COMMISSION STAFF WORKING DOCUMENT Country Report Belgium 2020 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2020 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: 2020-02-26
Institutions: European Commission, Secretariat-General
Subjects: Belgium, economic situation, green economy, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 26.2.2020  SWD(2020) 500 final  COMMISSION STAFF WORKING DOCUMENT Country Report Belgium 2020 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2020 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(2020) 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 
3.3.  Labour market, education and social policies 

3.4. Competitiveness and Investment 
3.5.  Environmental sustainability 

Annex A: Overview Table 

Annex B: DSA statistical annex 

Annex C: Standard Tables 

Annex D: Investment guidance on Just Transition Fund 2021-2027 for Belgium 

Annex E: Progress towards the Sustainable Development Goals (SDGs) 

References 

LIST OF TABLES 

Key economic and financial indicators – Belgium 

Table 1.1: 
Table 2.1: 
Progress with the implementation of the 2019 CSRs 
Table 3.1.1:  Government size by subsector in 2021, (% of GDP) 
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 

Financial market indicators 

Headline social scoreboard indicators 

Table 3.4.1:  Distribution of competences between government tiers - Funding 
Table C.1: 
Table C.2: 
Table C.3: 
Table C.4: 
Table C.5: 
Table C.6: 

Product market performance and policy indicators 

Labour market and education indicators 

Social inclusion and health indicators 

Green growth 

1 

4 

8 

15 

19 

19 
30 
34 
50 
66 

72 

83 

84 

90 

91 

96 

14 
17 
22 

30 
63 
84 
85 
86 
87 
88 
89 

 
 
 
Table E.1: 

Indicators measuring Belgium’s progress towards the SDGs 

LIST OF GRAPHS 

Private indebtedness 

Deflated house price index 

External accounts developments 

Potential growth estimates and components 

Changes in merchandise export market share 

Employment growth by occupation, cumulative, thousands 

Graph 1.1:  GDP growth and components 
Graph 1.2: 
Graph 1.3: 
Graph 1.4: 
Graph 1.5: 
Graph 1.6: 
Graph 1.7: 
Graph 1.8:  Monetary and financial institutions lending to the non-financial private sector 
Graph 2.1:  Overall multiannual implementation of 2011-2019 CSRs to date 
Graph 3.1.1:  Breakdown of gross public debt 
Graph 3.1.2:  Evolution of primary expenditure 
Graph 3.1.3:  Evolution of public net capital stock 
Graph 3.1.4:  Public debt medium-term projections and scenarios (% of GDP) 
Graph 3.1.5:  Tax wedge on average wage, single earner (2018) 
Graph 3.2.1:  Evolution of households debt 
Graph 3.2.2:  Households indebtedness, selected indicators 
Graph 3.3.1:  Key labour market indicators 
Graph 3.3.2:  Number of jobseekers per vacancy, by region 
Graph 3.3.3:  Share of private sector salaried employment that is ill, by duration of the illness 
Graph 3.3.4:  Employment rates, by population groups and regions (2018) 
Graph 3.3.5:  Low wage traps for different social benefits (for a single earner household working at 

the minimum wage), (2019)) 

Graph 3.3.6:  Correlation between the transition rate (2018) and participation in ALMPs (2017) 
Graph 3.3.7:  STEM wage premium (as% of the wage of a non-STEM worker; average 2014-2017) 
Graph 3.3.8:  Potential wage and productivity growth by sector from increased training (2008-2017) 
Graph 3.3.9:  Job seniority by age bracket 
Graph 3.3.10:  Average PISA score for reading, by region, gender, type of programme and socio-

economic and migrant background 

Graph 3.3.11:  Self-reported unmet needs for medical examination by main reason declared ("Too 

expensive") and income quintile (2018 data, % quintile population, inter-quintile 

differences (Q1-Q5)) 
Graph 3.4.1:  Export market share 
Graph 3.4.2:  Market dynamism and competitiveness of goods exports for top-10 sectors (2000-

2018) 

Graph 3.4.3:  Productivity growth (2010 = 100) 
Graph 3.4.4:  Services content of manufacturing (in 2015) in percent 
Graph 3.4.5:  Unit labour cost decomposition 

2 

91 

8 
8 
9 
10 
11 
12 
12 
13 
15 
19 
20 
21 
24 
27 
33 
33 
34 
34 
35 
35 

37 
37 
38 
39 
40 

41 

45 
50 

50 
51 
51 
53 

 
 
 
Graph 3.4.6:  Employment in fast-growing enterprises in 50% most innovative industries and 

employment in all fast-growing enterprises, both as % of total employment, 2016 

Graph 3.4.7:  GDP per head, 2017 – Index EU=100 
Graph 3.5.1:  Contribution of non-ETS sectors (%, 2016) 
Graph 3.5.2:  Building stock energy consumption, KWh/m² (2016) 

LIST OF BOXES 

Box 2.1: EU FUNDS AND PROGRAMMES TO ADDRESS STRUCTURAL CHALLENGES AND TO FOSTER 

GROWTH AND COMPETITIVENESS IN BELGIUM 

Box 3.1.2: Unequal tax treatment of rental income taxation 

Box 3.3.3: The importance of skills in the Belgian labour market 

Box 3.3.4: Monitoring performance in light of the European Pillar of Social Rights 

Box 3.4.5: Investment challenges and reforms in Belgium 

57 
62 
67 
68 

18 
29 
46 
49 
56 

3 

 
 
 
 
 
EXECUTIVE SUMMARY 

skills 

Structural  reforms  and  targeted  investment 
should  contribute  to  more  sustainable  and 
inclusive  growth  in  Belgium.  Reforms  in  the 
areas  of  pensions,  corporate  and  labour  taxation, 
wage  indexation,  the 
labour  market  and  the 
business  environment  have  been  introduced  in 
recent years. Nevertheless, Belgium is still midway 
in  this  process  and  adopting  and  implementing  
further  reforms  is  needed  if  it  is  to  address 
remaining  challenges,  especially  in  the  context  of 
population  ageing  and  subdued  productivity 
growth.  Addressing 
low 
to 
innovation  diffusion,  as  well  as  barriers 
competition  in  the  product  and  services  market 
will  help  to  boost  productivity  growth.  Increasing 
the  still  relatively  low  labour  participation,  will 
also  have  a  positive  impact  on  public  finances. 
Improving  the  composition  and  efficiency  of 
public 
spending 
reviews,  could  create  room  for  an  increase  in  the 
share  of  growth-friendly  expenditure,  such  as 
public investment. However, while reforms can be 
pursued  at  regional  and  communities  level,  the 
protracted situation of a caretaker  government has 
led  to  an  almost  complete  stop  of  the  reform 
process at the federal level.(1)  

spending,  notably 

shortages, 

through 

employed  in  2019,  the  highest  figure  in  the  past  
10  years.  Recent  employment  growth  is  mainly 
concentrated among older workers and in the high 
skilled  and  –  to  a  lesser  extent  -  low-skilled 
professions. Wage and labour costs are expected to 
continue to grow  moderately  in the  coming  years. 
Combined  with  a  drop  in  unemployment,  wage 
increases  are  expected  to  support  growth  in 
households’  disposable  income,  which  has  been 
sluggish in recent years.  

The high level of public debt, combined with the 
structural  budget  deficit,  limits  the  fiscal  space 
available  in  case  of  an  economic  downturn. 
According  to  the  Commission's  2019  Autumn 
Forecast,  under  a  no-policy-change  assumption, 
is 
the  general  government  headline  deficit 
expected  to  widen  to  2.6%  of  GDP  in  2021, 
following  a  notable  improvement  in  2017  and 
2018 when the deficit was  at 0.7 % of GDP. Some 
tax reforms adopted in recent years are expected to 
weigh on revenues. Rising age-related expenditure, 
notably due to higher pension, long-term care and 
health  expenditure,  will 
the 
headline deficit. Public debt is set to remain high at 
around 100% of GDP. 

further  worsen 

labour 

shortages, 

Belgium  has  significant  investment  needs  in 
education, sustainable transport, energy, digital 
infrastructure  such  as  5G  and  social  housing. 
Belgium’s  commitment 
to  fully  phasing  out 
nuclear energy by 2025  means there  is a  need  for 
major  investment  in  power  generation,  as  well  as 
interconnection  capacity,  smart  grids  and  storage. 
Addressing 
especially  of 
employees with backgrounds and skills in science, 
technology,  engineering  and  mathematics,  will 
require  investment  in  the  training  and  education 
system.  Important  investments  are  on-going  in 
suburban 
signalling. 
Renovating the old building stock, which predates 
introduction  of  energy  norms,  will  help 
the 
Belgium  meet 
its  2020  and  2030  emission 
reduction  targets.  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,  and  the  reinforcement 
of certain  key enforcers and public bodies, would 
improve institutional governance. 

infrastructure  and 

rail 

Economic growth is set to gradually slow down. 
The economy grew at an average rate of 1.8% per 
year in the wake of the financial crisis although it 
has  been  trailing  behind  the  euro  area  average 
since  2015.  In  2019,  GDP  growth  is  expected  to 
have  stood  at  1.4%  of  GDP  against  1.2%  in  the 
euro  area.  Economic  activity 
to 
moderate  further  to  just  above  1%  in  the  near 
future.  According 
latest  Commission 
forecast,  private  consumption  is  set  to  continue 
driving  economic  growth,  supported  by  robust 
fundamentals  and  offsetting  a  slowdown 
in 
investment  growth.  Net  exports  are  forecast  to 
weigh  negatively  on  growth,  amid  subdued 
prospects of growth in world trade.  

is  forecast 

the 

to 

Employment growth remains robust. Almost 4.9 
to  have  been 
million  people  are  expected 

(1)  This  report  assesses  Belgium’s  economy  in  light  of  the 
European  Commission’s  Annual  Sustainable  Growth 
Strategy  published  on  17  December  2019.  In 
this 
document, Commission sets out a new strategy  on how to 
address  not  only  the  short-term  economic  challenges  but 
also  the  economy's  longer-term  challenges.  This  new 
economic agenda of competitive sustainability rests on four 
dimensions:  environmental  sustainability,  productivity 
gains, fairness and macroeconomic stability. 

4 

 
                                                           
Executive summary 

low.  Educational  outcomes 

specific groups. Moreover, the share of individuals 
living in low  work intensity  households continues 
to  be  high.  Participation  in  adult  learning  is 
show 
relatively 
considerable  variation  linked  to  socio-economic 
and  migration  background,  but  also  between 
schools. Compared to other countries, people with 
disabilities  are  more  at  risk  of  poverty  or  social 
exclusion.  Child  poverty  is  high,  in  particular  in 
Brussels. 

the  Europe  2020  strategy, 

Regarding Belgium’s progress towards its national 
the 
targets  under 
employment  rate  target  of  73.2 %,  although  the 
country  is  getting  closer,  is  still  out  of  reach. 
Belgium has reached the targets for 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. 

(SDGs),  Belgium 

In  terms  of  the  United  Nations’  Sustainable 
Development  Goals 
is 
progressing  relatively  well.  While  performing 
well  in  relation  to  good  health  and  well-being 
(SDG 3), and reduced inequalities (SDG 10),more 
efforts 
on 
underachievement  in  reading,  maths  and  science 
(SDG 4).(3)  

progress 

needed 

are 

to 

Overall,  Belgium  has  made  limited (2)  progress 
in  addressing 
country-specific 
the  2019 
recommendations,  due  in  part  to  the  lack  of 
government    with  full  powers  at  the  federal 
level.  

There  has  been  some  progress  in  the  following 
areas. 

  After 

low 

remaining 

for  several  years,  
government  entities 
  have  designed  and 
launched  major  multiannual  investment  plans 
in transport infrastructure. 

There  has  been  limited  progress  in  the  following 
areas. 

  There  is  still  ample  room  to  improve  the 
composition and efficiency of public spending, 
at all levels of government. 

in 

  Disincentives to work remain and there is still a 
the  effectiveness  of 
need 
to  strengthen 
activation  measures, 
for 
particular 
vulnerable groups. Reforms have been initiated 
to improve educational outcomes and make the 
education and training systems more inclusive, 
but  there  is  still  a  significant  amount  of  work 
ahead.  There  have  been  initiatives  to  address 
skills mismatches, but more needs to be done. 

  There  are  still  barriers  to  competition  in 

services. 

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

There has been no progress in the following area: 

  Coordination  of  fiscal  policies  of  all  levels  of 

government. 

