  transition  will 
require 
significant 
investments, mainly from the private sector. (83)  

the  mobilisation 

of 

(82)  European  Commission,  Rail  Market  Monitoring  System, 
at: 

available 
https://ec.europa.eu/transport/modes/rail/market/market_m
onitoring_en. 

(83)  The National Pact for Strategic Investment estimates a total 
investment  need  of  €  60  Billion  between  2019  and  2030, 
mainly on retrofitting public buildings, making a transition 

53 

 
                                                           
                                                           
3.4. Competitiveness and investment 

Belgium. Both the retail markets for electricity and 
gas  have  become  significantly  more  dynamic  in 
recent years, as reflected in lower market shares of 
incumbents,  higher  entry  rates  for  producers  and 
higher  switching  rates  for  consumers.  This  was 
triggered  by 
several  government  measures 
including  legislative  modifications  and  public 
campaigns promoting switching of providers.  

Retail  prices  for  electricity  are  above  the  EU-
average. The non-energy component of electricity 
bills  are  on  average  making  up  75  %  of  the 
electricity price in the retail market in Belgium. In 
particular, distribution costs are above EU average. 
Distribution costs include revenues for measures to 
support the energy transition. While this acts as an 
incentive  to  take  measures  in  favour  of  higher 
energy  efficiency,  it  can  also  form  a  barrier  to 
decarbonisation,  especially  if  Belgium  would  aim 
to achieve this through increased electrification as 
part of their long term strategy. 

3.4.3.  THE REGIONAL DIMENSION AND THE 
INFRASTRUCTURE INVESTMENT   

Disparities  across  Regions  and  provinces  in 
Belgium  are  large.  While  GDP  per  capita  is  on 
average  higher  in  Belgium  than  in  the  EU,  the 
northern part of Belgium outperforms the southern 
provinces.  The  provinces  of  Belgium,  which  had 
GDP  per  head  above  the  EU  average  before  the 
crisis  not  only  recovered,  but  also  outperform  the 
EU average growth, except Brussels and Antwerp. 
In  contrast,  provinces  with  GDP  per  head  below 
the EU average prior to the crisis tend to stagnate 
or  recess  (see  Graph  3.4.2)  The  Brussels  capital 
regional  GDP,  which  accounted  for  18 %  of 
Belgium's  GDP  in  2016,  grew  by  0.2 %  annually 
in  2009-2016,  well  below  the  national  average  of 
0.8 %.  Labour  productivity  increased  by  2.6 % 
overall  in  Belgium  between  2010  and  2016, 
however  over  the  same  period  it  decreased  by 
0.5 % in the Brussels region  and  rose  by only 0.7 
4 % in Wallonia.  

Regional  competitiveness,  employment,  and 
potential  growth  are  important  challenges  for 
Wallonia  Wallonia’s  has  revealed  to  be  less 
reseilient  than  the  rest  of  the  country  in  the 
aftermathof 
the 
importance  of  adapting  the  industrial  structure  to 
testing  new 
the  global  challenges  and  of 

the  crisis,  which  highlighted 

In  March  2018,  the  federal  government  and  the 
three  regional  governments  agreed  on  the  Inter-
federal Energy Pact, which provides a longer-term 
vision  on  how  Belgium  will  handle  the  energy 
transition.  However,  certain  core  elements  of  the 
pact  (such  as  the  nuclear  phase-out)  are  open  to 
change if analysis by the newly established federal 
Energy  Committee  (consisting  of  representatives 
of the  federal government,  the  regions, employers 
and  industry)  judges  too  large  impacts  on  the 
evolution 
tariffs 
(affordability),  security  of  supply,  sustainability 
and  safety.  Other  elements  of  the  pact  include 
improved  energy  efficiency  of  buildings  and  of 
industrial  processes,  significant  penetration  of 
renewable  energy  (reaching  8  GW  of  photo 
voltaic,  4.2  GW  of  on-shore  and  4  GW  of  off-
shore  wind  by  2030),  development 
and 
deployment of storage solutions (1.5 GW by 2030) 
and  adjustment  of  the  networks,  including  smart 
grids. 

energy 

prices 

and 

of 

investment  needs 

The  integrated  National  Energy  and  Climate 
Plan  (NECP)  will  be  another  key  guidance  to 
in  the  area  of 
establish 
decarbonisation  and  energy.  In  its  final  Plan  to 
be adopted by 31 December 2019, in line with the 
Regulation  on  the  Governance  of  the  Energy 
Union  and  Climate  Action (84),  Belgium  will 
provide  an  overview  of  its  investment  needs  until 
2030  for  the  different  dimensions  of  the  Energy 
Union, 
renewable  energy,  energy 
efficiency,  security  of  supply,  and  climate 
mitigation  and  adaptation.  The 
information 
provided, including in the draft plan submitted on 
31  December  2018,  will  further  contribute  to  the 
identification  and  assessment  of  energy  and 
climate-related investment needs for Belgium.   

including 

The  level  of  market  concentration  for  power 
generation  is  decreasing  but  remains  high  in 

in 

the  energy  mix, 

in 
transmission  and 
investing 
distribution networks and smart grids, and storage capacity. 
(84)  Regulation  (EU)  2018/1999  of  the  European  Parliament 
and  of  the  Council  of  11  December  2018  on  the 
Governance  of  the  Energy  Union  and  Climate  Action, 
amending  Regulations  (EC)  No  663/2009  and  (EC)  No 
715/2009  of  the  European  Parliament  and  of  the  Council, 
Directives  94/22/EC,  98/70/EC,  2009/31/EC,  2009/73/EC, 
2010/31/EU, 2012/27/EU and 2013/30/EU of the European 
Parliament  and  of 
the  Council,  Council  Directives 
2009/119/EC and (EU) 2015/652 and repealing Regulation 
(EU)  No  525/2013  of  the  European Parliament and  of  the 
Council (Text with EEA relevance.) 

54 

 
                                                                                   
 
3.4. Competitiveness and investment 

approaches to industrial transition. In that context, 
Wallonia  is  part  of  the  Regions  in  Industrial 
Transition pilot action. 

Graph 3.4.3:  Change in GDP per head (PPS), index point 

difference, 2007-2016 

specialisation strategies) of the regions and of their 
provinces.  The  existence  of  inequalities  at  sub-
regional 
the  specificities  of  each 
province  make  the  use  of  integrated  territorial 
development strategies particularly relevant.  

level  and 

Graph 3.4.4:  Regions  in Belgium and factors endowment 

Note: The values correspond to the GDP per head relatively 
to  the  EU  in  2007  and  2016,  respectively  (EU=100).  The 
colours correspond to the change in the index from 2007 to 
2016,  with  blue  ones  indicating  an  increase  in  the  ratio.  EU 
real GDP per head grew by 3.4 % over the period. 
Source: Eurostat 

Source: Eurostat, European Commission own calculations 

important. 

In  Flanders, 

Intra-regional  disparities  in  Belgium  are  also 
very 
the  Antwerp 
province GDP per inhabitant is at 139 % of the EU 
average,  while  Limburg  is  at  97 %  of  the  EU 
average.  In  Wallonia,  differences  are  even  more 
extreme with Brabant Walloon topping at 133 % of 
the  EU  average  and  Hainaut  and  Luxembourg  at 
76 % and 75 % of the EU average. There are also 
important  differences  within  regions  in  terms  of 
unemployment  (see  Section  3.3.2).  The  Brussels-
Capital  Region,  one  of  the  wealthiest  in  the  EU 
(200 %  of  EU  average),  hosts  the  seven  of  the 
poorest  communes  in  terms  of  annual  income, 
notably  St-Josse/St-Joost  and  Molenbeek,  which 
are respectively 50 % and 44 % below the national 
average (Federal Public Service Economy).  

There are significant  regional and sub-regional 
differences  with  respect  to  factor  endowments 
(see  Graph  3.4.4).  Differences  between  regions 
and  provinces  persist,  in  terms  of  innovation, 
labour  market,  level  of  education,  health  and 
mobility  (see  relevant  sections  in  the  report).  The 
support  offered  by  Cohesion  Policy  in  Belgium 
could be, as much as possible, tailor-made to pre-
identified territorial needs – in direct support to the 
smart 
priorities 

(including 

strategies 

and 

underline 

differences 

Regional 
distinct 
investment  needs.  Flanders  plans  to  prioritise 
investment  in  infrastructures,  in  particular  on 
mobility,  school  buildings,  welfare  and  research 
and  development.  At  beginning  of  2018,  the 
Walloon  region  has  adopted  a  new  multi-sector 
investment  plan.  The  National  Plan  for  Strategic 
Investment is strictly interwoven with the regional 
strategies calling for a strong coordination between 
all  levels  of  government  in  order  to  ensure  an 
efficient  delivery  of  the  different  policies  (see 
Section 3.4.4).   

Sustainable growth and climate change  

Without  additional  measures,  Belgium 
is 
expected  to  miss  both  its  2020  and  2030 
greenhouse  gas  emission  reduction  targets. 
Emissions  in  the  sectors  not  covered  by  the 
emissions  trading  system  in  2020  are  expected  to 
be  only  12 %  below  2005  levels  compared  to  a 
reduction  target  of  15 %.  The  gap  is  expected  to 
widen further by 2030, with emissions expected to 
be  reduced  only  by  14 %  below  2005  levels 
compared to a reduction target of 35 %. 

55 

20406080100120140160180200220InnovationscoreboardTertiaryeducatedEmploymentrateUnemployment rateRoadaccessibilityIndex, EU 28=100EU28Non-capital regions 
 
 
 
sector 

The achievement of the 2030 energy and climate 
targets  calls  for  sustained  green  investments. 
Additional measures are particularly needed in the 
smart  mobility 
facilitating 
transport 
solutions  (EUR  1.5-2  billion)  through  modal  shift 
away from road towards rail and cycling; role-out 
of alternative fuels (EUR 0.3 billion); development 
of smart cities, etc.). Similar  efforts are needed in 
the  built  environment  (energy  efficiency  and  fuel 
switching),  which  together  represent  two-third  of 
greenhouse  gas  emissions  in  the  sectors  not 
included  in  the  EU  Emission  Trading  System 
(ETS). Energy audits is a key tool in helping firms 
to  overcome  the  information  barriers  to  energy-
efficiency investments. The share of energy audits 
of  the  small  and  medium-sized  enterprises  is  in 
line  with  the  EU  average  (25 %).  By  contrast, 
considerably lower is the share of large firms with 
an energy audit (58 % compared to 67 % of the EU 
average) 
Investment  Bank 
investment survey). Investment needs  will also be 
particularly  large  in  the  power  sector  (generation 
and  grid,  including  smart  power  and  data  grids) 
and 
industry  (resource-efficiency  and  circular 
economy).  Enabling  measures,  such  as  improving 
environmental  taxation  (see  Section  3.1.6),  in 
particular  by  reforming  the  company  car  tax 
deduction,  and  strengthening  transport  regulation 
(see  Section  3.4.2)  as  well  as  significant 
investments  in  energy,  building  and  transport 
infrastructure (see infra) are also called for. These 
green  investments  could  benefit  from  the  green 
linear bond (Obligation Linéaire/Lineair Obligatie) 
that  was  issued  by  the  Belgian  government  for 
EUR  4.5  billion  with  EUR  2.7  billion  foreseen  in 
the coming years, and the labelling for sustainable 
financial products by Febelfin and Beama.  

(2018  European 

3.4. Competitiveness and investment 

Graph 3.4.5:  Target and emission under the effort-sharing 

legislation - Belgium (percentage change 
from 2005) 

Source: European Commission 

that 

The building stock in Belgium is old and a large 
part  has  been  built  before  the  implementation 
of  energy  norms.  In  a  recent  study  the  Federal 
the  annual 
Planning  Bureau  estimated 
renovation  rate  in  the  residential  sector  to  ensure 
the energy transition in Belgium according to both 
the  2030  Climate  and  Energy  framework  and  a 
low-carbon  economy  in  2050  would  have  to 
increase  from  0.7 %  to  1.3 %,  which  would 
represent  roughly  800.000  housing  units  over  the 
period  2019-2030.  On  average,  30 %  of  firms’ 
building  stock  satisfies  high  energy  efficiency 
standards,  which  is  notably  less  than  the  EU 
average  (37 %).  The  difference  from  the  EU 
average  is  higher  for the large Belgian  firms. The 
final  report  on  carbon  pricing  puts  forward  even 
more  ambitious  annual  renovation  rates  of  2.6 % 
of 
(~120.000 
buildings per year).  

residential  building  stock 

the 

in 

the 
Some  progress  has  been  made 
development  and  implementation  of  climate 
and energy policies across the different levels of 
Government,  but  the  overall  effectiveness  is 
undermined  by  the  complex  and  evolving 
division of competences. This has led in the past 
to important delays in agreeing coordinated action, 
such  as  an  internal  effort  sharing  for  the  2020 
energy  and  climate  targets,  a  common  long-term 
vision for the energy transition and the completion 
of  important  infrastructure  projects,  such  as  the 

56 

-10%-15%-35%-10%-12%-14% -40% -30% -20% -10%+0%201720202030TargetEmissions (preliminary data)Projected emissions 
 
3.4. Competitiveness and investment 

recent 

labour 

policies.  A 
(European  Public 
report 
Administration  Country  Knowledge,  2018)  shows 
that  Belgium  is  one  of  the  Member  States  that 
combines a high degree of fragmentation and a low 
level  of  coordination.  There  is  still  no  formal 
agreement  on  annual  targets  at  all  levels  of 
government, in spite of the cooperation agreement 
signed  in  2013  in  the  context  of  the  transposition 
of 
the  Fiscal  Compact,  complicating  budget 
coordination  (see  Section  3.1).  Flanders  and 
Wallonia  have  started  an  action  plan  to  improve 
the 
Imperfect 
intra-regional  mobility. 
activation  at  regional  level  could  have  an  impact 
on  federal  and  local  public  finances  (see  Section 
3.3.1).  In  the  area  of  migration  policy,  there  have 
been  no  new  initiatives  to  increase  coordination 
between  various  policy  domains  (i.e.  social, 
employment, educational) and levels of power (see 
Section  3.3.1).  In  health,  greater  prevention 
requires  strong  primary  care,  but  the  necessary 
inter-governmental  collaboration  is  challenged  by 
the  sharing  of  health  responsibilities  between  the 
federal  level  and  federated  entities  (see  Section 
3.3.3). The federal level, the communities and the 
regions still have to agree on the framework for the 
introduction of 5G, which is essential for a timely 
development  of  this  key  technology  in  Belgium 
(see  section  3.4.2).    Developing  a  consistent 
mobility  vision  within  Belgium  is  complex  as  it 
requires  coordination  between  the  federal  level, 
responsible  for  rail,  and  the  Regions,  responsible 
for  other  means  of  transport  (see  Section  3.4.2), 
although in January 2019, Regions have agreed to 
a  multi-annual  60/40  allocation  key  for 
the 
Regional  ExpressNet..  Lack  of  coordination  in 
road  charging  could  further  complicate  mobility 
within Belgium. Finally, in spite of some progress 
with  the  implementation  of  climate  and  energy 
policies  across  all  levels  of  government,  the 
complex  and  evolving  division  of  competences 
undermines their effectiveness (see Section 3.4.2).   

Policy-making  could  benefit  from  improved 
analytical  support  and  the  reinforcement  of 
specific regulatory or judiciary institutions. The 
federal  regulatory  Impact  assessment  are  still  of 
for 
low  quality  according 
Administrative  Simplification 
(to  be 
checked),  and  these  are  judged  to  not  fully 
incorporating  the  principles  of  a  better  regulation 
agenda  (Poel  et  al,  2016).  Impact  assessments  are 
not  effectively  integrated  in  the  policy-making 
process,  and  cooperation  with  the  regional  level 

the  Agency 

report 

to 

Regional  express  Network  around  Brussels. 
Differences  in  opinion  on  the  introduction  of  a 
kilometre  charge  for  passenger  cars  have  also 
delayed  progress  in  tackling  growing  congestion 
and  transport  emissions.  Several  institutions  have 
improve  climate 
recently  made  proposals 
governance 
report 
in  Belgium.  Thus, 
published  in  January  2017,  the  Belgian  Senate 
made  recommendations  to  strengthen  the  intra-
Belgian  governance  with  respect  to  the  internal 
effort  sharing.  An 
inter-parliamentary  climate 
consultation adopted unanimously a resolution that 
should lead to the adoption of an integrated climate 
and energy plan.  

in  a 

to 

the  EU  average 

framework,  Belgium 

Belgium performs well in the circular economy 
but  lack  of  specific  skills  is  an  obstacle  to 
innovation  and  entrepreneurship  in  this  area.   
At  53.5 %  in  2016,  Belgium’s  municipal  waste 
recycling  rate  is  among  the  highest  in  the  EU. 
Based  on  the  10  indicators  in  the  EU  circular 
economy  monitoring 
is 
significantly  above  the  EU  average  in  circular 
(secondary)  use  of  material  (16.9 %  in  2014  vs.  a 
EU  average  of  11.4 %).  Belgium  also  performs 
slightly  above 
for  people 
employed in the circular economy (1.16 % of total 
employment  in  2015  versus  an  EU  average  of 
1.71 %(85). All regions are developing initiatives in 
the  circular  economy  and  important  investment 
initiatives  are  ongoing  or  are  planned  in  the 
National Pact for Strategic Investments. The Smart 
cities  partnership  between  the  EIB  and  Belfius  is 
supported  with  EUR  600  million  and  has  the 
potential  to  reach  2  million  people  in  Belgium. 
Nevertheless,  the  incineration  rate  has  slowly 
increased  reaching  44.3 %  in  2016  —  a  0.6 % 
increase  from  2014  and  there  is  a  lack  of  eco-
innovation  and  circular  economy  related  skills  in 
small and medium-sized enterprises (86). 

3.4.4.  GOVERNANCE AND INSTITUTIONAL 

QUALITY  

the  different 
Policy  coordination  between 
government  levels  is  complex  and  not  always 
effective,  complicating  the  delivery  of  certain 

(85)  Eurostat, Circular Economy Indicators. 
(86)  European  Commission,  Eco-Innovation  Observatory, 

https://ec.europa.eu/environment/ecoap/country_profiles_e
n. 

57 

 
                                                           
3.4. Competitiveness and investment 

days  in  Brussels.  In  the  context  of  the  Regional 
ExpressNet,  some  building  permits  have  been 
delayed by up to 5 years.  An online  platform  was 
set  up  recently  in  Flanders  to  facilitate  building 
permit  procedures,  which  are  also  harmonised  for 
public  and  private  projects.  This 
reduces 
administrative  burden,  despite  still  relatively  long 
decision  period  to  obtain  the  permit.  Judicial 
review  in  case  involving  building  permits  lasts 
about  two  years  at  first  instance  and  above  9 
months  at  second  instance.  There  is  room  for 
improvement regarding the standards on informing 
parties about the progress of their court case (2019 
EU  Justice  Scoreboard  (forthcoming)),  which 
could 
and 
predictability,  including  in  judicial  review  of 
building permits before administrative courts. 

provide  more 

transparency 

Digitalisation of public services 

Weak  and  fragmented  digitalisation  of  certain 
public  services  weights  on  administrative 
burden  for  businesses.  Although  Belgium  ranks 
15th  for  digital  public  services  and  scores  well  on 
eHealth and pre-filled forms, it ranks 20th in digital 
public services for business and 19th on open data. 
Belgium  has  a  poor  performance  in  registering 
property  (ranking  143th)  according  to  the  World 
Bank notably because databases are  missing (e.g. 
fragmented 
checking  encumbrances)  or  are 
(mapping  and  cadastral 
this 
context,  information  required  from  applicants  is 
not always known and statistics on transactions are 
not  available.  Belgium  also  lags  behind  in  the 
depth  of  credit  information  publicly  available 
(World  Bank  Doing  Business  Report  2019). 
Building  permits  procedures  are  largely  offline  in 
Brussels and Wallonia.   