Belgium  performs  well  on  a  number  of 
indicators  of  the  Social  Scoreboard  supporting 
the European Pillar of Social Rights,   although 
challenges  remain.  Belgium    scores  well  on 
gender  equality,  childcare  and  fair  working 
conditions.  Nevertheless,  a  number  of  Pillar 
principles  merit  attention.  The  employment  rate 
continues to be well below the EU average, mainly 
labour  market  outcomes  for 
driven  by  poor 

(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 

Regulatory barriers and insufficient investment 
in  infrastructure  networks  have  weighed  on 
productivity  growth.  Weak  labour  productivity 
growth can be observed both in manufacturing and 
services 
has 
underperformed.  Exit  and  entry  rates  of  firms  are 
among  the  lowest  in  the  EU,  in  particular  in 
services  sectors,  which  are  affected  by  high 
regulatory  burden.  The  combination  of  high 

Belgium 

sectors, 

where 

(3)  Within the scope of its legal basis, the European Semester 
can help drive national economic and employment policies 
towards the achievement of the United Nations Sustainable 
Development  Goals  (SDGs)  by  monitoring  progress  and 
ensuring  closer  coordination  of  national  efforts.  The 
present report contains reinforced analysis and monitoring 
on  the  SDGs.  A  new  annex  (ANNEX  E)  presents  a 
statistical  assessment  of  trends  in  relation  to  SDGs  in 
Belgium during the past five years, based on Eurostat’s EU 
SDG indicator set. 

5 

 
                                                           
                                                           
Executive summary 

employment  rate  is  particularly  low  for  some 
groups  such  as  low-skilled,  older  workers, 
people  with  a  migrant  background 
(in 
particular  non-EU  born  women)  and  people 
with  disabilities.  Disincentives 
to  work 
stemming from the taxation and social benefits 
systems  further  weaken  the  effectiveness  of 
active  labour  market  policies,  including  for 
those with a low earning potential.  

in 

in  professional, 

  A  shortage  of  adequate  skills  hampers 
potential  growth.  There  are  considerable 
technical  and 
shortages 
scientific  occupations.  The  mismatch  between 
the  skills  demanded  by  employers  and  those 
offered  by  jobseekers  leads  to  one  of  the 
the  euro  area. 
highest  vacancy  rates 
Education  and  training  systems  may  not  be 
delivering  all  the  skills  needed  in  the  labour 
market, in particular basic, language and digital 
skills. The shares of low and high achievers in 
basic  skills  show  that  the  Communities  have 
difficulties 
and 
combining  both 
excellence  in  their  education  and  training 
shortage  of  well-qualified 
systems.  The 
the  need  for 
teachers 
is  a  growing  concern. 
professionalisation 
and 
Reforms 
efficiency 
for 
effectiveness  could 
urgently  needed  investment.  Reforms,  such  as 
the 
the 
FrenchCommunity, to reverse the decline in the 
educational  outcomes  are  progressing  slowly 
and will take time to achieve their full impact. 
However,  participation 
learning 
remains  low,  with  a  potential  adverse  impact 
on  the  skills  mismatch.  Seniority  pay,  among 
other elements, contributes to low job mobility. 

increasing  and 

d’Excellence’ 

promoting 

in  adult 

resources 

release 

equity 

‘Pacte 

in 

is 

fairer, 

simpler 

  There  is  room  to  make  the  taxation  system 
greener, 
and  more 
sustainable.  Belgium  has  a  high  level  of 
taxation,  but  also  substantial  tax  expenditures. 
Their  extensive  use    makes  the  tax  system 
complex  for  businesses.  The  high  level  of 
taxation on labour weakens labour participation 
and  discourages 
learning.  The 
existence  of  the  ‘marital  quotient’  generates 
work  disincentives  for  second  earners.  Some 
features  of  the  taxation  system  for  real  estate 
hinder labour mobility and contribute to distort 
investment  choices  and  overinvestment  in  real 
estate. Environmental taxes have increased but 

lifelong 

regulation,  high  wage  costs  and  labour  market 
rigidities weighs on the retail sector's performance. 
In  spite  of  recent  reforms,  professional  and  craft 
services  continue  to  be  highly  regulated.  Belgium 
risks  lagging  behind  in  5G.  Weak  competition  in 
the telecommunication sector, in particular in fixed 
network, leads to higher prices. Belgium performs 
well in railway freight, port and rail infrastructure, 
but  scores  low  in  road  quality.  Growing  traffic 
volumes boosted by commuting subsidies like tax 
advantages  create  congestion  and  are  putting  land 
transport infrastructure under pressure while inland 
infrastructure investments remain low. Uncertainty 
remains over the opening of passenger rail services 
to competition.  

  Administrative 

burden,  weak 

policy 
coordination  and 
  highly  concentrated 
innovation  are  weighing  on  investment  and 
productivity  growth.  Belgium  performs  well 
in  innovation,  but  the  efficiency  of  the  high 
level of public support for business R&D is not 
proven,  as  overall  investment  is  high  but 
remains  concentrated  in  a  limited  number  of 
large  firms.  The  gap  between  the  best  and  the 
least  performing  firms  is  widening,  which 
insufficient  diffusion  of 
might  signal  an 
technological 
Ineffective 
advances. 
coordination  between  government  levels  and, 
ineffective  evaluations  processes  combined 
with  understaffing  of  key  enforcers  weigh  on 
the regulatory environment and the delivery of 
a  certain  number  of  policies.  The  State's  slow 
to  businesses  has  significantly 
payments 
deteriorated.  In  addition, 
long  delays  for 
building  permits,  a  costly  property  registration 
procedure and lengthy judicial proceedings are 
perceived  as  obstacles  hindering  business 
improvements, 
investment.  Despite  gradual 
insufficient  digitalisation  and 
lack  of 
resources  remain  a  challenge  for  the  justice 
system.  

  a 

job 

  In  spite  of  recent  reforms,  some  structural 
challenges  in  the  labour  market  remain 
unaddressed.  Recent  economic  growth  has 
been 
intensive.  The  employment  rate 
reached a long-time high of 69.7% in 2018 and 
the  unemployment  rate  fell  at  a  record  low  of 
5.5%  of  the  active  labour  force.  Nevertheless, 
the  labour  market  remains  characterised  by  a 
relatively  low  participation  rate  and  remaining 
regional  disparities  in  unemployment.  The 

6 

 
Executive summary 

and  to  ensure  the  low-carbon  transition.  . 
The Belgian National Energy and Climate Plan 
has  low  ambition  in  terms  of  energy  targets. 
Large public and private investment needs have 
been  identified  and  will  be  required  to  adapt 
mobility  solutions,  energy  production  and 
housing quality. Despite proactive policies, the 
building  sector  is  responsible  for  a  fifth  of 
emissions  in  Belgium,  notably  due  to  the  old 
age  of 
low 
renovation  rates.    Road  users  pay  around  43% 
(passenger) and 27% (freight) of their external 
.Intensive 
and  variable  infrastructure  costs 
agriculture, 
and 
relatively  high  population  density  exert  strong 
pressures on land and biodiversity.   

the  building  stock  and  still 

in  Flanders, 

especially 

  The 

low-carbon 

transition  may 

impact 
vulnerable  consumers,  notably 
through 
energy  prices,  and  employees  in  energy-
intensive  industries.  The  energy  bill  remains 
high for low revenues households, partly due to 
distribution  costs.  The  Commission’s  proposal 
for  a    Just  Transition  Mechanism  under  the 
next  multi-annual  financial  framework  for  the 
period  2021-2027,  includes  a  Just  Transition 
Fund, a  dedicated just transition scheme  under 
InvestEU, and a new public sector loan facility 
with  the  European  Investment  Bank.  It  is 
designed  to  ensure  that  the  transition  towards 
EU  climate  neutrality  is  fair  by  helping  the 
most affected regions in Belgium to address the 
social  and  economic  consequences.  Key 
priorities  for  support  by  the  Just  Transition 
Fund,  set  up  as  part  of  the  Just  Transition 
Mechanism,  are 
in  Annex  D, 
identified 
building  on  the  analysis  of  the  transition 
challenges outlined in this report. 

there is scope for further alignment with carbon 
emissions. The company car scheme continues 
to  provide  adverse  incentives  in  terms  of 
mobility.  

  There 

low 

in  order 

investment,  considered  key 

for 
the 
improving 
room 
is 
efficiency  of  public 
composition  and 
to  better  support 
spending, 
economic  growth.  The  structurally  low  level 
of  public 
in 
boosting  long-term  economic  potential,  has 
resulted  in  a  deterioration  of  the  public  net 
level  of  public 
capital  stock.  The 
investment  calls  for  an  in-depth  reflection  on 
the  quality  of  public  finances  through  the 
implementation  of  spending  reviews  across  all 
levels  of  government.  Moreover,  budgetary 
coordination is not sufficiently effective yet, as 
the  2013  cooperation  agreement  has  not  been 
fully  implemented.  Fiscal  rules  are  scarce  at 
and 
subnational 
Communities  have 
important  expenditure-
recurring tasks. 

level,  while  Regions 

  Belgium  faces  substantial  challenges 

in 
relation  to  the  medium-  and  long-term 
sustainability of its public finances. Concerns 
related  to  the  high  level  of  public  debt  and 
large age-related liabilities are compounded by 
the  deterioration 
in  Belgium’s  budgetary 
situation. The effective retirement age remains 
well  below  the  statutory  retirement  age,  in 
particular for civil servants. Spending on long-
term  care 
increase 
is  also  projected 
substantially over 2016-2070. 

to 

  Banks’  vulnerabilities  in  relation  to  the 
residential real estate market have deepened 
in a context of deteriorating credit standards 
and rising household debt. Faced with intense 
competition  on  prices,  which  squeezed  their 
margins,  banks  have  loosened  their  credit 
standards  to  increase  lending  volumes.  The 
National  Bank  of  Belgium  has  urged  the 
financial  sector  to  exercise  more  caution  in 
loans.  Though 
granting 
measures  have  been  taken,  the  design  of  the 
Belgian  macroprudential 
framework  could 
hamper the decision-making process.  

risky  mortgage 

  Belgium  faces  important  investment  and 
regulatory challenges for sustainable growth 

7 

 
1.  ECONOMIC SITUATION AND OUTLOOK 

Economic growth 

Growth  is  forecast  to  have  eased  to  1.4%  in 
2019 after a robust economic expansion of 1.5% 
in 2018. After growing at an average rate of 1.8% 
per  year  from  2014  to  2017,  economic  activity 
remained  robust  in  2018.  The  expansion  was 
driven  exclusively  by  rising  domestic  demand,  as 
household  consumption  increased  by  1.5%  and 
investment  by  4%.  Net  trade  weighed  negatively 
on  growth,  explaining  most  of  the  slowdown 
compared  to  2017.  According  to  the  Commission 
2020  Winter  Forecast,  economic  activity 
in 
Belgium is forecast to have eased to 1.4% in 2019 , 
due to weaker domestic demand compounded by a 
drag  from  net  export  and  inventories  (Graph  1.1). 
This  is  mostly  due  to  more  moderate  private 
consumption  growth  and  to  a  large  negative 
change in inventories.  

Graph 1.1:  GDP growth and components 

on exports while rising domestic demand supports 
imports. 

The  recent  revision (4)  of  national  accounts 
shows  that  domestic  consumption  played  a 
stronger role in the recent economic expansion. 
In 2019, the Belgian Institute of National Accounts 
published (Institut des comptes nationaux, 2019) a 
benchmark revision of its national accounts which 
slightly  revised  up  average  annual  economic 
growth  (+0.1pp  of  GDP  per  year  between  1995 
and  2017).  Private  consumption  was  revised  up, 
among others due to a better estimate  of  financial 
services,  housing  expenditure  and  e-commerce 
spending. 

Graph 1.2: 

Potential growth estimates and components 

Source: European Commission 

Economy  activity 
is  forecast  to  moderate 
further  in  2020  and  2021.  According  to  the 
Commission  2020  Winter  Forecast,  economic 
activity  in  Belgium  is  forecast  to  slow  down 
further  to  1.2%  in  2020  and  to  1.0%  in  2021 
(Graph  1.1).  Domestic  demand  growth  is  forecast 
to  rise  slightly  compared  to  2019  as  household 
consumption picks up pace, offsetting a slowdown 
in  investment  growth.  Net  trade  is  projected  to 
make  a  negative  contribution  to  growth  in  2020 
and  2021,  as  subdued  world  trade  growth  weighs 

Source: European Commission 

The moderate growth outlook is consistent with 
the  current  estimate  for  potential  growth.  In 
recent years, actual economic output has exceeded 
potential  growth,  estimated  at  around  1.5%  over 
2017-2019 (Graph 1.2), bringing the output gap to 
a positive 0.8% of GDP in 2018. Potential growth 
bottomed out at around 0.8% in 2013 and has since 
been  trending  upward,  although  it  remains  below 
the  pre-2009  estimates.  This  is  a  feature  Belgium 
shares with several Member States and, in general, 
the  euro  area  as  whole.  Potential  growth  is 

(4)  In  line  with  the  recommendations  issued  by  Eurostat, 
Belgium,  like  most  other  EU  countries,  carried  out  a 
benchmark  revision  of  its  national  accounts  in  2019, 
covering statistical series dating back to 1995. In principle, 
this  kind  of  revision  takes  place  every  5  years  and  falls 
under normal procedures for improving the statistics. 

8 

-1.5-1.0-0.50.00.51.01.52.02.53.03.510111213141516171819'20'21'%, ppsNet exportsConsumptionInvestment (GFCF)Inventories investmentReal GDP growth0.00.51.01.52.02.505060708091011121314151617181920212223Rate of change y-o-y (%)Capital Accumulation ContributionTFP ContributionTotal Labour (Hours) ContributionPF Potential Growth 
  
 
  
                                                           
1. Economic situation and outlook 

2019  (1.8%),  in  line  with  the  electoral  cycle.  It  is 
forecast  to  grow  by  6.2%  in  2020  and  8.2%  in 
2021.  

External trade is forecast to weigh negatively on 
growth,  amid  subdued  world  trade  growth 
prospects.  Net 
trade  has  made  a  negative 
contribution  to  growth  on  average  since  2010, 
most  notably  in  2016  and  2018.  The  recovery  of 
the  goods  balance  in  volume  since  2009,  though 
notable,  has  been  insufficient  to  fully  offset  the 
steady  decline  in  the  balance  of  services  in 
volume,  which  became  negative  in  2018.  The 
subdued  growth  of  world  trade,  notably  among 
Belgium’s  main  trading  partners  in  the  EU,  has 
contributed  to  these  developments.  In  addition, 
Belgium  has  lost  export  market  shares  over  the 
past  decade  (Graph  1.3),  both  in  goods  and 
services,  notably  due  to  the  lower  dynamism  of 
imports in its relevant export markets (see Section 
3.4).  This  trend  is  expected  to  continue  in  2020-
2021  and  be  compounded  by  rising  unit  labour 
costs,  which  might  negatively  affect  Belgium’s 
price competitiveness. 

Graph 1.3:  Changes in merchandise export market share 

projected  to  broadly  stabilise  at  1.5%  until  2021 
and then decrease to about 1.1%. This is due  to a 
much  weaker  contribution 
labour,  as 
population  ageing  weighs  on  the  growth  of  the 
labour force. 

from 

is  set 

through 

Private  consumption,  supported  by  robust 
to  continue  driving 
fundamentals, 
economic  growth.  Private  consumption  grew  by 
1.5 %  on  average  in  2013-2018,  broadly  in  line 
with the trend observed since the early 2000s. This 
was  achieved  despite  modest  increases  in  real 
disposable  income  until  2016,  which  reflected  a 
wage  moderation  policy  aimed  at  correcting  for 
past losses in cost competitiveness. Income growth 
has  picked  up  since  2016  and  is  expected  to  rise 
further as wages are being adjusted for the cost of 
living 
real  wage 
increases  have  been  agreed  between  social 
partners,  while  income  tax  cuts  have  also  been 
introduced since 2016 as part of a multiannual tax 
reform.  A 
labour  market 
performance  is  expected  to  continue  contributing 
to  growth 
in  households’  purchasing  power. 
However,  deteriorating  consumer  confidence  is 
estimated 
to  have  slowed  down  household 
consumption  growth  in  2019  to  1.1 %.  Combined 
with a rise  in disposable income, this  has led to a 
pick-up  in  the  households  saving  rate.  Household 
consumption  is  forecast  to  rise  by  1.3 %  in  2020 
and 2021, which will stabilise the saving rate 

indexation.  Some 

relatively 

strong 

the  need 

Investment  growth  has  been  strong  in  recent 
years,  but  is  forecast  to  moderate.  Investment 
grew  by  4.0%  in  2018,  slightly  above  the  yearly 
average growth of 3.6% observed since 2014, and 
is  expected  to  have  grown  by  3.4%  in  2019. 
Business investment growth has been broad-based, 
underpinned  by  favourable  financing  conditions 
and substantial corporate liquidity reserves. It also 
reflected 
to  address  high  capacity 
utilisation  rates.  However, the investment cycle is 
forecast  to  turn  amid  deteriorating  confidence 
indicators  and  weaker  order  books,  despite  a 
recovery  in  January  2020.  Household  investment 
growth has remained relatively contained in recent 
years  with  an  average  2.2%  annual  growth  rate 
between  2013  and  2018.  It  is  estimated  to  have 
picked up significantly to 6.5% in 2019 amid very 
favourable financing conditions, and is forecast to 
return to its past growth trend in 2020-2021. Public 
investment  increased  markedly  in  2018  (13.3%) 
and is estimated to have grown very moderately in 

9 

Source: European Commission 

Labour market and social developments 

Employment  growth remains robust in spite of 
a slowdown in economic activity throughout the 
last  year.  In  2019,  employment  growth  remained 
robust  at  1.4%,  but  is  likely  to  be  restrained  by  a 
slowdown in economic growth due to a weakening 
of  the  world  economy.  More  than  4.7  million 

-14%-12%-10%-8%-6%-4%-2%0%2%4%6%Gains within extra EUGains within intra EUExposure to extra EUExposure to intra EUTotal market share change    
1. Economic situation and outlook 

substantially 

reducing  market 

Income  inequality  and  poverty  are  below  the 
EU  average. The  income  quintile  ratio  (S80/S20) 
in  2018  remained  constant  at  3.8,  well  below  the 
EU  average  of  5.1  in  2017.  The  inequality-
reducing  impact  of  the  tax  and  benefit  system  is 
high, 
income 
inequality. An effective tax and benefit system also 
keeps the risk of poverty or social exclusion under 
the  EU  average  (19.8%  in  2018  compared  to  EU 
average  of  21.9%),  though  the  impact  of  social 
transfers  keeps  declining.  Challenges  remain  in 
inequality  of  opportunity:  the  risk  of  poverty  or 
social  exclusion  for  children  with  low  educated 
parents  (65.1%)  remains  very  high  especially  in 
comparison  with  children  of  higher  educated 
parents (5.6%). Opportunities are also hindered by 
challenges in education and healthcare (see Section 
3.3). 

Prices, wages and costs 

to 

in  2020.  Headline 

Inflation decelerated in 2019 and is expected to 
rise  moderately 
inflation 
measured  by  the  harmonised  index  of  consumer 
prices  fell  from  2.3 %  in  2018  to  1.2%  in  2019, 
driven by lower energy and food prices. The prices 
of  services  and  non-energy  industrial  goods  grew 
at a slightly higher pace, supporting core inflation. 
the  Commission  2020  Winter 
According 
Forecast, headline inflation is expected to pick-up 
slightly  to  1.4%  in  2020  and  to  1.5%  in  2021, 
reflecting  higher  food  and  services  prices.  Core 
inflation is also expected to pick up from 1.6 % in 
2019 to 1.7 % in both 2020 and 2021. The inflation 
gap  compared  to  the  euro  area  average  has 
continued  to  narrow,  from  1.6  pp  in  2016  and 
closed in 2019, but is forecast to increase  slightly 
to 0.1 pp in 2020 and 2021. 

2018, 

weaker 

suggesting 

Belgium’s real effective exchange rate increased 
in 
price 
competitiveness.  The  real  effective  exchange 
rate   (5)  aims  to  assess  a  country’s  price  or  cost 
competitiveness relative to its main competitors in 
international  markets,  which  depend  not  only  on 
exchange  rate  movements  but  also  on  cost  and 
price  trends.  Efforts  to  improve  Belgium’s  price 
competitiveness, notably through wage moderation 
policies,  helped  decrease 
real  effective 
exchange  rate  from  2014  to  2016.  However, 

the 

(5)  Deflated  by  the  unit  labour  cost  -  37  trading  partners 

industrial countries. 

people  are  expected  to  be  employed  in  2019,  the 
highest  figure  in  the  past  10  years.  Employment 
growth 
is  mainly  concentrated  among  older 
workers, in the high skilled and – to a lesser extent 
- low skilled professions (Graph 1.4).  

Graph 1.4: 

Employment growth by occupation, 
cumulative, thousands 

Source: Eurostat 

the 

increased 

outcomes 

population, 

vary  widely 

Despite  the  overall  improvement  in  the  labour 
across 
market, 
job 
population  groups  and  regions.  Strong 
creation  combined  with  a  limited  increase  in  the 
working-age 
the 
employment  rate  to  70.7%  in  2019Q3,  one  of  the 
highest  levels  ever.  However,  the  employment 
rate,  which  is  held  back  by  a  low  activity  rate, 
remains  below  the  Europe  2020  objective  of 
73.2%.  Despite  recent  improvements  for  some 
groups,  employment  rates  remain  particularly  low 
for 
low-skilled,  people  with  migrant 
background,  older  workers  and  people  with 
disabilities. The unemployment rate has continued 
to  decrease  and  reached  5.2% 
in  2019Q4. 
However, there remain large regional disparities in 
labour  market 
the 
outcomes. 
unemployment rate  ranged from 3.4% in Flanders 
to 13.2% in Brussels. Further disparities exist with 
regard  to  long-term  unemployment.  In  Flanders 
33.9%  of  all  unemployment 
long-term 
unemployment,  compared  to  56.9%  in  Brussels 
and  56.2%  in  Wallonia.  The  share  of  temporary 
contracts  increased  to  9.8%  in  2018,  which  is  1.7 
pp. higher than in 2014, but below the EU average 
of 13.2%. 

2018, 

In 

is 

10 

-100-50050100150200250300350201020112012201320142015201620172018High skilledMedium skilledLow skilled  
                                                           
1. Economic situation and outlook 

and  has  been  negatively  affected  by  the  relatively 
weak  trade  balance.  The  goods  balance  improved 
gradually  and  was  positive  from  2015  to  2017, 
although  changes  in  oil  prices  go  a  long  way  in 
explaining  this.  In  contrast,  the  services  balance 
has  recorded  a  steady  deterioration.  The  primary 
income  balance  remained  positive  despite  a 
significant  deterioration  in  the  net  investment 
income  balance,  the  latter  stemming  partly  from 
higher revenue paid to foreign direct investors than 
that  received  from  the  rest  of  the  world.  From  a 
sectoral  perspective, 
the  deteriorating  savings 
position of corporations, in particular non-financial 
corporations, was the biggest reason for the decline 
of the net lending balance in 2018. 

Graph 1.5: 

External accounts developments 

Source: European Commission 

Belgium  has  a  net  creditor  position  in  relation 
to  the  rest  of  the  world.  The  balance  between 
external  financial  assets  and  liabilities  accounted 
for  41.3%  of  GDP  in  2018,  one  of  the  highest 
figures  in  the  EU.  This  surplus  has  decreased 
compared to 2017, when it reached 56.7% of GDP, 
mostly  due  to  valuation  effects.  Belgium’s  net 
creditor position has its origin in the private sector, 
in  particular  Belgian  households,  which  owned 
gross  assets  — 
foreign  and  domestic  — 
representing  289%  of  GDP  in  2018,  with  a  net 
financial asset position of 225% of GDP. 

countries  with  similar  characteristics.    For  a  detailed 
explanation, see Coutinho et al. (2018): "Methodologies for 
the  Assessment  of  Current  Account  Benchmarks", 
European Economy Discussion Paper 86. 

Belgium’s  price  competitiveness  appears  to  have 
weakened as the rate  increased in 2017 and 2018, 
amid rising inflation and unit labour costs.   