information).  In 

forward 

to  push 

Despite  efforts  to  improve  the  quality  of  the 
justice  system  and 
the 
digitalisation,  further  efforts  are  needed  to 
address  these  serious  challenges.  By  end  2018, 
most  courts  were  equipped  with  proper  hardware, 
but  only  about  half  migrated  to  the  new  case-
management  system  (MACH),  and  adoption  (by 
the  College  of  Courts  and  Tribunals)  of  court-
specific  procedures  and  unified  coding  system  
will  remain  outstanding  at  least  until  the  end  of 
2019.  Implementation  of  all  these  steps  is  a 
precondition  for  collecting  reliable  court  data, 
introducing  a  data-led  management  of  human  and 
financial resources in courts, publishing judgments 

has still room for improvement. (Poel et al, 2016). 
Additionally,  investments  to  address  bottlenecks 
would  benefit  from  more  systematic  cost-benefit 
analysis,  which  is  currently  under-used.  The  Rail 
Regulator still has room to broaden the scope of its 
the 
regulating  activities  (Section  3.4.3)  and 
Belgian  Competition  Authority  has 
limited 
resources  compared  to  the  resources  of  other 
Member 
Competition  Authorities. 
Administrative  justice  is  experiencing  challenges 
due to lacking resources and  lengthy proceedings, 
causing important delays, in particular for building 
permits  (cf.  infra),  but  also  for  procurement 
procedures (87).  Cooperation  between  customs 
authorities  and  market  surveillance  authorities  is 
sub-optimal  increasing  risks  that  non-compliant 
the  Belgian 
products  enter 
borders.(88)  

the  EU 

through 

States' 

Business environment 

In  spite  of  efforts  to  ease  the  red  tape,  the 
complexity  of  administrative  procedures 
is 
perceived  as  a  problem  for  doing  business  (see 
supra). This is the perception of 75 % of Belgian 
companies  against  an  EU  average  of  60 %.  Both 
federal and regional  governments  have introduced 
measures  to  simplify  administrative  procedures, 
reduce the reporting burden for small and medium-
sized enterprises and setting  up genuine one-stop-
shops for enterprises.  

In  spite  of  recent  progress  to  streamline 
procedures 
in  Flanders,  time  for  granting 
building permits in Belgium is long, also due to 
lengthy judicial review. Although Belgium ranks 
38th  in  the  2019  World  Bank  Ease  of  Doing 
Business  for  building  permits,  it  ranks  168th  for 
the  time  needed  to  obtain  a  building  permit  (212 
days). (89)  For  instance,  for  mobile  radio  masts, 
delays  range  from  120  days  in  Wallonia  to  600 

(87)  Evaluation  of  the  Remedies  Directive:  SWD/2017/013 

final. 

(88)  Belgium  carries  an  important  responsibility  for  the  single 
market  for  goods  with  Antwerp  being  the  second-largest 
port in the EU. Belgium is amongst the main importers of 
goods in the European Union, representing about 7 % of all 
EU product imports. The risk that non-compliant products 
enter  the  EU  through  the  Belgian  borders  is  correlated  to 
the  high  volume  of  imports  and  a  significant  amount  of 
non-compliant products could be entering through Antwerp 
given  that  cooperation  between  customs  authorities  and 
market surveillance authorities is sporadic. 

(89)  Out of which 110 days concern the local authorities and 75 

days to obtain the water and sewage connection. 

58 

 
                                                           
3.4. Competitiveness and investment 

online  and  allowing  for  a  cost-saving  electronic 
communication  with court users (2019 EU Justice 
Scoreboard,  forthcoming).  The  High  Council  of 
Justice  aims  to  enhance  the  quality  of  the  justice 
system  through  re-enforcing  its  external  auditing 
of 
introducing  a  new  electronic 
complaints system, and encouraging improvements 
to business processes by making this a criterion in 
the selection of court presidents. Lacking resources 
in  the  prosecution  service  are  hindering  the 
effective prosecution of certain criminal cases. 

the  courts, 

59 

 
ANNEX A: OVERVIEW TABLE 

Commitments 

Summary assessment (90) 

2018 Country-Specific recommendations (CSRs) 

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): 

CSR 1: Ensure that the nominal growth rate of 
net  primary  government  expenditure  does  not 
exceed  1.8 %  in  2019,  corresponding  to  an 
annual  structural  adjustment  of  0.6 %  of  GDP. 
Use windfall gains to accelerate the reduction of 
the  general  government  debt  ratio.  Pursue  the 
envisaged  pension  reforms  and  contain  the 
care 
projected 
expenditure.  Pursue  the  full  implementation  of 
the  2013  Cooperation  Agreement  to  coordinate 
fiscal policies of all government levels. Improve 
the  efficiency  and  composition  of  public 
spending  at  all  levels  of  government  to  create 
room for public investment, notably by carrying 
out spending reviews.  

long-term 

increase 

in 

  Ensure  that  the  nominal  growth  rate  of  net 
primary  government  expenditure  does  not 
exceed  1.8 %  in  2019,  corresponding  to  an 
annual  structural  adjustment  of  0.6 %  of 
GDP.  Use  windfall  gains  to  accelerate  the 
reduction  of  the  general  government  debt 
ratio. 

  Pursue the envisaged pension reforms 

The  compliance  assessment  with  the  Stability  and 
Growth Pact will be included in Spring when final 
data for 2018 will be available. 

Limited  Progress.  A  number  of  measures  have 
been  adopted  since  2015  in  order  to  control  the 
fiscal 
costs  of  ageing  and  guaranteeing 
sustainability  of 
the  first  pension  pillar.  The 
measures  mostly  consist  in:  gradually  raising  the 

the 

(90)  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. 

60 

 
 
 
 
 
 
 
 
                                                           
 
A. Overview Table 

pension; 

eliminating 

legal age; tightening the conditions of access to the 
early 
the 
gradually 
consideration  of  years  of  study  in  careers  for  the 
public  sector;  introduction  of  the  mixed  pension 
system.  However,  even  when  taking  into  account 
those  measures,  the  projected  increase  in  pension 
expenditure  is  significant  and  put  the  long-term 
sustainability  at  risk.  The  planned  measures  about 
the definition of ‘ardous jobs’ and the  introduction 
of  ‘credit-based  public  pension  system’  have  been 
postponed. 

  and  contain  the  projected  increase  in  long-

term care expenditure. 

Limited Progress. The devolution to the regions of 
the  responsibilities  for  the  long-term  care  system 
does  not  appear  to  have  a  clear  impact  the  long-
term  sustainability  of  the  system.  In  absence  of 
measures, according to the Ageing Working Group 
reference scenario public expenditure on long-term 
care is projected to steadily increase from 2.3 % of 
GDP in 2016 to 4.0 % of GDP in 2070. 

  Pursue  the  full  implementation  of  the  2013 
Cooperation  Agreement  to  coordinate  fiscal 
policies of all government levels 

 

Improve  the  efficiency  and  composition  of 
public  spending  at  all  levels  of  government 
investment, 
to  create  room  for  public 

to 

take  a  decision  on 

the  2013 
Limited  Progress.  According 
Cooperation  Agreement, 
Consultation 
the 
Committee  must  discuss  the  global  budgetary 
individual 
objective  and 
objectives for the Stability Programme based on an 
opinion of the High Council of Finance. In contrast 
with the practice of previous Stability Programmes, 
in  which  the  Consultation  Committee  "took  note" 
of the trajectory, all levels of government approved 
the  overall  fiscal  trajectory  presented  in  2018 
Stability 
the 
achievement  of  the  fiscal  targets  by  2020  for  all 
government  levels.  Although  this  approval  added 
credibility  to  the  overall  trajectory,  there  was  no 
formal  agreement  on  the  annual  fiscal  targets  at 
each  level  of  government.  In  addition,  the  lack  of 
annual targets for individual entities undermines the 
possibility  for  the  High  Council  of  Finance  to 
monitor  the  compliance  with  an  agreed  budgetary 
trajectory. 

Programme 

supported 

and 

Limited  Progress.  In  March  2017,  the  Prime 
Minister  announced  the  elaboration  of  a  National 
Pact 
the 
framework  of  the  National  Pact  for  Strategic 

Investments.  Within 

for  Strategic 

61 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
notably by carrying out spending reviews. 

CSR  2:  Remove  disincentives  to  work  and 
strengthen  the  effectiveness  of  active  labour 
market  policies,  notably  for  the  low-skilled, 
people  with  a  migrant  background  and  older 
workers.  Pursue  the  education  and  training 
reforms,  including  by  fostering  equity  and 
in 
increasing 
science, 
and 
mathematics. 

the  proportion  of  graduates 
technology, 

engineering 

  Remove 

to  work 

disincentives 

and 
strengthen the effectiveness of active labour 
market  policies,  notably  for  the  low-skilled, 
people with a migrant background and older 
workers. 

A. Overview Table 

investments  concerning 

Investments,  eight  working  groups  were  set  up  to 
support  the  Strategic  Committee.  Six  of  these 
working  groups  have  made  a  thorough  analysis  of 
the  six 
the  potential 
thematic  pillars  of  the  Pact  (digital,  cyber  security 
and  trust  in  digital,  education,  health,  energy  and 
mobility)  and  two  working  groups  have  discussed 
the  transversal  issues  of  the  regulation  and  the 
mobilisation  of  capital  for  investment.  In  Mach 
2017, a Strategic Committee was also established to 
outline  the  main  points  of  the  Pact  and  make 
recommendations to the government. Since October 
2017,  the  Strategic  Committee  has  been  in  the 
operational  phase  of  the  Pact,  which  is  aimed  at 
formulating 
on 
investment  projects  and  measures  to  promote  their 
impact  on 
implementation  and 
growth.  In  the  context  of  the  preparation  of  the 
initial budget 2019, the federal government intends 
to  finance  447  million  on  strategic  investment 
projects. 

recommendations 

concrete 

increase 

their 

The  Government  of  Flanders  is  preparing  the 
structural 
incorporation  of  a  spending  review 
approach  in  its  budgetary  process.  As  a  first  step, 
the  Flemish  Government  is  carrying  out  a  pilot 
project  with  a  focus  on  a  specific  topic,  as 
recommended  by  the  European  Council.  The  pilot 
project  will  be  completed  in  spring  2019.  Further 
preparatory  measures 
structural 
incorporation of spending reviews in the budgetary 
process are planned for 2019. 

towards 

the 

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

Limited Progress. As of 1st January 2019, the new 
programme  for  employment  support  -  AktiF  and 
AktiF  Plus  -  enters  into  force  in  the  German-
speaking  Community.  It  consists  of  financial 
support to employers who hire people from groups 
far-away  from  the  labour  market  (in  particular 

62 

 
 
 
 
 
 
 
A. Overview Table 

below 26 and 50+). 

In  July  2018  Flanders  has  reinforced  the  existing 
target  group  policies.  A  higher  reduction  of  social 
security  contribution  is  introduced  for  employers 
willing to hire people over 60 years old. Employers 
will also be exempted from employer contributions 
if they hire people over 55 years old and low skilled 
youngsters. Support to people with a disability will 
be increased. The income threshold of the disability 
premium  (VOP)  will  be  lowered  to  make  it  more 
attractive to independent workers and the procedure 
will  be  simplified.  The  reinforced  target  group 
policy will enter into force in January 2019. At the 
same  time  existing  measures  will  be  continued: 
language 
through 
experience 
work’ 
trajectories,  activation  long  term  unemployed  job 
seekers  (>2years)  and  trying  to  reach  more  NEET 
youngsters. 

through  ‘integration 

temporary  work 

training 

(PES), 

As  of  Jan  1st  2019,  new  rules  have  entered  into 
force  Flanders,  regarding,  a.o  the  recruitment  and 
hiring (and financial support) of medium and highly 
qualified workers from abroad. The main goal is to 
attract talent from outside the EU in order to fill in 
recurrent  bottleneck  professions.  At  the  same  time 
existing  procedures  have  been  simplified.  Today 
employers  can  start  a  procedure  to  obtain  a  work- 
and residence permit at the same time for a non-Eu 
national who wants to work in Flanders. In 2019 an 
electronic  platform  will  be  developed  to  further 
simplify the existing procedures.  

In  July  2018  the  Walloon  Government  decided  on 
attributing  new  financial  means  to  the  so-called 
Brasero  mechanism,  which  aims  at  supporting  the 
social 
cooperatives 
creation 
entrepreneurship. 

and 

of 

In  November  2018  the  Walloon  government  has 
approved  the  revamping/streamlining  of  the  so-
called Airbag mechanism, which aims at supporting 
the  transition  towards  self-employment  as  main 
occupation.  The  newly  adopted  measures  aim  at 
reducing  the  delay  for  assessment/examinations  of 
the dossiers and at simplifying the mechanism both 
for  the  workers  and  for  the  FOREM  (in  charge  of 
its implementation). 

As  of  Jan  1st  2019,  the  Tax  Shift  enters  in  its  last 
phase, with notably, among others, the reduction of 

63 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Pursue  the  education  and  training  reforms, 

including by fostering equity and 

A. Overview Table 

personal  social  security  contributions  for  the  low-
wage workers. 

Limited Progress. Limited progress has been made 
in proposing and adoption of education and training 
reforms,  including  for  fostering  equity,  but  many 
important reforms still need implementation.  

inequalities 

The implementation of the 'Pact for Excellence', the 
French  Community's  flagship  school  reform  to 
improve  basic  skills,  efficiency,  governance  and 
tackle 
is  progressing  slowly.  The 
is  gradually  proposing  or 
French  Community 
adopting decrees for the implementation of the Pact 
for  Excellence,  but  only  a  few  measures  are  being 
implemented so far.  

From  2019,  there  will  be  a  gradual  increase  in  the 
budget  for  individualised  child  support  to  reduce 
grade  repetition  and  school  failure.  New  quality 
assurance and school governance  measures as  well 
as  the  recently  adopted  reform  of  the  initial 
teachers'  education  aim  to  improve  educational 
performance 
inequalities. 
Nevertheless, major reforms are still pending, such 
as  the  extension  of  the  common  multi-disciplinary 
curriculum  to  the  9th  grade  and  the  new  working 
organisation of teachers.   

reduce 

and 

to 

Some decrees improving educational outcomes and 
reducing inequalities have been adopted: 

-  The  decree  on  remediation  and  individualised 
support of pupils was adopted on 10 October 2018. 

-  The  decree  on  the  separation  of  the  organizing 
power  from  the  regulatory  power  adopted  on  6 
February  2019  will  allow  the  public  schools' 
network  to  become  autonomous  and  decentralised 
as  well  as  the  adoption  and  the  implementation  of 
further reforms  foreseen in the Pact for Excellence 
in Education. 

-  The  decrees  on  the  6-year  piloting  plans  of 
schools  with  improvement  objectives  are  being 
gradually  implemented  over  the  next  few  years,  as 
well as the macro governance measures. 

-Additional support staff (speech therapists) for pre-
primary school have been available as of 1 January 
2019  and  pre-primary  school  will  be  free  as  of  1 

64 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A. Overview Table 

September 2019. 

-The  decree  on  the  implementation  of  certification 
by units in formal Initial Vocational Education and 
Training (IVET) programmes has been adopted on 
13 June 2018 and a pilot is being implemented. 

The French Community has adopted on 6 February 
2019 a reform of the Initial Teachers’ Education for 
elementary  and  lower  secondary  education,  which 
will  enter  into  force  in  2020.  The  main  thrusts  of 
the  reform  are:  the  extension  of  studies,  the 
harmonization  of  teacher  training  at  all  levels  of 
schooling, the reinforcement of training contents, in 
particular  those  giving  teachers  the  means  to 
manage  their  education.  Heterogeneity  of  classes 
and to fight against school failure, the accentuation 
of 
the 
development of scientific research in teaching, and 
the revision of the training of trainers. 

theory  and  practice, 

the  articulation 

Additional reforms are under preparation, but have 
not been adopted and implemented yet: 

The draft decrees on the work organisation and the 
workload of teachers, the status of school directors, 
the  missions  of  the  new  school  inspection  and  the 
support  to  low  performing  schools  are  relatively 
advanced in the legislative process. 

the 

The  government  of  the  French  Community  has 
proposed  on  19  December  2018 
legal 
framework  for  the  extended  Common  curriculum 
(to  be  implemented  as  of  school  year  2020/2021). 
Parliament  will  need  to  adopt  this  draft  decree.  A 
follow-up  draft  decree  on 
the  educational 
attainment  targets  will  need  to  be  proposed  and 
adopted before this new common curriculum can be 
implemented.  

There  has  been  some  progress  in  the  Flemish 
Community  to  reduce  inequalities,  as  adopted 
decrees targeted many education levels.  

Close  monitoring  will  be  needed  to  ensure  that 
some of the measures mentioned below also have a 
positive impact on equity. 

The  Flemish  Community  adopted  on  28  March 
2018  a  decree  on  the  modernisation  of  secondary 
school  education.  It  will  be  implemented  as  of 

65 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A. Overview Table 

school year 2019/2020. 

The  decree  on  the  reform  of  the  attainment  goals 
for  the  first  stage  of  secondary  education  is 
expected  to  be  adopted  by  the  Flemish  Parliament 
before the end of the current legislature.   

the  dual 

in 
The  decree  on 
secondary  education  was  adopted  on  21  March 
2018  and  will  be  fully  implemented  as  of  1 
September 2019 onwards. 

learning  system 

The  reform  of  the  pupil  guidance  in  secondary 
education  was  implemented  as  of  1  September 
2018. 

The  decree  on  Higher  Vocational  Education  was 
adopted by the Flemish Parliament on 4 May 2018 
and  will  be  implemented  as  of  academic  year 
2019/2020. 

The  decree  on  the  reform  of  Adult  Education  was 
adopted on 7 March 2018 and will be implemented 
as of school year 2019/2020. 

The  adoption  of  the  decree  on  the  Right  to 
enrolment  in  compulsory  education  is  currently 
suspended. 

The decree on the reform of the existing system of 
training incentives was adopted in October 2018.  

The  decree  on  the  reform  of  the  teaching  career  is 
currently  being  drafted.  “Teacher  platforms”  have 
already been set up to provide more job security to 
young starting teachers. 

On 11 July 2017, the Government of Flanders and 
social partners reached an agreement on the reform 
of  education  and  training  incentives  for  adults 
which will start on 1/9/2019. The goal is to have an 
integrated  training  incentive  policy  with  three 
instruments  with  a  labour  market-oriented  and 
forward-looking 
Flemish 
training 
educational  leave,  training  vouchers  and  Flemish 
training credit. 

focus: 

66 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

increasing  the  proportion  of  graduates  in 
and 
science, 
mathematics 

engineering 

technology, 

the 

3:  Reduce 

and 
CSR 
incentivise 
administrative 
entrepreneurship  and  increase  competition  in 
services,  particularly  retail,  construction  and 

regulatory 
to 

burden 

A. Overview Table 

Limited Progress. Limited progress has been made 
in  pursuing  education  and  training  reforms  to 
increase the proportion of  STEM graduates.  