Wage growth is expected to remain moderate in 
the coming years. In the period 2019-2021, labour 
costs are expected to grow on average by 1.9% per 
year. The most important driver is inflation, which 
is passed on to wages via the system of automatic 
wage indexation. In addition, it is assumed that the 
maximum  margin  of  1.1%  for  negotiated  wage 
increases  in  the  period  2019-2020  will  be  fully 
used  (see  Section  3.4).  Real  wage  growth  has 
increased  slightly  by  0.3%  in  2018,  from  0.1%  in 
2017, 
the  negative  growth 
recorded between 2013 and 2016. Combined  with 
a  decline  in  unemployment,  wage  increases  are 
expected 
in  disposable 
household income, which has been sluggish in the 
past  years.  According  to  the  Commission  autumn 
Forecast, unit labour costs are expected to continue 
growing  by  1.8%  per  year  on  average,  slightly 
above that of the euro area (1.6%).  

to  enhance  growth 

in  contrast  with 

in 

slowdown 

productivity 

growth 
The 
continues.  Large  private  capital  accumulation,  a 
highly  skilled  workforce  and  strong  innovation 
performance  in  some  sectors  (pharmaceuticals, 
to  a 
minerals,  chemicals)  have  contributed 
relatively  high  level  of  productivity.  However,  as 
explained  in  previous  country  reports  (European 
Commission, 2019) labour productivity has grown 
very  little  in  the  past  decade,  broadly  flattening 
since  2015.  As  in  other  advanced  economies,  this 
is  largely  due  to  the  growing  importance  of 
services in the economy and to policies to increase 
the  participation  rate  (including  by  the  “service 
vouchers” measure). Policies to support total factor 
productivity growth are therefore expected to play 
an  important  role.  Productivity  is  discussed  in 
Section 3.4. 

External accounts 

The current account balance is expected to have 
remained  negative  in  2019.  Belgium’s  current 
account balance fell from 1.2% of GDP in 2017 to 
-1.0%  of  GDP  in  2018,  and  is  forecast  to  remain 
negative  at  - 0.8%  of  GDP  in  2019  (Graph  1.5). 
The  current  account  balance  is  below  its  norm (6) 

(6)  The  CA  'norm',  or  benchmark,  of  a  country  can  be 
considered  as  the  usual  CA  balance  that  prevails  in 

11 

-6-4-202460910111213141516171819*% of GDPCapital accountSecondary income balancePrimary income balance  Trade balance - services  Trade balance - goodsTrade balanceCurrent account balance (CA)                                                           
    
                                                                                   
1. Economic situation and outlook 

disposable income. Household debt has increased 
slightly to 59.7% of GDP, from 58.9% of GDP in 
2017. It accounted for 104.1% of gross disposable 
income  in  2018,  up  from  102.7%  in  2017.  This 
remains  below  what  fundamental  drivers  would 
suggest is sustainable (see Section 3.2).  However, 
it continues to rise above the level of the prudential 
benchmark (i.e. the level generally associated with 
heightened  risks  of  banking  crisis).  In  contrast, 
households’  debt  still  account  for  a  relatively 
modest share of their financial assets, at 21.2% in 
2018, due to a very favourable aggregate net asset 
position.  

Graph 1.7:  Deflated house price index, index 2002Q1=100 

Private indebtedness 

linked 

to  cross-border 

Private  debt  was  relatively  high  at  179 %  of 
GDP in 2018. The bulk of it is constituted by non-
financial  corporate  debt,  at  118.8 %  of  GDP  in 
2018  (Graph  1.6),  a  much  higher  level  than  what 
fundamental  drivers  would  suggest.  Non-financial 
corporation  debt  is  also  above  the  prudential 
benchmark (i.e. the level generally associated with 
heightened  risks  of  banking  crisis).  Most  of  the 
increase  since 2007, when non-financial corporate 
debt accounted for a more moderate 88 % of GDP, 
intra-group 
has  been 
lending,  which  is  included  in  the  consolidated 
figures 
liabilities 
in  national  accounts.  The 
stemming  from  intra-group  lending  are  estimated 
at  around  62.8 %  of  GDP  in  2018  and  therefore 
push  up  the  debt-to-GDP  ratio.  However,  these 
liabilities  are  matched  by  an  almost  equivalent 
amount  of  assets  and  thus  bear  minor  risks. 
Excluding intra-group lending, the debt of Belgian 
non-financial  corporations  is  actually  close  to  the 
various  benchmarks,  at  about  60 %  of  GDP  in 
2018  (National  Bank  of  Belgium  2019,  p  110), 
suggesting  that  deleveraging  needs  are  actually 
more modest. Cross-border intra-group lending has 
been stimulated by the notional interest deduction, 
an allowance for corporate equity within corporate 
income  taxation.  Nevertheless,  recent  changes 
made  to  the  notional  interest  scheme  are  likely  to 
render it less interesting for corporations. 

Graph 1.6: 

Private indebtedness 

Source: European Commission 

Housing  prices  have  increased  moderately  in 
recent  years.  Real  house  prices,  as  measured  by 
the  house  price  index,  have  increased  by  1.1% 
year-on-year  as  of  2019  Q2,  broadly  in  line  with 
their evolution in recent years (1.2% per year since 
2015).  This  moderate  expansion  follows  a  period 
of strong growth of about 5% per year from 1998 
to 2007. Over the past few years, Belgian housing 
prices have grown much more slowly than those in 
neighbouring  countries  (Graph  1.7).  Nevertheless, 
some indicators point to overvaluation risks in the 
Belgian residential real estate  market (see Section 
3.2). 

Credit growth has remained robust and broad-
based. Total net credit to the non-financial private 
sector  accounted  for  4.5%  of  GDP  on  a  yearly 
basis  as  of  2019  Q2,  slightly  below  the  level 
recorded  in  2018  but  above  the  average  annual 

Source:  

Household  debt  increased  slightly  and  remains 
moderate,  both  as  a  share  of  GDP  and  of 

12 

020406080100120140160180200101112131415161718% of GDPHouseholdNon financial corporationsPrivate sectorPrivate sector EU28608010012014016018020002Q103Q104Q105Q106Q107Q108Q109Q110Q111Q112Q113Q114Q115Q116Q117Q118Q119Q12002= 100ELIEESITPTDEFRBE    
  
1. Economic situation and outlook 

worsened  the  headline  deficit.  Under  a  no-policy-
change assumption, the headline deficit is expected 
to  further  widen  to  2.3%  of  GDP  in  2020  and  to 
2.6% of GDP in 2021, respectively. 

Public  debt  is  forecast  to  stabilise  at  close  to 
100%  of  GDP.  After  peaking  at  107.0%  of  GDP 
in 2014, public debt fell gradually to 100% of GDP 
in  2018.  According  to  the  Commission  2019 
Autumn  Forecast, 
is 
expected to have fallen to 99.5% of GDP in 2019 
and  to  hedge  up  to  99.6%  in  2020  (see  Section 
3.1). 

the  debt-to-GDP 

ratio 

Regional disparities 

Inter-  and  intra-regional  disparities  remain 
high in Belgium. They concern various economic 
dimensions  including  GDP  per  head  and  GDP 
growth, employment and unemployment as well as 
competitiveness (see Section 3.4). 

Sustainable Development Goals. 

Belgium  is  overall  an  average  performer  in 
achieving  the  Sustainable  Development  Goals. 
According  to  Eurostat’s  Sustainable  Development 
Goals  (SDGs)  indicators  (see  Annex  E),  over  the 
past  5  years  Belgium  has  been  making  uneven 
progresses.  Belgium  performs  well  with  regard  to 
industry,  innovation  and  infrastructure  (SDG  9) 
thanks  to  the  relatively  high  R&D  expenditure  as 
share of GDP and the share of employment in high 
and  medium-high  technology  manufacturing  and 
industries,  despite  going 
knowledge-intensive 
slightly  backwards 
transport. 
in 
Belgium is also good performer in health and well-
being (SDG 3) in line with the high standard of its 
health  system,  where  all  indicators  apart  one  are 
above  the  EU  average  and  in  reduced  inequalities 
(SDG  10)  thanks  to  its  tax  and  benefit  system. 
However,  in  relation  to  waste  generation  and 
management,  Belgium  performance  is  mixed  as 
good  indicator  for  the  recycling  and  circular 
material  use  are  offset  by  a  larger  (than  EU 
average)  production  of  waste  per  capita.  Finally, 
Belgium  has  well  above-average  nitrates  and 
phosphate pollution problems. 

sustainable 

credit  growth  of  previous  years  (see  Graph  1.8). 
Credit  growth 
is  predominantly  driven  by 
corporate  lending,  although  credit  to  households 
registered a robust growth in 2018 before slowing 
down in the first half of 2019. The cost of credit in 
Belgium  has  continued  to  diminish  and  has 
gradually  aligned  with  that  registered  in  the  euro 
area,  both  for  corporations  and  households  (see 
Section 3.2).   

Graph 1.8:  Monetary and financial institutions lending to 
the non-financial private sector 

Source: European Commission 

Public finance 

is 

expected 

The  government  deficit 
to 
deteriorate. According to  the Commission's 2019 
Autumn  Forecast,  the  general  government  deficit 
is  expected  to  have  increased  to  1.7%  of  GDP  in 
2019,  following  a  notable  improvement  in  2017 
and  2018  when  the  fiscal  deficit  was  recorded  at 
0.7%  of  GDP.  The  deterioration  is  expected  to 
have been driven both by a decrease in revenue of 
0.9%  of  GDP  and  an  increase  in  expenditure  of 
around 0.2% of GDP. Some tax reforms adopted in 
recent  years  are  expected  to  have  weighed  on 
revenues.  Corporate 
is 
expected to decrease in 2019 as it reverts to trend 
after  a  temporary  peak  in  2017  and  2018.  In 
addition,  a  cut  in  personal  income  tax  has  taken 
effect  as  part  of  measures  to  shift  taxation  away 
from labour. Furthermore, weaker macroeconomic 
conditions are expected to weigh on the growth of 
the tax base. On the expenditure side, rising social 
benefits  and  transfers  in  kind,  notably  due  to 
higher  pensions  and  health  expenditure,  further 

revenue 

income 

tax 

13 

-10-505101507Q108Q109Q110Q111Q112Q113Q114Q115Q116Q117Q118Q119Q1% of GDP (over last 4 quarters)Domestic corporate bondsDomestic NFC loansDomestic HH loanstotal lending & corporate bonds acquistions    
 
 
1. Economic situation and outlook 

Table 1.1: 

Key economic and financial indicators – Belgium 

(1) NIIP excluding direct investment and portfolio equity shares.         
(2) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches.         
(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.  
(4)  Defined as the income tax on gross wage earnings plus the employee's social security contributions less universal cash 
benefits, expressed as a percentage of gross wage earnings. 

Source:  Eurostat and ECB as of 4-2-2020, where available; European Commission for forecast figures (Winter forecast 2020 for 
real GDP and HICP, Autumn forecast 2019 otherwise). 