The  Flemish  Community  further  pursued 
the 
implementation  of  the  STEM  action  plan  2012-
2020. Two of the five objectives have already been 
met  in  2016.  Specific  measures  advocated  by  the 
STEM  platform  include  further  development  of 
STEM academies (driven by volunteers) to provide 
extracurricular initiatives to raise awareness among 
young  people  and  better  structural  support  and 
quality promotion through collaboration  with other 
instances,  training  centres,  art  academies,  and 
schools with a good STEM infrastructure. As from 
2019  onwards,  a  broad  range  of  initiatives  will  be 
taken 
the  Regional 
Technological  Centres  of  Flanders,  CPD's  and  a 
broad range of VET schools.  

collaboration  with 

in 

to  grant  a  subsidy 

The Walloon Government decided on 13 December 
2018 
the  5  Walloon 
universities  to  promote,  disseminate  and  raise 
awareness of STEM studies and careers. 

to 

The  Digital  Wallonia  Plan  includes  measures  to 
grant  subsidies  to  digital  projects  for  schools 
(Digital  Schools)  and  an  awareness  campaign  to 
promote STEM, and in particular digital studies for 
women (Wallonia Wonder Women).  

Brussels  Capital  Region  has  launched  a  call  for 
proposals  for  the  financing  of  coding  projects 
targeting compulsory schools. 

The government of the French Community adopted 
a  Digital  Strategy  for  education  (schools)  on  10 
October 2018 to be gradually implement in the next 
5  years.  The  measure  on  digital  governance  will 
require legislative approval by the next government 
in 2019.  

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

67 

 
 
 
 
 
  
 
 
 
the  growing 
professional  services.  Tackle 
through 
in  particular 
mobility  challenges, 
investment 
transport 
in  new  or  existing 
infrastructure  and  reinforcing  incentives  to  use 
collective and low emission transport. 

  Reduce  the  regulatory  and  administrative 
burden to incentivise entrepreneurship and 

A. Overview Table 

Limited  progress  has been  made on the reduction 
incentivise 
of 
entrepreneurhip.  

administrative 

burden 

to 

-The  reform  of  the  company  law  code  will  reduce 
the  number  of  companies  from  17  to  4,  remove 
minimal  company  requirements  for  setting  up  a 
liability  of 
company,  abolish 
the  unlimited 
administrators  and  allow  e-mail 
replace 
to 
registered letters.  

-  Flanders  has  adopted  a  decree  on  18  May 
abolishing the legal provisions on basic knowledge 
of business management. 

-  Flanders  has  integrated  the  retail  license  in  the 
environmental permit. 

-  The  implementation  of  the  2017  reform  to 
simplify  the  corporate  tax  system  has  continued. 
The  statutory  tax  rate  has  been  lowered  from 
33.99%  to  29.58%  in  2018.  The  reform  also 
introduced  amendments  to  ease  taxation  on  start-
ups  and 
some 
inefficient tax expenditures remain in place such as 
the  company  car 
infra).  The 
scheme 
regionalisation  of  some  taxes  may  add  complexity 
to the tax system. 

small  companies.  However, 

(cf. 

Digitisation  of  public  services  is  still  fragmented 
and  progressing  slowly  in  spite  of  a  number  of 
innovative initiatives at regional and local level. 

Digitalisation  of  the  justice  system  is  advancing 
slowly. The e-Deposit system allowing for a digital 
submission  of  court  documents  is  still  being 
implemented. The e-Box network is also still under 
implementation  by  courts.  The  establishment  of  a 
national  register  for  interpreters,  translators  and 
court  experts  is  still  under  implementation.    The 
the  handling  of 
digital  platform  Regsol  for 
insolvency 
under 
implementation. The  migration of the  civil register 
to  a  digital  environment  has  been  announced  for 
March  2019.  The  establishment  of  a  central 
the  extra-judicial  collection  of 
platform 

proceedings 

still 

for 

is 

68 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A. Overview Table 

unchallenged  monetary  claims  for  the  business-to-
business environment is still being implemented. 

Limited  progress  has  been  made  to  increase 
competition 
retail, 
construction and professional services: 

services,  particularly 

in 

 

increase competition in services, particularly 
retail, construction and professional services. 

-  Brussels  has  adopted  a  reform  of  the  Code 
Bruxellois  de 
l'Aménagement  du  Territoire 
(CoBAT) to facilitate retail establishment 

-  Flanders  has  integrated  the  retail  license  in  the 
environmental permit. 

-  Flanders  has  adopted  a  decree  to  abolish  the 
qualifications 
construction-related 
eleven 
professions. 

for 

-  A  Royal  Decree  has  been  adopted  to  adapt  rules 
on activities that can be performed together with the 
profession  of  accountant  has  been  adopted  in 
August 2018. 

the 

However, 
legal 
the  modernisation  of 
professions announced for the summer 2018 has not 
been published yet. There has been no follow-up to 
the  analysis  of  the  need  for  and  proportionality  of 
specific  restrictions  imposed  on 
legal  persons 
providing professional services. 

Finally,  no  reforms  have  taken  place  to  reduce  the 
important  restrictions  to  rail  and  road  transport 
services. 

  Tackle  the  growing  mobility  challenges,  in 
particular  through  investment  in  new  or 
existing transport infrastructure  

Some  progress  was  made  to  tackle  investment  in 
existing  transport  infrastructure.In  January  2019, 
Regions  have  agreed  to  a  multi-annual  60/40 
allocation key for the Regional ExpressNet. 

The  Brussels  Regional  Government  has  approved 
and  is  carrying  out  a  multiannual  investment 
programme for the renovation of its tunnels, bridges 
and  viaducts  worth  over  1  billion  euros  for  the 
coming 10 years. In addition, the Brussels Regional 
Government 
a  multiannual 
investment  programme  for  public  transport  that  is 
currently  being  carried  out.  The  plan  runs  from 
2015  until  2025  and  foresees  5.2  billion  euros  of 

approved 

has 

69 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A. Overview Table 

investments  in  new  metro  lines,  tram  lines  and  a 
greener bus fleet. 

An  agreement  for  additional  funding  for  the 
regional ExpressNet project was reached at the end 
of  2018.  The  agreement  has  been  approved  by  the 
Federal  Parliament  and  is  waiting  for  approval  by 
the Regional Parliaments. 

the 

Limited Progress. Belgium is still a country where 
the  use  of  company  cars  for  commuting  is  heavily 
incentivised,  whereas 
connectivity  with 
collective public transport, in particular between the 
centre  of  Brussels  and  its  outskirts  is  deficient.  As 
to  low-emission  transport,  the  use  of  alternative 
fuels  in  new  passenger  cars  sold  in  Belgium  has 
been increasing very dynamically over the past four 
years.  The  different  Belgian  regions  each  apply 
their  own  set  of  support  measures,  potentially 
leading 
to  market  fragmentation,  but  all  put 
emphasis  on  encouraging  the  uptake  of  electric 
vehicles.  The  Federal  Government  grants  a  tax 
credit  of  30 %  on  the  purchase  of  an  electric 
vehicle. 

The  employment  rate  for  20-64  years  old  workers 
increased  to  68.5 %  in  2017 (+0.8 pp  compared  to 
2016), but remains below the EU average (72.2 %). 
At the  current pace, the 2020 target of 73.2 % still 
seems out of reach. 

R&D  intensity  has  pursued  its  increase  to  reach 
2.58 %  in  2017.  This  is  due  to  increasing  private 
R&D 
remains 
relatively stable (0.76 %). 

(1.76 %)  while  public  R&D 

to 

the 

According 
latest  national  projections 
submitted  to  the  Commission  and  taking  into 
account  existing  measures,  it  is  expected  that  the 
target will be missed: -12 % in 2020 compared with 
2005  (i.e.  projected  shortfall  of  3  percentage 
points). 

  and  reinforcing  incentives  to  use  collective 

and low emission transport. 

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 

Belgium  is  in  line  with  its  indicative  trajectory  for 
renewable  energy  (with  a  share  of  renewable 
energy  of  8.65 %  in  2016).  However,  additional 

70 

 
 
 
 
 
 
 
 
 
 
 
 
 
A. Overview Table 

modes of transport equal to 10 %. 

Energy efficiency: 

43.7 Mtoe  primary  consumption  and  32.5 Mtoe 
final energy consumption  

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: 

- 380 000 compared to 2008. 

efforts  will  be  needed  to  reach  the  2020  target  of 
13 % of final energy consumption. 

Additional  efforts  will  be  required  for  Belgium  to 
meet  its  ambitious  indicative  targets  for  2020  in 
terms  of  energy  efficiency:  43.7  Mtep  primary 
energy  (32.5  Mtep  of  final  energy).  In  2016,  the 
final energy consumption reached 49 Mtep, putting 
at  risk  the  achievement  of  the  EU  2020  energy 
efficiency target.   

In 2016, Belgium reached its Europe 2020 national 
target of 9.5 % on early school leaving (ESL). With 
8.9 % at national level in 2017, the rate is below the 
EU  average  but  it  remains  high  in  the  Brussels 
region  (12.9 %).  This  compares 
in 
Flanders  and  10.5 %  in  Wallonia.  The  gender  gap 
of  3.1  percentage  points  (with  a  higher  rate  of 
10.4 %  for  men)  is  close  to  the  EU  average.  The 
gap  between  foreign-  (16.4 %)  and  native-born 
(7.9 %) population is high. The proportion of young 
people  in  2017  not  in  employment,  education  or 
training (NEET, 15-24 years old) at 9.3 %, is below 
the EU average. 

to  7.2 % 

In  2017,  the  proportion  of  30-  to  34-year-old 
tertiary  graduates  in  Belgium  increased  to  45.9 %, 
on track to reach the Europe 2020 national target of 
in 
47 %.  Belgian  and  regional  rates  (46.4 % 
Flanders, 54.4 % in the Brussels region and 40.9 % 
in  Wallonia)  are  above  the  EU  average  of  39.9 %. 
The  tertiary  attainment  of  women  is  50.9 %,  10.1 
percentage points higher than that of men (40.8 %). 
The gap between foreign- (37.6 %) and native-born 
(48.8 %) students is high 

Though diminishing from one year to the other, the 
number  of  people  at  risk  of  poverty  or  social 
exclusion 
is  still  very  high.  The  cumulative 
difference from 2008 stood at (in thousands):  

+146 in 2014;  

+143 in 2015;  

+141 in 2016; 

+ 102 in 2017.  

Though on a downwards trend, the current pace of 
reduction makes it unlikely for Belgium to achieve 

71 

 
 
A. Overview Table 

its 2020 target. 