14 

2004-072008-122013-1620172018201920202021Real GDP (y-o-y)3.00.71.42.01.51.41.21.0Potential growth (y-o-y)2.11.41.21.31.51.51.51.5Private consumption (y-o-y)1.61.51.81.81.5...Public consumption (y-o-y)1.41.30.50.30.9...Gross fixed capital formation (y-o-y)6.00.23.61.34.0...Exports of goods and services (y-o-y)5.70.84.95.31.2...Imports of goods and services (y-o-y) 5.91.35.24.42.1...Contribution to GDP growth:Domestic demand (y-o-y)2.41.11.51.31.9...Inventories (y-o-y)0.50.00.1-0.10.3...Net exports (y-o-y)0.2-0.3-0.10.7-0.7...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.50.50.40.60.70.70.70.6Capital accumulation (y-o-y)0.60.50.50.60.70.70.70.7Total factor productivity (y-o-y)0.90.50.30.20.10.10.10.2Output gap1.2-0.4-0.40.90.80.4-0.1-0.6Unemployment rate8.27.68.37.16.05.55.45.3GDP deflator (y-o-y)2.01.61.71.71.51.61.92.0Harmonised index of consumer prices (HICP, y-o-y)2.12.51.02.22.31.21.41.5Nominal compensation per employee (y-o-y)2.72.51.01.81.91.71.82.1Labour productivity (real, person employed, y-o-y)1.7-0.10.80.30.1...Unit labour costs (ULC, whole economy, y-o-y)0.92.6-0.11.51.81.81.71.9Real unit labour costs (y-o-y)-1.10.9-1.7-0.20.30.2-0.2-0.1Real effective exchange rate (ULC, y-o-y)0.20.3-2.01.71.2-1.4-0.70.1Real effective exchange rate (HICP, y-o-y)0.3-0.3-0.51.62.3-1.2-0.7-0.5Net savings rate of households (net saving as percentage of net disposable income)10.79.96.05.24.8...Private credit flow, consolidated (% of GDP)9.311.710.50.10.8...Private sector debt, consolidated (% of GDP)125.2176.2174.0185.0178.5...of which household debt, consolidated (% of GDP)44.153.057.358.959.7...of which non-financial corporate debt, consolidated (% of GDP)81.1123.2116.7126.1118.8...Gross non-performing debt (% of total debt instruments and total loans and advances) (2)2.64.23.62.32.0...Corporations, net lending (+) or net borrowing (-) (% of GDP)1.31.52.40.9-1.1-0.10.40.8Corporations, gross operating surplus (% of GDP)24.223.624.425.825.625.726.126.3Households, net lending (+) or net borrowing (-) (% of GDP)3.63.81.61.10.91.11.00.9Deflated house price index (y-o-y)6.80.80.41.71.0...Residential investment (% of GDP)5.96.15.85.75.8...Current account balance (% of GDP), balance of payments2.30.10.91.2-1.0-0.8-0.9-1.0Trade balance (% of GDP), balance of payments2.5-0.20.71.4-0.2...Terms of trade of goods and services (y-o-y)-0.5-0.60.6-0.6-1.00.10.30.3Capital account balance (% of GDP)-0.20.00.00.10.0...Net international investment position (% of GDP)35.649.946.956.741.3...NENDI - NIIP excluding non-defaultable instruments (% of GDP) (1).58.453.546.536.6...IIP liabilities excluding non-defaultable instruments (% of GDP) (1).241.1197.5191.4185.9...Export performance vs. advanced countries (% change over 5 years)0.4-2.8-8.4-1.7-3.4...Export market share, goods and services (y-o-y)-2.5-3.30.3-0.3-1.0-0.7-1.8-2.0Net FDI flows (% of GDP)-2.0-3.01.75.61.9...General government balance (% of GDP)-0.7-3.9-2.7-0.7-0.7-1.7-2.3-2.6Structural budget balance (% of GDP)..-2.8-1.7-1.8-2.1-2.4-2.2General government gross debt (% of GDP)92.8100.4105.6101.8100.099.599.6100.0Tax-to-GDP ratio (%) (3)45.646.247.446.746.946.045.845.7Tax rate for a single person earning the average wage (%) (4)42.042.641.940.639.9...Tax rate for a single person earning 50% of the average wage (%) (4)25.827.324.721.520.1...forecast 
 
  
 
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

in 

of 

in 

the 

total 

lifting 

productivity. 

continued  decline 

The 
factor 
productivity  is  an  obstacle  to  potential  growth. 
Limited  progress 
restrictions  on 
competition  in  services,  in  alleviating  a  rather 
heavy  administrative  burden  on  companies,  in 
broadening 
technological 
diffusion 
advances, combined with a low resource allocation 
have  constrained  the  growth  contribution  of  total 
factor 
the 
implementation  of  various  labour  cost  moderation 
policies  has  been  successful  in  stimulating  job 
labour 
creation, 
participation rate  and a record-low  unemployment 
the  contribution  of  capital 
rate.  Similarly, 
deepening 
the  potential  growth  estimate 
remained  stable  compared  to  the  pre-crisis  years 
thanks 
investment 
counterbalancing 
level  of  public 
investment.  

resilient 
the 

increasing 

contrast, 

leading 

private 

low 

By 

an 

to 

to 

to 

Graph 2.1:  Overall multiannual implementation of 2011-

2019 CSRs to date 

of 

all 

60% 

Since  the  start  of  the  European  Semester  in 
2011, 
country-specific 
recommendations  addressed  to  Belgium  have 
recorded  at  least  ‘some  progress’ (7).  ’‘Limited' 
or  ‘no  progress’  has  been  made  on  40%  of  the 
recommendations  (see  Graph  2.1).  Substantial 
progress has been achieved by reforming the wage 
bargaining  framework  to  safeguarding  and  restore 
the  cost-competitiveness  of  the  economy,  and  the 
recommendation on increasing the resilience of the 
financial  sector  has  been  fully 
implemented. 
Important  measures  were  adopted  as  well  in  the 
areas  of  pensions,  labour  market  (Jobs  deal)  and 
taxation,  including  the  reform  of  the  corporate 
taxation and the ‘Tax shift’. 

share  of 

significant 

Since 2011, Belgium has made some progress in 
strengthening  public  finances.  However,  a  more 
structural  budget  consolidation  could  have  been 
the 
undertaken,  as  a 
improvement stemmed from a reduction in interest 
spending  thanks  to  low  interest  rates.  In  the 
absence  of  additional  measures, 
the  general 
government  deficit  is  projected  to  widen  in  the 
near  future.  Meeting  the  target  of  a  structurally 
balanced  budget  has  been  repeatedly  postponed 
now  to  2021  by  the  Federal  Government.  The 
public  debt-to-GDP  ratio  peaked  at  107.0   %  of 
GDP  in  2014  and  is  forecast  to  have  declined 
below  100%  in  2019.  However,  it  remains  high 
and is not expected to decrease further in the near 
future, contributing to fiscal sustainability risks.  

Measures  have  been  introduced  to  address  the 
projected  increase  in  age-related  expenditure, 
yet  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,  legislation  was 
passed  increasing  the  statutory  retirement  age  by 
two  years  :  it  will  increase  from  65  to  66  years 
from  2025  and  will  increase  to  67  as  of  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. 

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

past, see in particular section 3. 

* 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 
2020 Country Report. 

Source: European Commission 

Investment  is  crucial  to  ensure  longer-term 
growth.  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  positive  when  it  comes  to 
public investment. The latter has been structurally 
low  for  several  decades,  as  a  result  of  policy 
choices  within  a  context  of  prolonged  fiscal 
consolidation. Sustained cut 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 

15 

40%37%20%3%No ProgressLimited ProgressSome ProgressSubstantial ProgressFull Implementation 
                                                           
  
 
2. Progress with country-specific recommendations 

to  systematically 

congestion through a more efficient use of rail and 
waterways.  Moreover, 
the  Service  provided 
support for the introduction of spending reviews in 
Flanders  through  a  pilot  project  and  technical 
advice  on  how 
introduce 
spending  reviews  in  the  budgetary  process.  This 
has  informed  the  Flemish  government’s  plan  to 
carry  out  regular  spending  reviews  In  2019,  work 
started on exploring the use of spending reviews at 
the 
the 
fiscal 
coordination  between 
levels  of 
government,  and  reducing 
the  administrative 
burden  for  citizens  and  businesses  in  the  Brussels 
Region. 

the  different 

strengthening 

federal 

level, 

agreement  on  a  national  pact 
for  strategic 
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 

2019 

limited  progress 

in 
Belgium  has  made 
addressing 
country-specific 
recommendations. There has been no progress on 
distributing fiscal targets among the various levels 
of  government  in  a  way  that  can  be  enforced. 
Limited progress has been also made on improving 
the  composition  of  public  expenditure,  although 
regional  governments  are  making  progress  in 
introducing  spending  review  mechanisms  in  their 
budgetary process.  Meanwhile, some progress was 
made  in  fostering  investment  in  transport  through 
the  National  Pact  for  Strategic  Investment,  an 
increase  in  infrastructure  investment  is  projected. 
There has also been limited progress on vocational 
training,  quality  of  education 
education  and 
to  performance 
reforms  with 
and 
regard 
the  Communities  are 
inclusiveness,  although 
reforms 
(e.g. 
reforms 
in  education 
phasing 
covering 
the  Flemish 
in 
sectors 
Community  and  the  French    Community's  ‘Pacte 
limited  progress  on 
d'Excellence’).  There 
is 
to  work, 
the  financial  disincentives 
reducing 
implementing  labour  market  reforms  with  regard 
to  disadvantaged  groups  and  addressing  skills 
mismatches.  Limited  progress  has  been  made  in 
fostering  investment  in  knowledge-based  capital, 
even  if  measures  vary  in  scope  at  regional, 
community and federal level. Limited progress has 
been  made  in  lifting  barriers  to  competition  in 
services.  For 
services, 
to  hamper 
regulatory 
competition. Also, limited progress has been made 
in improving the functioning of the retail sector for 
the  benefit  of  businesses  and  consumers.  Finally, 
limited  progress  has  been  made  in  improving 
mobility. 

certain  professional 

restrictions 

continue 

several 

request 

from  a  Member  State, 

Upon 
the 
Commission  can  provide  tailor-made  expertise 
under  the  Structural  Reform  Support  Programme 
to  help  design  and  implement  growth-enhancing 
reforms.  Since  2018,  such  support  has  been 
provided to Belgium for more than 20 projects. In 
2019,  several  projects  were  delivered  on  the 
ground.  The  Commission,  for  example,  supported 
the  Port  of  Antwerp’s  efforts  to  address  road 

16 

 
 
 
2. Progress with country-specific recommendations 

Table 2.1: 
8  

Progress with the implementation of the 2019 CSRs8 

Source: European Commission 

For CSR3 the regulatory framework underpinning the programming of the 2021-2027 EU cohesion policy funds has not yet 
been adopted by the co-legislators, pending inter alia an agreement on the multiannual financial framework (MFF). 

17 

                                                           
 
  
 
 
2. Progress with country-specific recommendations 

Box 2.1: EU FUNDS AND PROGRAMMES TO ADDRESS STRUCTURAL CHALLENGES AND TO 
FOSTER GROWTH AND COMPETITIVENESS IN BELGIUM 

The financial allocation from the EU Cohesion policy funds (1) for Belgium amounts to € 2 billion in the 
current Multiannual Financial Framework with a national co-financing of €2.6 billion. This total investment 
of €4.7 billion is equivalent to around 0.2 % of the GDP annually. By the end of 2019, some €4.3 billion 
(around 91% of the total amount planned) were allocated to specific projects and €1.6 billion were reported 
as spent by the selected projects (2), showing a level of implementation below the EU average.  

EU  Cohesion  policy  funding  supports  structural  challenges  in  Belgium.  The  Cohesion  Policy 
programmes  for  Belgium  have  allocated  €  526 million  for  smart  growth,  €  358 million  for  sustainable 
growth  and  sustainable  transport  and  €  1.1 billion  for  inclusive  growth.  In  2019  following  a  performance 
review (3) € 240 million have been made available for Belgium. 

EU  Cohesion  policy  funding  is  contributing  to  major  transformations  of  the  Belgian  economy  by 
promoting growth and employment via investments, among others, in research, technological development 
and innovation, competitiveness of enterprises, sustainable transport, employment and labour mobility. By 
2019, investments driven by EU Funds have already led to 165 new research projects supported to market 
products.  Support  was  already  decided  for  20,380 enterprises  including  5,345 start-ups,  generating 
9,845 new jobs. ESI funds contributed to the reduction of greenhouse gas emissions by 15,958 tons of CO2. 
The  ESF  provided  specific  and  tailor-made  support  for  young  people  not  in  education,  employment  or 
training.  Thanks  to  the  European  Social  Fund  (ESF)  and  Youth  Employment  Initiative  more  than 
150,000 young  people  have  benefitted  to  date  from  targeted  support  for  their  integration  in  the  labour 
market. The ESF also reinforced improved access to and development of training support, including through 
dual learning. To make skills and qualifications more relevant to the job market, the ESF improved access to 
dual training for more than 222,000 people. 

For  instance,  in  order  to  address  the  issue  of  youth  unemployment,  the  Public  Employment  Service  in 
Brussels implements a specific action, the Youth Guarantee Service, dedicated to assist young people at the 
end  of  their  studies  with  a  job,  a  traineeship  or  a  training  within  four  months  after  their  registration. 
Benefiting  from  a  total  support  of  €  3.4 million  (of  which  50 %  ESF),  this  service  has  accompanied 
17,500 young  people  between  2014-2018.  Likewise,  TechnoCampus  is  a  training  center  for  future  jobs in 
Hainaut-Namur.  With  a  total  cost  of  €  2.7 million  (ERDF  €  1.1 million),  it  proposes  a  wide  range  of 
trainings covering the most important competences for the enterprises of the industrial sector. 