72 

 
 
ANNEX B: COMMISSION DEBT SUSTAINABILITY ANALYSIS AND 

FISCAL RISKS 

73 

General Government debt projections under baseline, alternative scenarios and sensitivity tests2017201820192020202120222023202420252026202720282029Gross debt ratio103.4101.499.898.797.596.696.195.895.996.397.298.499.9Changes in the ratio (-1+2+3)-2.7-2.0-1.6-1.1-1.2-0.9-0.6-0.20.00.50.81.31.4of which(1) Primary balance (1.1+1.2+1.3)1.61.41.20.80.40.1-0.2-0.4-0.4-0.7-0.8-0.8-1.0(1.1) Structural primary balance (1.1.1-1.1.2+1.1.3)1.11.00.90.40.20.0-0.2-0.4-0.4-0.7-0.8-0.8-1.0(1.1.1) Structural primary balance (bef. CoA)1.11.00.90.40.40.40.40.40.40.40.40.40.4(1.1.2) Cost of ageing0.20.40.71.01.01.31.41.51.6(1.1.3) Others (taxes and property incomes)0.00.10.10.20.20.20.30.30.3(1.2) Cyclical component0.00.10.20.20.20.10.00.00.00.00.00.00.0(1.3) One-off and other temporary measures0.50.30.10.20.00.00.00.00.00.00.00.00.0(2) Snowball effect (2.1+2.2+2.3)-1.0-1.4-1.1-1.0-0.8-0.8-0.7-0.6-0.4-0.20.10.40.5(2.1) Interest expenditure2.52.42.22.12.12.12.22.32.52.72.93.23.4(2.2) Growth effect-1.7-1.5-1.5-1.4-1.2-1.0-1.0-1.1-1.0-1.0-0.9-0.9-1.0(2.3) Inflation effect-1.7-2.2-1.9-1.7-1.8-1.8-1.9-1.9-1.9-1.9-1.9-1.9-1.9(3) Stock-flow adjustments-0.10.70.70.70.00.00.00.00.00.00.00.00.0Note: For further information, see the European Commission Fiscal Sustainability Report (FSR) 2018. b. For the medium-term, the risk category (low/medium/high) is based on the joint use of the S1 indicator and of the DSA results. The S1 indicator measures the fiscal adjustment required (cumulated over the 5 years following the forecast horizon and sustained thereafter) to bring the debt-to-GDP ratio to 60 % by 2033. The critical values used are 0 and 2.5 pps. of GDP. The DSA classification is based on the results of 5 deterministic scenarios (baseline, historical SPB, higher interest rate, lower GDP growth and negative shock on the SPB scenarios) and the stochastic projections. Different criteria are used such as the projected debt level, the debt path, the realism of fiscal assumptions, the probability of debt stabilisation, and the size of uncertainties. c. For the long-term, the risk category (low/medium/high) is based on the joint use of the S2 indicator and the DSA results. The S2 indicator measures the upfront and permanent fiscal adjustment required to stabilise the debt-to-GDP ratio over the infinite horizon, including the costs of ageing. The critical values used are 2 and 6 pps. of GDP. The DSA results are used to further qualify the long-term risk classification, in particular in cases when debt vulnerabilities are identified (a medium / high DSA risk category). [2]Thechartspresentaseriesofsensitivitytestsaroundthebaselinescenario,aswellasalternativepolicyscenarios,inparticular:thehistoricalstructuralprimarybalance(SPB)scenario(wheretheSPBissetatitshistoricalaverage),theStabilityandGrowthPact(SGP)scenario(wherefiscalpolicyisassumedtoevolveinlinewiththemainprovisionsoftheSGP),ahigherinterestratescenario(+1pp.comparedtothebaseline),alowerGDPgrowthscenario(-0.5pp.comparedtothebaseline)andanegativeshockontheSPB(calibratedonthebasisoftheforecastedchange).Anadversecombinedscenarioandenhancedsensitivitytests(ontheinterestrateandgrowth)arealsoincluded,aswellasstochasticprojections. Detailed information on the design of these projections can be found in the FSR 2018.BE - Debt projections baseline scenario[1]Thefirsttablepresentsthebaselineno-fiscalpolicychangescenarioprojections.Itshowstheprojectedgovernmentdebtdynamicsanditsdecompositionbetweentheprimarybalance,snowballeffectsandstock-flowadjustments.Snowballeffectsmeasurethenetimpactofthecounteractingeffectsofinterestrates,inflation,realGDPgrowth(andexchangerates in some countries). Stock-flow adjustments include differences in cash and accrual accounting, net accumulation of assets, as well as valuation and other residual effects.[3] The second table presents the overall fiscal risk classification over the short, medium and long-term. a. For the short-term, the risk category (low/high) is based on the S0 indicator. S0 is an early-detection indicator of fiscal stress in the upcoming year, based on 25 fiscal and financial-competitiveness variables that have proven in the past to be leading indicators of fiscal stress. The critical threshold beyond which fiscal distress is signalled is 0.46. 70758085909510010511011512020162017201820192020202120222023202420252026202720282029Debt as % of GDP -BEBaselineEnhanced lower GDP growth scenarioAdverse combined scenarioEnhanced higher interest rate scenario70809010011012020162017201820192020202120222023(% of GDP)Stochastic debt projections 2019-2023 -BEp10_p20p20_p40p40_p60p60_p80p80_p90p50Baseline70758085909510010511011512020162017201820192020202120222023202420252026202720282029Debt as % of GDP -BEBaselineHistorical SPB scenarioSGP scenario70758085909510010511011512020162017201820192020202120222023202420252026202720282029Debt as % of GDP -BEBaselineHigher interest rate scenarioNegative shock on the SPBLower GDP growth scenarioBaselineHistorical SPBLower GDP growthHigher interest rateNegative shock on SPBStochastic projectionsRisk categoryHIGHHIGHHIGHHIGHHIGHHIGHDebt level (2029)99.994.8105.3105.4103.3Debt peak year20182018202920292029Percentile rank52.0%42.0%Probability debt higher31.3%Dif. between percentiles28.1HIGHLong termDSAHIGHDebt sustainability analysis (detail)Medium termHIGHHIGHShort termLOW(S0 = 0.2)(S1 = 4.3)S2MEDIUM(S2 = 4.3)S1 
 
ANNEX C: STANDARD TABLES 

Table C.1: 

Financial market indicators 

1) Latest data Q3 2018. Includes not only banks but all monetary financial institutions excluding central banks. 
2) Latest data Q2 2018. 
3) Quarterly values are annualised. 
* Measured in basis points. 

Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators). 

74 

201320142015201620172018Total assets of the banking sector (% of GDP)1)260,4275,4261,2259,5232,3226,3Share of assets of the five largest banks (% of total assets)64,065,865,566,268,8-Foreign ownership of banking system (% of total assets)2)51,150,349,249,549,150,1Financial soundness indicators:2)              - non-performing loans (% of total loans)-4,33,83,22,72,4              - capital adequacy ratio (%)18,717,618,718,819,018,4              - return on equity (%)3)6,27,810,38,98,88,3Bank loans to the private sector (year-on-year % change)1)6,29,97,06,85,59,5Lending for house purchase (year-on-year % change)1)10,119,512,19,25,89,5Loan to deposit ratio2)-88,488,588,090,286,6Central Bank liquidity as % of liabilities1)-1,61,01,92,92,7Private debt (% of GDP)169,2166,8180,9198,9187,0-Gross external debt (% of GDP)2) - public56,667,865,466,361,662,3    - private103,6102,6103,7118,3108,6104,3Long-term interest rate spread versus Bund (basis points)*84,055,034,438,640,538,4Credit default swap spreads for sovereign securities (5-year)*36,331,030,028,814,610,7 
 
 
 
 
 
 
C. Standard Tables 

Table C.2: 

Headline Social Scoreboard indicators 

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 Long-term unemployed are people who have been unemployed for at least 12 months.       
4 Gross disposable household income is defined in unadjusted terms, according to the draft Joint Employment Report 2019.       
5 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).       
6 Average of first three quarters of 2018 for the employment rate, unemployment rate and gender employment gap. Data for 
unemployment rate is annual.       

Source: Eurostat 

75 

201320142015201620172018 6Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)11,09,810,18,88,9:Gender employment gap (pps)10,28,78,39,39,88,6Income inequality, measured as quintile share ratio (S80/S20)3,83,83,83,83,8:At-risk-of-poverty or social exclusion rate1 (AROPE)20,821,221,120,720,3:Young people neither in employment nor in education and training (% of population aged 15-24)12,712,012,29,99,3:Dynamic labour markets and fair working conditions†Employment rate (20-64 years)67,267,367,267,768,569,5Unemployment rate2 (15-74 years)8,48,58,57,87,15,9Long-term unemployment rate3 (as % of active population)3,94,34,44,03,53,0Gross disposable income of households in real terms per capita4 (Index 2008=100) 96,696,896,497,198,0:Annual net earnings of a full-time single worker without children earning an average wage (levels in PPS, three-year average)23848243552477225082::Annual net earnings of a full-time single worker without children earning an average wage (percentage change, real terms, three-year average)-0,10,20,10,1::Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction542,643,644,241,139,5:Children aged less than 3 years in formal childcare46,048,850,143,852,9:Self-reported unmet need for medical care1,92,52,42,42,1:Individuals who have basic or above basic overall digital skills (% of population aged 16-74)::60,061,061,0: 
  
 
 
 
 
C. Standard Tables 

Table C.3: 

Labour market and education indicators 

* Non-scoreboard indicator       
1 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.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.       
2 PISA (OECD) results for low achievement in mathematics for 15 year-olds.       
3 Impact of socio-economic and cultural status on PISA (OECD) scores. Values for 2012 and 2015 refer respectively to 
mathematics and science.       
4 Average of first three quarters of 2018 for the activity rate, employment growth, employment rate, part-time employment, 
fixed-term employment. Data for youth unemployment rate is annual. 

Source: Eurostat, OECD 

76 

Labour market indicators201320142015201620172018 4Activity rate (15-64)67.567.767.667.668.068.4Employment in current job by durationFrom 0 to 11 months10.510.910.811.211.4:From 12 to 23 months8.57.98.18.18.5:From 24 to 59 months15.916.615.915.114.9:60 months or over65.164.665.265.765.1:Employment growth* (% change from previous year)-0.30.40.91.31.41.2Employment rate of women(% of female population aged 20-64)62.162.963.063.063.665.2Employment rate of men (% of male population aged 20-64)72.371.671.372.373.473.7Employment rate of older workers* (% of population aged 55-64)41.742.744.045.448.349.9Part-time employment* (% of total employment, aged 15-64)24.323.724.324.724.524.6Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)8.18.69.09.110.410.5Participation in activation labour market policies(per 100 persons wanting to work)41.945.049.766.7::Transition rate from temporary to permanent employment(3-year average)38.038.335.635.437.8:Youth unemployment rate (% active population aged 15-24)23.723.222.120.119.316.6Gender gap in part-time employment (aged 20-64)33.832.832.332.631.131.7Gender pay gap1 (in undadjusted form)7.56.66.56.16.0:Education and training indicators201320142015201620172018Adult participation in learning(% of people aged 25-64 participating in education and  training)6.97.46.97.08.5:Underachievement in education2::20.1:::Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)42.743.842.745.645.9:Variation in performance explained by students' socio-economic status3::19.3::: 
 
 
 
 
 
 
 
 
 
 
 
C. Standard Tables 

Table C.4: 

Social inclusion and health indicators 

Notes: 
* 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 

77 

201220132014201520162017Expenditure on social protection benefits* (% of GDP)Sickness/healthcare8,28,38,47,87,5:Disability2,12,22,32,42,4:Old age and survivors11,511,811,812,812,7:Family/children2,12,22,22,12,1:Unemployment3,43,43,43,12,6:Housing0,20,20,30,20,2:Social exclusion n.e.c.0,70,70,60,60,7:Total28,328,829,029,028,2:of which: means-tested benefits1,51,51,41,41,5:General government expenditure by function (% of GDP, COFOG)Social protection19,520,119,820,020,0:Health7,98,08,17,67,4:Education6,26,46,36,46,4:Out-of-pocket expenditure on healthcare (% of total health expenditure)17,317,517,216,515,9:Children at risk of poverty or social exclusion (% of people aged 0-17)*22,821,923,223,321,622,0At-risk-of-poverty  rate1 (% of total population)15,315,115,514,915,515,9In-work at-risk-of-poverty rate (% of persons employed)4,54,44,84,64,75,0Severe material deprivation rate2  (% of total population)6,35,15,95,85,55,1Severe housing deprivation rate3, by tenure statusOwner, with mortgage or loan0,10,20,40,10,81,2Tenant, rent at market price2,23,43,03,05,59,0Proportion of people living in low work intensity households4 (% of people aged 0-59)13,914,014,614,914,613,5Poverty thresholds, expressed in national currency at constant prices*108151116411140110611131711364Healthy life years (at the age of 65)Females11,010,911,011,011,4:Males10,610,811,011,210,3:Aggregate replacement ratio for pensions5 (at the age of 65)0,50,50,50,50,50,5Connectivity dimension of the Digital Economy and Society Inedex (DESI)6::69,374,675,877,9GINI coefficient before taxes and transfers*49,348,749,549,850,350,1GINI coefficient after taxes and transfers*26,525,925,926,226,326,0 
 
 
 
 
 
 
 
 
 
C. Standard Tables 

Table C.5: 

Product market performance and policy indicators 

Notes: 
1 Value added in constant prices divided by the number of persons employed.       
2 Compensation of employees in current prices divided by value added in constant prices.       
3 The methodologies, including the assumptions, for this indicator are shown in detail here: 
http://www.doingbusiness.org/methodology.        
4 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 
75% % and above, two if received below 75%, three if refused or rejected and treated as missing values if the application is 
still pending or don't know.       
5 Percentage population aged 15-64 having completed tertiary education.       
6 Percentage population aged 20-24 having attained at least upper secondary education.       
7 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       
8 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). 

78 

Performance indicators201220132014201520162017Labour productivity per person1 growth (t/t-1) in %Labour productivity growth in industry-0.302.856.195.080.520.00Labour productivity growth in construction0.25-0.452.062.22-0.85-2.07Labour productivity growth in market services-0.450.31-0.120.540.270.76Unit Labour Cost (ULC) index2 growth (t/t-1) in %ULC growth in industry4.010.24-3.49-4.690.152.98ULC growth in construction1.500.930.46-2.730.933.54ULC growth in market services3.241.420.610.02-0.300.59Business environment201220132014201520162017Time needed to enforce contracts3 (days)505505505505505505Time needed to start a business3 (days)4.04.04.04.04.04.0Outcome of applications by SMEs for bank loans40.680.540.360.460.310.37Research and innovation201220132014201520162017R&D intensity2.272.332.392.462.552.58General government expenditure on education as % of GDP6.206.406.306.406.40:Employed people with tertiary education and/or people employed in science and technology as % of total employment505052515153Population having completed tertiary education5313233333336Young people with upper secondary education6838384848586Trade balance of high technology products as % of GDP0.140.330.470.570.530.41Product and service markets and competition200320082013OECD product market regulation (PMR)7, overall1.641.521.39OECD PMR7, retail4.684.564.06OECD PMR7, professional services2.522.472.47OECD PMR7, network industries82.842.081.84 
 
 
 
 
 
 
 
 
C. Standard Tables 

Table C.6:  Green growth 

Notes: 
All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2010 prices)         
          Energy intensity: gross inland energy consumption (Europe 2020-2030) (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 use of industry (in kgoe) divided by gross value added of industry, including construction 
(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 use in transport sector including international aviation, (in kgoe) divided by transport 
industry gross value added (in 2010 EUR)         
Transport carbon intensity: GHG emissions in transport sector divided by gross value added of the transport activities        
Energy import dependency: net energy imports divided by gross inland energy consumption plus consumption of 
international maritime bunkers         
Aggregated supplier concentration index: Herfindahl-Hirschman index for net imports of crude oil and NGL, natural gas and 
hard coal. Smaller values indicate larger diversification and hence lower risk. 
Diversification of the energy mix: Herfindahl-Hirschman index of the main energy products in the gross inland consumption of 
energy 
* 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) 

79 

Green growth performance201220132014201520162017MacroeconomicEnergy intensity kgoe / €0.150.150.140.140.150.1Carbon intensity kg / €0.260.260.250.250.25-Resource intensity (reciprocal of resource productivity)kg / €0.420.410.390.380.360.38Waste intensity kg / €0.14-0.15-0.16Energy balance of trade % GDP-5.0-4.5-3.8-2.7-2.2-2.5Weighting of energy in HICP%11.711.310.911.09.29.0Difference between energy price change and inflation %3.3-5.8-8.0-5.50.47.3Real unit of energy cost% of value added17.816.516.217.017.9-Ratio of environmental taxes to labour taxesratio0.090.080.090.090.10-Environmental taxes% GDP2.22.12.12.12.22.2Sectoral Industry energy intensity kgoe / € 0.140.140.130.130.130.13Real unit energy cost for manufacturing industry excl. refining% of value added25.924.024.025.326.8-Share of energy-intensive industries in the economy% GDP8.48.69.09.89.78.7Electricity prices for medium-sized industrial users€ / kWh0.110.110.110.110.110.11Gas prices for medium-sized industrial users€ / kWh0.030.040.030.030.030.02Public 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%53.452.853.853.553.553.7Share of GHG emissions covered by ETS*%39.137.938.538.037.1-Transport energy intensitykgoe / €0.500.510.520.540.550.5Transport carbon intensitykg / €1.281.301.331.381.39-Security of energy supplyEnergy import dependency%75.877.179.883.975.474.8Aggregated supplier concentration indexHHI14.116.214.414.014.9-Diversification of energy mixHHI0.270.270.280.280.270.3 
 
 
 
 
 
ANNEX D: INVESTMENT GUIDANCE ON COHESION POLICY 

FUNDING 2021-2027 FOR BELGIUM 

Building  on  the  Commission  proposal  for  the  next  Multi-Annual  Financial  Framework  for  the  period 
2021-2027  of  2  May  2018  (COM  (2018)  321),  this  Annex  D  presents  the    preliminary  Commission 
services views on priority investment areas and framework conditions for effective delivery for the 2021-
2027 Cohesion Policy. These priority investment areas are derived from the broader context of investment 
bottlenecks,  investment  needs  and  regional  disparities  assessed  in  the  report.  This  Annex  provides  the 
basis for a  dialogue  between Belgium and the Commission services in view of the programming of the 
cohesion policy funds (European Regional Development Fund and European Social Fund Plus). (91) 

Policy Objective 1: A Smarter Europe – Innovative and smart industrial transformation 

The  country  is  a  strong  innovator  thanks  to  its  attractive  research  centres.  However,  attracting  young 
people  in  digital/science  technology  careers  remains  a  challenge.  There  is  scope  for  strengthening 
innovation  performance  and  fostering  productivity  growth  by  identifying  smart  specialisation  areas 
based on regional needs and potential. As well, there is scope for improvement by increasing the uptake 
of Research, Development and Innovation outcomes in concrete products and marketed items, enhancing 
research and innovation capacities and the  uptake  of advanced technologies. Territorial specificities in 
the  three  regions  (Brussels,  Flanders  and  Wallonia  with  a  potential  focus  on  sub-regional  dimensions) 
will be taken into account when developing solutions to sustain Research, Development and Innovation 
in Belgium. 

Priority needs(92) have therefore been identified to : 

 

invest  in  the  growth  of  firms  through  support  to  their  activities,  both  in  a  material  aspect  e.g. 
development capacities, living-labs, test-beds, joint interregional and cross-border projects and in a 
more immaterial aspect (networking, cluster development, transnational cooperation); 

  develop the capacities of research facilities in the orientation of research and the commercialisation 

of their outcomes; 

 

facilitate the creation of links and collaborations between research centres, universities and small and 
medium-sized enterprises in order to have the same links with small and medium-sized enterprises as 
the ones existing with large companies; 

 

reinforce marketing and product finalisation of research; 

  stimulate integrated cooperation in new value chains across regions and across borders. 