Agricultural  and  fisheries  funds  and  other  EU  programmes  also  contribute  to  addressing  the 
investment  needs. The  financial allocations from the European Agricultural Fund for Rural Development 
(EAFRD)  and  the  European  Maritime  and  Fisheries  Fund  (EMFF)  in  the  current  Multiannual  Financial 
Framework  amount  to  € 648 million  and € 41.7 million  respectively  (€1.4  billion  and  €68  million  in  total 
cost respectively). In addition, Belgium also benefits  from other  EU programmes, such as the Connecting 
Europe  Facility,  which  allocated  EUR  638 million  to  specific  projects  on  strategic  transport  networks, 
Horizon  2020,  which  allocated  EU  funding  of  EUR  2.3 billion  (including  496 SMEs  with  about  EUR 
359.3 million). 

EU  funding  contributes  to  mobilization  of  private  investment.  ESI  funds  supported  programmes  alone 
mobilise additional capital by allocating about € 283 million in the form of loans, guarantees and equity. As 
of end of 2018, 7 % of the ESI funds were paid in a form of financial instruments. 

EU funds already invest on actions in line with the Sustainable Development Goals (SDGs). In Belgium 
European  Structural  and  Investment  Funds  support  12 out of  17 SDGs  and  up  to  97 %  of  the  spending  is 
contributing to those goals.  

(1)  European Regional Development Fund (ERDF), European Social Fund (ESF) and Youth Employment Initiative. 
(2)  Available at: https://cohesiondata.ec.europa.eu/countries/BE. 
(3)  Under the performance review (Article 22 of Regulation (EU) No 1303/2013), 5-7% of overall resources allocated are 

released to performing priority axes of the operational programmes, which includes national co-financing. 

18 

 
3.  REFORM PRIORITIES 

3.1.  PUBLIC FINANCES AND TAXATION 

3.1.1.  FISCAL POLICIES 

The  Belgian  general  government  deficit 
is 
projected  to  increase.  The  headline  deficit  is 
estimated to have increased from 0.7% of GDP in 
2018 to 1.7% in 2019 and is projected to increase 
further  to  2.3%  of  GDP  in  2020  according  to 
Commission  2019  Autumn  Forecast.  Revenue 
growth  is  expected  to  be  affected  by  a  drop  in 
corporate and personal income taxation as  well as 
by  a  lowering  of  social  security  contributions  in 
the  context  of  the  ’tax  shift‘,  a  multi-year  tax 
the  tax  pressure  on  labour. 
reform  reducing 
Expenditure  growth  is  expected  to  be  driven  by 
rising  social  benefits  and  social  transfers,  in  line 
with the trend observed in previous years.  

The  fiscal  stance  is  expected  to  have  become 
expansionary 
in  2019,  with  the  structural 
balance  deteriorating.  From  a  deficit  of  3.9%  of 
GDP in 2011, the structural balance improved to a 
deficit  of  1.8%  of  GDP  in  2018.  However,  this 
improvement is expected to have come to a halt in 
2019  with  the  structural  balance  deteriorating  by 
0.3 pps of GDP. This is forecast to be  repeated in 
2020,  resulting  in  an  expansionary  fiscal  stance. 
Up  to  2018,  more  than  half  of  the  structural 
balance improvement stemmed from a reduction in 
interest spending, thanks to low interest rates. In its 
stability  programme  of  April  2019,  Belgium 
confirmed its target of a balanced structural budget 
but  postponed  its  achievement  by  one  year  to 
2021. Due to the protracted period with a caretaker 
government, no measures were undertaken in 2019 
to resume the consolidation effort.  

Public  debt  has  declined  further,  but 
is 
expected  to  stabilise  at  its  currently  high  level. 
Debt  declined  to  100%  of  GDP  in  2018,  from  a 
peak  of  107%  of  GDP  in  2014.  Public  debt  is 
expected  to  have  decreased  further  in  2019  to 
99.5% of GDP, but is forecast to rise again in 2020 
to  99.6%  of  GDP  according  to  the  Commission 
2019  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 
left 
spending, 
unaddressed, would amplify those risks. 

age-related 

in 

if 

The bulk of the debt  and of its recent  decrease 
is  at  federal  level.  The  decomposition  of  debt 
across the different government tiers shows that in 
2018  85.2%  of  the  overall  debt  was  held  by  the 
federal government. The social security sector has 
almost  no  debt  (0.4%  of  total  debt).  The  regions 
and  local  governments  debt  have  reached  13.2% 
and  5.1%  respectively  (see  Graph  3.1.1).  The 
decrease in public debt since its peak in 2014 was 
mostly due to the efforts of the federal government 
and of the social security sector. 

Graph 3.1.1:  Breakdown of gross public debt 

Note: Figures for general government debt are consolidated 
across all entities. This explain why the sum of the debt of all 
entities does not equal the level for the general 
government. 
Source: European Commission 

3.1.2.   COMPOSITION OF PUBLIC SPENDING 

Total public expenditure as a share of GDP had 
decreased, but remains among the highest in the 
euro area. While decreasing since its peak in 2012 
at 56.5% of GDP, it still stood at 52.1% of GDP in 
2018 compared to 47.0% of GDP in the euro area. 
France  and  Finland  were  the  only  euro-area 
countries  with  a  higher  level  of  public  spending, 
respectively at 56.0% and 53.1% of GDP. Interest 
spending  contribute  to  the  higher  level  of  total 
public  expenditure,  due  to  Belgium’s  high  public 
debt. Primary expenditure (total public expenditure 
net of interest payments) stood at 50.0% of GDP in 
2018,  also  well  above  the  euro  area  average  of 

19 

0.020.040.060.080.0100.0120.01415161718Central governmentState governmentLocal governmentSocial security fundsGeneral government 
  
3.1. Public finances and taxation 

Graph 3.1.2:  Evolution of primary expenditure 

Source: European Commission 

A prolonged policy of low public investment has 
resulted in a depletion of the public  net capital 
stock.  Public  investment  in  Belgium  has  merely 
compensated  for  the  depreciation  of  the  existing 
capital  stock  since  1995  (see  Graph  3.1.3).  As  a 
result, the public net capital stock has declined by 
15 percentage point of GDP since 1995. Germany 
initially experienced a similar evolution, but since 
2006  the  drop  has  halted.  By  contrast,  France 
managed to slightly increase its capital stock over 
the same period. 

The  operationalisation  of  the  National  Pact  for 
Strategic  Investment  could  help  increase  the 
overall level of public investment by improving 
the  coordination,  including  budgetary,  of  the 
different  investment  plans.    The  regions  and 
communities  plan  to  increase  their  investment 
rates.  Almost 90% of public  investment is carried 
out  by 
(regions  and 
federated  entities 
communities)  and  local  authorities,  reflecting  the 
distribution  of  competences  across  the  different 
tiers  of  government.  Nevertheless,  their  overall 
investment  has  remained  rather  stable  since  2000, 
hovering  at  around  2%  of  GDP (10).  Regional 
governments  have  announced  major  investment 
plans  in  their  programmes.  However,  these  are 
expected  to  be  deficit-increasing  as  they  do  not 

the 

(10)  It slightly increased in 2018 in line with previous electoral 

cycles. 

45.2%  of  GDP.  Only  France,  Finland  and 
Denmark  recorded  a  higher  level  of  primary 
expenditure in 2018. 

Expenditure started to increase again in 2018. It 
increased  from  51.8%  in  2017  to  52.1%  of  GDP. 
Public  investment  increased  by  0.2  percentage 
point  of  GDP  in  2018  compared  to  the  previous 
year. As the increase was not financed by saving in 
other spending items, this halted a downward trend 
that  started  in  2013.  Total  spending  decreased 
steadily from a peak of 56.5% of GDP in 2012 to 
51.8% in 2017. The consolidation benefitted from 
lower interest spending thanks to low interest rates. 
The  implicit  interest  rate  on  public  debt  shrank 
from  3.5%  to  2.3%  of  GDP over  the  same  period 
of time. 

The  recent  expenditure  consolidation  only 
partially counterbalanced previous increases. In 
2018,  primary  expenditure  stood  7.3  percentage 
points  of  GDP  higher  than  its  level  in  2000  (see 
Graph 3.1.2). Primary expenditure increased by 2.2 
pp. in the euro area over the same period of time. 
The increase in social spending (9) explained more 
than  half  of  the  increase  (around  4  percentage 
points  of  GDP).  The  remaining  share  stems  from 
an  increase  in  compensation  of  employees  (+1.1 
(+2.0 
percentage  points)  and 
percentage points). Belgium spends comparatively 
more  than  the  euro  area  average  on  public  wages 
and  subsidies  to  the  private  sector  (see  European 
Commission, 2019). 

subsidies 

in 

Despite  significant  investment  needs,  public 
investment  barely 
increased  and  remained 
below 
the  euro-area  average. Belgium  has 
important  investment  needs  in  social  housing, 
education  (see  Section  3.3),  sustainable  transport, 
energy and digital infrastructure (see Section 3.4). 
However, in line with previous electoral cycles, in 
2018  gross  fixed  capital  formation  increased  to 
2.6% of GDP from 2.4% in the previous year. The 
increase  is  mostly  due  the  regional  and  local 
governments,  while  investment  from  the  federal 
government  barely  changed.  At  2.6%  of  GDP, 
public  investment  in  Belgium  remains  below  the 
level in France (3.4%) and the Netherlands (3.3%), 
but above Germany (2.4%). 

(9)  Social  spending  is  measured  as the  sum  of  social  benefits 
other  than  social  transfers  in  kind  and  social  transfers  in 
kind supplied to households via market producers. 

20 

4244464850525400010203040506070809101112131415161718% of GDP+10.3-3.0                                                           
   
                                                           
3.1. Public finances and taxation 

appear  to  be  financed  by  an  increase  in  revenues 
nor by a decrease in other expenditure. (11) 

for  a  better  exchange  of  data  as  basis  for  proper 
evaluations. 

Graph 3.1.3:  Evolution of public net capital stock 

Source: European Commission 

3.1.3.  SPENDING REVIEWS 

Spending reviews could contribute to improving 
the  composition  and  the  efficiency  of  public 
spending  and  make  it  more  growth  friendly. 
Belgium’s  high  level  of  public  spending  coexists 
with  a  low  level  of  public  investment.  Spending 
reviews could serve as a key tool for reprioritising 
expenditure  towards  spending  outlays  that  better 
meet  the  country’s  economic  and  societal  goals. 
By  unlocking  efficiency  gains,  they  can  generate 
savings without constraining growth.  

for 

the  prerequisites 

Budgetary  processes  currently  does  not  fully 
satisfy 
introducing 
spending  reviews.  Budgets  of  the  federal  and 
federated entities tend to present spending without 
making  a  link  to  policy  objectives  and  therefore 
hampering  their evaluation.  With the exception of 
Flanders,  annual  budgets  rather  than  multiannual 
budgets are produced. More collaboration between 
budgetary  and  policy-oriented  departments  at 
different administrative levels would notably allow 

(11)  The  Court  of  Auditor  pointed  out  this  behaviour  in  its 
recent  report  on  the  2020  budget  of  the  Walloon  region, 
available 
at: 
https://www.ccrek.be/FR/Publications/Fiche.html?id=b088
674b-983f-44e2-851d-31f0ce0b19cc.  This  is  also  true  for 
the Flemish Region, for the French Community and for the 
Brussels Region. 

Important  expenditure-incurring  tasks  have 
been devolved to regions, communities and local 
authorities.  The  sixth  state  reform 
in  2016 
devolved some competencies and related resources 
to the regional authorities. In 2018, about 32.6% of 
total public expenditure  was  spent at regional and 
community  level  and  13.2%  at  local  level  with 
health care and social protection being the biggest 
items (12).  It  is  the  responsibility  of  each  level  of 
government to make efficient use of public money, 
in particular as Belgium has no hierarchy of norms 
between  its  different  levels  of  government.  The 
devolution  of  an  increasing  share  of  spending 
responsibilities  from  the  Federal  Government  to 
the Federated entities combined to the need for the 
latter to upgrade the regions’ infrastructure call for 
a  continued  scrutiny  of  their  expenditure  in  order 
to identify potential efficiency gains13. 

Subnational fiscal rules are scarce. According to 
the  Commission  database (14)  existing  fiscal  rules 
in  Belgium  cover  the  general  government,  the 
social  security  sector  and  the  local  authorities. 
There  are  no  fiscal  rules  covering  the  regional 
government.15 Of the different kind of fiscal rules, 
expenditure  rules  for  regional  governments  in 
federal  states  could  be  easier  to  be  envisaged  in 
light  of  their  higher  share  in  general  government 
expenditure. 

The  cost-efficiency  ratio  of    several  public 
services could be improved. A recent analysis of 
the National Bank of Belgium (Cornille, D. et al., 
2017)  pointed  to  education  (see  Section  3.3), 
health  (see  infra)  and  mobility  (see  Section  3.4) 
policies  as  area  where  further  efficiency  gains 
could  be  pursued.  There  is  also  room  to  improve 
Belgium’s  rank  in  certain  public  services  for 

(12)  Source:  Eurostat;  total  spending  net  of  transfers  to  other 
government  tiers  as  a  share  of  general  government 
spending. 

(13)  During  the  latest  State  reform,  the  federated  entities,  for 
certain  of  the  transferred  competencies,  received  less 
resources  from  the  federal  level  than  originally  used, 
requiring certain efficiency gains on behalf of the federated 
entities. 

(14)  Fiscal 

rule 

available 
https://ec.europa.eu/info/publications/fiscal-rules-
database_en. 

database, 

at: 

(15)  Flanders  has  approved  a  debt-norm  at  the  end  of  2016. 
Accordingly,  the  debt  should  be  limited  to  a maximum  of 
65% of current revenues. 

21 

30.035.040.045.050.055.00.00.51.01.52.02.53.0959799010305070911131517% of GDP% of GDPGross fixed capital formation (lhx)Consumption of fixed capital (lhx)Net capital stock (rhs)  
                                                           
                                                           
3.1. Public finances and taxation 

businesses  (see  Section  3.4.2)  digital  public 
services to citizens and justice (see Section 3.4.4). 
Belgium performs well in health, but strengthened 
prevention (see section 3.3) and a more appropriate 
use  of  services  and  pharmaceuticals(see  infra) 
could  improve  overall  efficiency,  and  reduced 
inequalities.  

increase  (see  Table  3.1.1) (18)  given 
to 
the 
projected  increase  in  ageing  cost  (see  Section 
3.1.5) and in particular of pension and health care. 

Table 3.1.1:  Government size by subsector in 2021, (% of 

GDP) 

on 

services 

to  systematically 

Flanders  announced  its  intention  to  roll  out 
spending  reviews  after  having  carried  out  a 
spending  review  pilot  exercise  in  2018-2019. 
With  the  support  of  the  Commission  a  spending 
vouchers 
review 
(dienstencheques/titres  services)  and  a  technical 
analysis  of  how 
introduce 
spending review in the budgetary process (16) were 
finalised  in  2019.  The  new  Flemish  government 
announced  its  intention  to  roll  out  spending 
reviews further with the aim to conduct at least one 
in  every  policy  domain  within  every  legislature. 
The  Federal  level,  Brussels  and  Wallonia  have 
recently  shown  interest  in  introducing  spending 
reviews, even if at different extent.(17)  The French 
Community  has  currently  no  plans  to  introduce 
spending reviews.  

3.1.4.  FISCAL FRAMEWORK 

The  current  budgetary  framework  put  the 
burden of the fiscal consolidation on the federal 
government.  Final  expenditure  by  the  federal 
government  represents  only  a  limited  share  of  its 
total  expenditure.  The  service  of  the  debt  and  the 
transfers to the other government tiers represented 
the  bulk  of  it  in  2018  (respectively  1.9%  and 
17.1%  of  GDP).  Large  transfers  to  the  social 
security sector, to compensate for insufficient own 
revenues,  put  an  additional  strain  on  the  federal 
government  budget.  These  transfers  are  expected 

(16)  Available 

at: 
https://fin.vlaanderen.be/sites/default/files/atoms/files/MC_
Flanders_-
_Technical_Assistance_Mission_Report_%20Master%20V
5.pdf. 

(17)  The Federal level has studied the possibility of introducing 
spending reviews in the budgetary process with the support 
of 
the  European  Commission.  The  Bruxelles-Capital 
Region  announced  steps  to  increase  the  quality  and 
efficiency  of  its  spending,  including  the  possibility  to 
introduce  spending  reviews  in  its  budgetary  process. 
Similarly  the  Walloon  Region  decided  to  operationalise  a 
budget ‘base-zero’ by not later than 2021. 

Source: European Commission 

the  postponement  of 

Budgetary  coordination 
is  not  sufficiently 
effective yet, as the 2013 cooperation agreement 
has not been fully implemented. As described in 
previous country reports, Belgian federated entities 
and  the  federal  government  signed  a  cooperation 
agreement  in  2013  to  ensure  effective  budget 
coordination. The Concertation Committee did not 
approve but merely ’took note‘ of the overall fiscal 
trajectory  presented 
the  2019  Stability 
in 
the 
Programme  and 
achievement  of  fiscal  target  to  2021  by  all 
government  levels.  Although  this  is  a  step  back 
compared  to  the  formal  approval  of  the  fiscal 
trajectory  expressed  in  2018,  this  is  explained  by 
the national and regional elections in May 2019. A 
lack  of  agreement  on  the  targets  at  each  level  of 
government  may  undermine  the  viability  of  the 
the  medium-term 
towards 
trajectory 
overall 
the  Public  sector 
objective.  It  also  prevents 
borrowing  requirements  section  of 
the  High 
Council  of  Finance  from  effectively  monitoring 
compliance with these targets (see High Council of 
Finance, 2018, pp 13-14). 

levels  on 

The 2013 Cooperation Agreement entrusted the 
High Council of Finance to advise and supervise 
their  budget 
all  government 
trajectories  in  order  to  effectively  implement 
the  European  Union’s  Fiscal  Compact.  The 
High Council of Finances (HCF) aims to promote 
coordination  and  discipline  in  the  design  and 
implementation of fiscal policy in the context of a 
federal  state  structure.  In  this  regard,  the  2013 
Cooperation Agreement entrusted it with a double 

(18)  Based on forecasts from the Federal Planning Bureau as in 

‘Perspectives économiques 2019-2024’. 

22 

FederalSocial securityRegionsLocal governmentTotal Total revenues24.821.919.27.1Own revenues24.214.78.03.850.6Transfers from other govern. tiers0.77.211.23.4Total expenditure26.722.119.67.1Final expenditure7.419.816.96.951.0Transfers to other govern. tiers17.72.32.50.1Interest payments1.60.00.20.01.9Headline balance-1.9-0.2-0.40.1-2.4                                                           
 
  
 
                                                           
3.1. Public finances and taxation 

flag  a  significant  risk.  This  low  short-term  risk  is 
consistent  with  the  ‘AA  stable’  rating  given  to 
Belgian government debt by the three major credit 
rating agencies. 

the  medium 

indicator(22), 

term,  Belgium’s 

In 
fiscal 
sustainability  risks  are  high.  According  to  the 
baseline scenario in the debt sustainability analysis 
(see  Annex  B),  at  unchanged  policies,  the  public 
debt ratio is projected to remain  high at 97.4% of 
GDP  in  2030,  the  last  projection  year.  The 
favourable  snowball  effect  (i.e.  the  difference 
between  the  implicit  interest  rate  on  government 
debt and the nominal growth rate of the economy) 
is expected to more than counterbalance the impact 
from 
the  negative  primary  balance.  The  S1 
indicates  a  high 
sustainability 
medium-term risk, mainly due to insufficient fiscal 
effort.  This  indicator  implies  that  a  cumulative 
gradual  improvement  in  the  Belgian  structural 
primary balance of 4.1 percentage points of GDP, 
relative to the baseline scenario, would be required 
over  5  years  (starting  from  2022)  to  reduce  the 
debt  ratio  to  60%  of  GDP  by  2034.  Specifically, 
the  required  fiscal 
3.4  percentage  points  of 
adjustment  would  be  due  to  the  debt  ratio’s 
distance  from  the  60%  reference  value,  and  1.1 
percentage points to the projected increase in age-
related  public  spending.  This  would  be  only 
partially  counterbalanced  by  the  favourable  initial 
budgetary position (defined as the gap to the debt-
stabilising  primary  balance).  Adhering  to  the 
existing fiscal rules (23) would significantly reduce 
the  public  debt-to-GDP  ratio  compared  to  a 
baseline  scenario  of  unchanged  fiscal  policy 
(Graph 3.1.4).  

Over the long-term, Belgium is deemed to be at 
medium fiscal sustainability risk. The long-term 
fiscal sustainability indicator S2 (24) shows that an 
improvement  in  the  structural  primary  balance  of 
4.8 percentage points of GDP would be required to 
stabilise the debt-to-GDP ratio over the long-term. 

(22)  The  S1  indicator  measures  the  required  fiscal  adjustment 
needed  between  2022  and  2027  to  bring  the  public  debt 
ratio down to 60% of GDP by 2034. 

(23)  Defined  as  full  compliance  with  the  requirements  of  the 
preventive  arm  of  the  SGP  and  convergence  with  the 
medium-term objective). 

(24)  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. 

role. (19)  First, 
the  Public  Sector  Borrowing 
Requirement  section  of  the  High  Council  (HCF-
PB) contributes to the budgetary policy through its 
recommendations for the budget targets of general 
government 
including 
subnational  government.(20)  Second,  the  HCF-PB 
is  entrusted  with  an  important  supervisory  and 
advisory  role  in  the  area  of  budgetary  policy  that 
extends beyond the central government. 

sub-sectors, 

and 

its 

However, the reinforcement of the autonomy of 
the  High  Council  of  Finance  (HCF)  has  not 
been fully implemented yet. The Royal Decree of 
23  May  2018  provided  for  a  reinforcement  of  the 
staff  of  the  High  Council  of  Finance.  It  increased 
the  number  of  full-time  staff  to  10,  equally 
representing  the  federal  state  and  the  federated 
entities  (regions  and  communities).  However,  due 
to  the  presence  of  a  caretaker  government,  the 
measure has not been implemented yet. 

3.1.5.  DEBT SUSTAINABILITY ANALYSIS AND 

FISCAL RISKS  

increasing  pressure 

Belgium’s rapidly ageing population is expected 
to  put 
the  country’s 
budgetary  situation.  The  most  recent  projections 
of the Study Committee on Ageing (High Council 
of  Finance,  2019)  point 
to  ageing-related 
expenditure  items  increasing  by  5.6  percentage 
points of GDP by 2070. The 2018 Ageing  Report 
(European  Commission,  2018b),  projected  a 
comparable  increase  of  5  percentage  points  of 
GDP. 

Short-term sustainability challenges are limited 
in spite of the high public debt ratio. Short-term 
sustainability  is  assessed  by  the  indicator  S0(21). 
Both  the  fiscal  and  the  financial  competitiveness 
sub-indexes  stand  below  their  respective  critical 
threshold, so that the overall S0 indicator does not 

(19)  The 2013 Cooperation Agreement of 13 December 2013 is 
at: 

available 
http://www.ejustice.just.fgov.be/mopdf/2013/12/18_3.pdf 

(20)  Recommendations  by  the  HCF-PB  Section  are  typically 
limited to budgetary targets. No advice is given on specific 
consolidation measures aimed at reaching these targets, nor 
does  the  Section  provide  estimates  of  the  budgetary  or 
macroeconomic impact of such measures. 

(21)  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. 

23 

                                                           
 
 
                                                           
3.1. Public finances and taxation 

increase  in  pension  spending  is  already  kicking 
in. (27)  According  to  the  report,  pension  outlays 
will  increase  by  22.6%  between  2020  and  2024, 
and over the same period health care spending will 
increase by 23.9%. 

age 

effective 

The 
remains 
retirement 
substantially  below  the  statutory  retirement 
age,  in  particular  in  the  public  sector.  At  61.7 
years  for  men  and  60.1  for  women  in  2017  the 
effective  retirement  age  was  substantially  lower 
than  the  statutory  retirement  age  of  65  years (28). 
Despite  of  recent  reforms  tightening  eligibility 
criteria  for  early  retirement  which  resulted  in  an 
increase  in  the  employment  rate  of  older  workers 
(see  section  3.3),  in  2017  a  substantial  share  of 
pensioners  was  younger  than  65  years.  In  the 
public  sector,  53.8%  of  civil  servants  draw  a 
pension  at  the  age  of  60  or  earlier  (58.8%  for 
women). In the private sector, even if the share of 
people  leaving  the  labour  market  with  a  pension 
before the age of 60 is lower (15.1% of employees 
and  9.6%  of  self-employed  people),  a  significant 
share  of  employees  (34.4%)  and  self-employed 
(37.7%) leaves before the age of 65)29.  