(91)  This Annex is to be considered in conjunction with the EC Proposal for a Regulation of the European Parliament and of the 
Council on the European Regional Development Fund and on the Cohesion Fund COM(2018) 372 and the EC Proposal for a 
Regulation of the European Parliament and of the Council on the European Social Fund Plus COM(2018) 382, in particular as 
regards the requirements for thematic concentration and urban earmarking outlined in these proposals. 

(92)  The intensity of needs is classified in three categories in a descending order - high priority needs, priority needs, needs. 

80 

 
 
                                                           
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Belgium 

The  potential  of  Belgian  small  and  medium-sized  enterprises  and  innovation  start-ups  is  not  fully 
exploited  and  there  has  been  a  downward  trend  in  the  number  of  newly  created  Innovation  and 
Communication Technology start-ups in the last 5 years.  

Priority investment needs have therefore been identified to enhance growth and competitiveness of small 
and  medium-sized  enterprises  and  in  promoting  development  of  skills,  digitalisation  (especially  in 
Wallonia) and new start-ups in line with the smart specialisation strategy, to: 

 

reinforce access to finance and advanced business services for small and medium-sized enterprises to 
create a boost for the establishment of new firms;  

  assist  small  and  medium-sized  enterprises  and  provide  support  to  start-ups  in  the  development  of 

new business models; 

  develop small and medium-sized enterprises’ and start-ups’ skills and capacities in the exportation of 

their products and services; 

  develop skills in higher education and research institutions and closer collaboration with small and 

medium-sized enterprises and start-ups to support their business needs mentioned above. 

Although  Belgium  improved  its  digital  performance  in  the  private  and  public  sector  over  the  last  few 
years, it still falls short of other countries. With a good level of fixed and mobile connectivity, there is an 
opportunity to move to very-high capacity networks in order to provide new services to both citizens and 
businesses.  The  level  of  digital  skills  is  good  but  stagnating,  showing  that  more  than  one  third  of  the 
labour  force  has  insufficient  digital  skills.  Priority  needs  have  therefore  been  identified  to  reap  the 
benefits of digitisation for citizens, companies and governments, to: 

  strengthen  the  capacity  of  the  industry  (including  small  and  medium-sized  enterprises)  to  adapt  to 
digital  transformation,  exploit  the  potential  of  digitalisation  and  increase  the  Information  and 
Communication Technology uptake within the private and public sector; 

  promote  skills  development  for  smart  specialisation,  industrial  transition  (Wallonia  is  one  of  the 

regions chosen in the pilot phase for regions in industrial transition) and entrepreneurship.  

Policy Objective 2: A low carbon and greener Europe  – Clean and fair energy transition,  Green 
and blue investment, circular economy, climate adaptation and risk prevention 

Belgium is significantly above the European Union average in circular (secondary) use of material and 
priority  needs  have  therefore  been  identified  to  reinforce  the  already  existing  measures  in  favour  of 
circular economy.  

Belgium does not fully make better use of its potential to become a low-carbon innovation leader. High 
priority investment needs have therefore been identified to decrease energy consumption, to increase the 
share of low carbon and clean energy production, and to continue to develop circular economy, where 
Belgium is performing well, in particular by: 

  encouraging energy efficient renovations of public and residential buildings, with a particular focus 

on the disadvantaged; 

  encouraging  energy  efficiency  in  small  and  medium-sized  enterprises,  provided  that  energy 
efficiency  is  the  primary  objective  of  the  measure  with  a  particular  focus  on  addressing  energy 

81 

 
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Belgium 

poverty;; 

  promoting  eco-innovation  and  circular  economy  and  related  skills  in  small  and  medium-sized 

enterprises; 

  encouraging the use of renewable energy in heating and cooling; 

  promoting small-scale electricity generation based on renewable energy; 

 

investing in the adaptation to climate change, implementation of the national adaptation strategy and 
action  plan,  reinforced  research  into  the  impacts  of  climate  change;  and  enhanced  integration  of 
climate change and disaster risk reduction. 

Policy  Objective  3:  A  more  connected  Europe  –  Mobility  and  regional  Innovation  and 
Communication Technology connectivity 

Belgium suffers from chronic road congestion, which has a negative  impact on climate and air quality.  
High  priority  needs  have  therefore  been  identified  to  develop  sustainable,  climate  resilient,  intelligent 
and  intermodal  national,  regional  and  local  mobility,  including  improved  access  to  Trans-European 
Transport Network and cross-border mobility, by: 

 

improving urban cross-border mobility, especially within the public transportation system to make it 
more efficient in order to shift individuals from cars to public transport; 

  digitalisation and decarbonisation of road transport (e.g. digitally connected roads, alternative  fuels 

infrastructure, including those facilitating integration of renewables); 

  promoting  sustainable  multimodal  urban,  urban/rural  and  rural  mobility  and  other  investments 
aiming  to  reduce  the  negative  externalities  of  transport,  in  particular  congestion,  emissions 
(pollutants, greenhouse gases, noise) and traffic accidents. 

Policy Objective 4: A more social Europe – Implementing the European Pillar of Social Rights 

Activity and employment rates are low and skills mismatches are high, in particular for the young, low 
skilled, and people with a migrant background. High priority investment needs have been identified  to 
improve  access  to  employment,  to  assess  and  anticipate  skills  needs  and  to  ensure  support  to 
labour market matching, transitions and mobility, and in particular to:  

  support active and preventive labour market measures and provide integrated tailor-made activation 
support to unemployed and inactive persons, including young people not in employment, education 
or training;  

  support  advocacy  and  awareness  measures  to  improve  hiring  practices  of  employers,  to  address 

discrimination, and prevent in-work poverty;  

  develop and implement comprehensive regional skills strategies;  

  develop policies and actions which support voluntary labour mobility across sectors and regions; 

  support  existing  and  new  business  incubators,  self-employment,  micro-enterprises,  business/jobs 

creation and social innovation. 

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D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Belgium 

Inadequate outcomes from the education system, characterised by strong inequalities and disparities, as 
well  as  low  participation  in  lifelong  learning  contribute  to  high  skills  mismatches.  High  priority 
investment needs have been identified to promote quality and inclusive education and training and 
to promote lifelong learning, and in particular to:  

  ensure  that  vocational  education  training  systems  are  relevant  to  labour  market  needs  and  are 

attractive to students and employers;  

  support the acquisition of key competences and 21st century skills (including digital skills) through 

education and training;  

  upgrade  infrastructure  and/or  equipment  for  early  childhood  education  and  care,  school  and 
vocational education and training and enhance supporting services for an inclusive education system; 

  develop the competences of teachers, trainers, researchers, and other staff in the sector;  

 

target outreach and support to individual (disadvantaged) learners to increase access, improve basic 
skill attainment, and increase completion at all levels of education and training;  

  enhance inclusive quality education and training for persons with disabilities;  

  promote and upgrade adult learning via upskilling and reskilling. 

Inequalities  of  opportunities  persist  between  different  populations  groups  (including  in  access  to 
healthcare).  People  with  disabilities  face  particularly  strong  multi-faceted  challenges.  High  priority 
investment needs have been identified to foster active inclusion, enhance access to services, including 
health-  and  long-term  care,  and  to  promote  the  socio-economic  integration  of  third-country 
nationals through integrated measures, and in particular to:  

  support access to affordable social services for activation and rehabilitation of disadvantaged people;  

  support  cross-border  healthcare  and  community-based  services  including  basic/primary  social  care 

facilities;  

  support  the  transition  from  institutional  care  to  independent  living  community-based  services  for 

dependent persons, in particular persons with disabilities;  

  support the re-skilling and upskilling of the healthcare and long-term care workforce; 

  overcome prejudice and discrimination in education and the labour market;  

  enhance  housing  and  social  services  for  the  inclusion  of  migrants  and  refugees  to  address  urban 

poverty and security and to foster educational and housing inclusiveness. 

Policy Objective 5 –  A Europe  closer  to  citizens  by  fostering  the  sustainable  and  integrated  
development  of urban, rural and coastal areas and local initiatives 

Uncoordinated  strategic  planning  and  insufficiently  developed  integrated  approaches  to  interventions 
could create numerous negative externalities and make it more difficult to address significant disparities 
at regional level. High priority investment needs have therefore been identified to foster the integrated 
social,  economic  and  environmental  development,  cultural  heritage  and  security  in  urban  areas, 

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D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Belgium 

including through community-led development, and in particular to: 

  support the revitalisation of the local economy and the adaptation of the labour forces in urban areas 

where industrial transition takes place; 

 

 

regenerate deprived urban areas as well as integrate people with a migrant background through the 
missing investments in education or health infrastructure; 

improve  multimodal  sustainable  mobility  in  urban  and  rural  areas,  where  obstacles  to  mobility 
negatively  affect  socio-economic  activities  and  where  polluting  emissions  from  transport  exceed 
acceptable limits;  

  contribute  to  innovative  projects  for  culture  and  tourism  in  the  urban  areas  in  the  frame  of  an 

integrated strategy.  

Factors for effective delivery of Cohesion policy 

  broader use of financial instruments and/or contributions to a Belgian compartment under InvestEU 

for revenue-generating and cost-saving activities; 

  continue the efforts of improving and strenghtening the effectiveness of the management and control 

bodies; 

  administrative  capacity  issues    need  to  be  addressed  in  relation  with  the  sustainability  of  the 

management and control bodies.  

 

take into account the lessons learnt in Wallonia during the implementation of the Commission pilot 
project on industrial transition; 

  strong  support  and  involvement  of  social  partners,  local  authorities  and  other  public  bodies  and 

stakeholders for effective implementation; 

  support to (Social) innovation and experimentation. 

84 

 
 
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