An  agreement  on  the  reform  of  ‘arduous  job’ 
could  not  be  reached.  The  previous  government 
attempt to find an agreement on a definition of an 
‘arduous  job’  covering  both  the  private  and  the 
public  sectors  failed.  However,  social  partners 
drew  up  a  detailed  list  with  categories  of  arduous 
professions in the civil service. The current system 
in the public sector of preferential career fractions 
and  preferential  schemes  (with  lower  early  or 
statutory retirement age) would have been replaced 
by  the  new  system  for  arduous  jobs,  under  which 
fewer    civil  servants  would  qualify  (about  50% 
instead of more than 60%). 

The  build-up  of  complementary  pension 
remains  low,  in  spite  of  recent  government 
measures.  In  2018,  measures  were  adopted  to 
promote  supplementary  pension  schemes.  One  of 

execution  of  the  budget  and  providing  updated  fiscal 
projections. 

:  estimation  de 

(27)  Comité  de  monitoring 

la  situation 
budgétaire  pour  2020-2024,  page  142.  Available  at: 
https://bosa.belgium.be/fr/actualites/comite-de-monitoring-
estimation-de-la-situation-budgetaire-pour-2020-2024. 
(28)  Recent  reforms  have  increased  the  legal  retirement  age  to 

66 years as of 2025 and to 67 as of 2030. 

(29)  Federal  Pension  Service,  as  provided  by  Cellule 

Strategique Pension/Beleidscel Pensioen. 

initial  budgetary  position 

This  is  mostly  due  to  the  projected  increase  of 
ageing costs (contribution of 4.0 percentage points 
of GDP,  mainly  from  higher  spending on pension 
and  long-term  care)  and  to  a  lesser  extent  to  the 
unfavourable 
(0.8 
percentage points of GDP). Moreover, under more 
adverse 
involving  more  dynamic 
age-related expenditures, the sustainability gap S2 
indicator  would  increase  to  6.5  percentage  points 
of  GDP,  thus  pointing  to  high  long-term  fiscal 
risks.  Vulnerabilities  linked  to  the  high  debt 
burden,  as  captured  by  the  debt  sustainability 
high 
result 
analysis, 
sustainability risks in the long term (25).  

scenarios 

already 

overall 

in 

Graph 3.1.4:  Public debt medium-term projections and 

scenarios (% of GDP) 

Source: European Commission 

Pension  

Pension expenditure is projected to increase by 
almost  3  percentage  points  of  GDP  by  2070. 
Over  the  same  time  span,  pension  expenditure  in 
the  EU  is  projected  to  decrease  by  0.2  pp.  on 
average. (European Commission, 2018b).  

The bulk of this increase will materialise in the 
short  to  medium  term  with  an  increase  of  2.4 
percentage  point  of  GDP  by  2040  (European 
Commission, 2018b). The latest projections of the 
Monitoring Committee (26) confirm that the steady 

(25)  For  a  detailed  discussion  of  the  approach  to  the  overall 
long-term  sustainability  challenges  see  the  2019  Debt 
Sustainability Monitor, 2020). 

(26)  The Monitoring Committee is a technical committee of the 
Belgian Federal administration in charge of monitoring the 

24 

75808590951001051102018201920202021202220232024202520262027202820292030BaselineSGP scenarioHigher interest rate scenarioLower GDP growth scenario  
                                                           
                                                                                   
3.1. Public finances and taxation 

Long-term care 

in 

the 

long 

significantly 

Spending  on  long-term  care  is  expected  to 
increase 
term 
(European Commission, 2018b). It stood at 2.3% 
of  GDP  in  2016  (above  the  EU  average  of  1.6%) 
and  is  projected  to  increase  steadily  to  4.0%  in 
2070  according  to  the  ’Ageing  Working  Group 
reference  scenario‘.  The  increase  will  be  even 
more  significant  (up  to  5.8%)  according  to  the 
’Ageing  Working  Group  risk  scenario‘,  which 
accounts  for  additional  cost  drivers  in  terms  of 
demography and health status.  

The  underlying  pressure  coming  from  ageing 
still challenges long-term fiscal sustainability in 
the  current  structure  of  service  delivery. 
Belgium’s  density  of  residential  beds  for  over-65 
years old is among the highest in the EU. This has 
decreased  from  2011  to  2014,  but  went  up  again 
from  2015  to  reach  68  beds  (per  1,000  65+  years 
old)  in  2018,  and  the  need  is  projected  to  further 
increase  in  the  future.  Whereas  Belgium  has 
already started to strengthen the  use of home care 
and  a  process  to  ensure  that  only  those  who 
actually  need  it  have  access  to  residential  care, 
there  seems  to  be  room  for  additional  efficiency 
gains, based on available indicators, to respond to 
the future fiscal sustainability challenge. To assess 
the  current  use  of  resources,  KCE,  the  Belgian 
Health  Care  Knowledge Centre, has developed an 
indicator  (ELD-5)  to  monitor  whether/to  what 
extent independent users and those with low levels 
of  dependency  (category  0  and  A  respectively  on 
the Katz scale), for whom institutionalisation may 
be unnecessary or at least premature, are currently 
receiving  residential  care.    Though  on  a  positive 
trend,  with  a  steady  decline  from  32%  in  2011  to 
25% in 2018, these data  indicate that  there  is still 
room  for  improvement  in  light  of  differences 
observed  between  the  regions.  In  Brussels,  more 
than  one  third  (34%)  of  elderly  people  living  in 
residential structures still have some autonomy. In 
Flanders, this proportion does not exceed 20% (34). 

to 
The  current  governance  model  seems 
guarantee  spending  oversight  but  not  control. 

(34)  Devos  C,  Cordon  A,  Lefèvre  M,  Obyn  C,  Renard  F, 
Bouckaert  N,  Gerkens  S,  Maertens  de  Noordhout  C, 
Devleesschauwer  B,  Haelterman M, Léonard C, Meeus  P. 
Performance  du  système  de  santé  belge  –  Rapport  2019  – 
Synthèse.  Health  Services  Research  (HSR).  Bruxelles: 
Centre  Fédéral  d’Expertise  des  Soins  de  Santé  (KCE). 
2019. KCE Reports 313B. D/2019/10.273/33. 

the  measures allows independent  workers to build 
up a supplementary pension, similar to the existing 
possibilities for self-employed company managers. 
A  second  measure  introduced  mixed  pensions  in 
the  public  sector,  attributing  pension  rights  as  an 
employee for the period as a contractual agent and 
a public sector pension for the period as a statutory 
allows 
civil 
a 
employees,  who  do  not  benefit 
supplementary  pension  organised  by 
their 
employer  or  sector  or  whose  supplementary 
pension  plan  is  insufficient,  to  ask  their  employer 
to  make  deductions  from  their  salary  in  order  to 
build up a (higher) supplementary pension.  

servant(30).  A 

third  measure 

from 

Health care 

is  above 

Total  public  health  spending  has  increased 
slowly  in  recent  years  and  there  is  room  to 
improve  its  efficiency  in  specific  areas,  notably 
prevention (31).  Health  spending  accounted  for 
10.3%  of  GDP  in  2017,  up  from  8.9%  in  2006, 
which 
the  current  EU  average  of 
9.8% (32).  Public  spending  accounted  for  77%  of 
overall health spending (close to the EU average of 
79%). The  remaining  spending  comes  from  direct 
out-of-pocket spending (18%) and voluntary health 
insurance (5%). Population ageing will continue to 
exert  pressure  on  health  and  long-term  care 
systems (33). The reduction in the ceiling for health 
public spending growth since 2013 has contributed 
to  keeping  the  growth  rate  in  line  with  GDP 
growth. While efficiency gains have been achieved 
in  hospitals,  promoting  more  appropriate  use  of 
services and pharmaceuticals could help to free up 
resources  to  respond  to  these  growing  needs. 
Networks  of  hospitals  are  being  created,  while  e-
prescriptions and medical data exchange are being 
developed  (see  Section  3.4.4).  Another  challenge 
is  to  strengthen  primary  care  and  improve  care 
coordination – in particular for people with chronic 
conditions. 

(30)  Moreover,  the  legal  framework  has  been  adapted  to 
encourage  administrations,  including  local  authorities  and 
public  enterprises  to  develop  a  supplementary  pension 
regime  for  their  contract  agents. The  federal  government 
has  already  committed  itself  to  establish  a  supplementary 
pension for its contractual staff. 

(31)  Belgium  allocates  2.2%  of  overall  health  expenditure  to 
organised  prevention  programmes,  which  is  less  than  the 
EU average of 3.1%. 

(32)  State of Health in the EU – Country Health Profile 2019. 
(33)  The  reduction  in  the  ceiling  for  health  public  spending 
growth  since  2013  has  contributed  to  keeping  the  growth 
rate in line with GDP growth. 

25 

                                                           
                                                           
3.1. Public finances and taxation 

the  existence  of  ‘marital  quotient’  helps  create 
work disincentives for second earners (see Section 
3.3). Moreover, most tax expenditures, like the tax 
deductibility of service vouchers and housing loans 
interest  deductibility  on  secondary  residence, 
disproportionally  benefit  high-income  earners36. 
Mortgage tax deductibility has contributed to drive 
the  increase  in  private  debt  (see  Section  3.2). (37) 
While  well-designed  tax  expenditures  can  be 
justified  and  enhance  positive  spill  overs  and 
welfare, they  may cause economic distortions and 
not  be  the  most  cost-efficient  means  of  achieving 
economic and social policy goals.    

consequences. 

Some tax expenditures also  lead to undesirable 
environmental 
Although 
alternative tax expenditures (e.g. the ’cash-for-car’ 
and  ‘mobility  budget’)  were  introduced  in  2018 
and  2019,  recent  data  from  the  human  resources 
provider from the social secretariat show that very 
few  taxpayers  opted  for  the  cash  for  car  system 
(38),  which  in  the  meantime  has  been  ruled 
unconstitutional by the Constitutional Court and is 
therefore  annulled  (39).  The  favourable  company 
car scheme therefore continues to provide adverse 
incentives in terms of road travel. The deductibility 
of  fuel  costs  is  particularly  harmful,  since  it 
induces  employers  to  cover  the  cost  of  fuel 
consumed  for  private  purposes  (‘fuel  card’). 
Employer-purchased  fuel  encourages  the  use  of 
company  cars  for  private  purposes  and  runs 
counter  the  incentives  provided  by  energy  and 
to  reduce  fuel  consumption 
vehicle 
(European Commission, 2017).   

taxation 

(36)  In  Flanders,  the  tax  deductibility  of  service  vouchers  was 

decreased from 30% to 20% as of 1 January 2020. 

(37)  Flanders has followed Brussels in deciding to phase out by 
2020 the mortgage deductibility woonbonus scheme. 
(38)  268  employees  for  the  last  quarter  of  2018  and  407 

employees in the first quarter of 2019. 

(39)  The  cash  for  car  scheme.  The  judgment  maintains  the 
consequences  of  the  scheme  until  new  legislation  is 
introduced, at the latest until 31 December 2020. 

Most  of  the  competences  for  long-term  care  have 
now been almost devolved to the regions, meaning 
budgetary and quality control mechanisms are now 
decentralized  too.  Federal  institutions  retained 
responsibility  for  overarching  activities  related  to 
the  social  protection  system,  e.g.  managing 
statistics  to  monitor  and  report  on  current  and 
projected  dynamics  of  spending  and  participating 
in  international  reporting  activities  in  this  regard 
(Federal  Public  Service  Social  Security,  Federal 
Planning  Bureau),  however 
lack  of  a 
centralised approach may weaken the effectiveness 
of  overall  expenditure  control.  For  the  part  which 
is  still  a  federal  competence,  there  are  different 
monitoring  systems  in  place.  Different  bodies  are 
involved  in  the  elaboration  and  execution  of  the 
budget,  and  there  are  checks  built  in  into  the 
system  (e.g.  a  budgetary  control  commission);  in 
addition, corrective action is foreseen in the event 
of general budget overrun.  

the 

3.1.6.  TAXATION 

tax 

tax 

income 

reduces 

revenue 

the  share  of 

Belgium  has  a  high  level  of  taxation,  but  also 
substantial  tax  expenditures.  In  2017,  Belgium 
tax  revenues  represented  44.8%  of  GDP  (EU 
average  39.2%),  however 
tax 
expenditure in  most tax categories is high (23.1% 
of  personal 
tax  receipts;  13.4%  of 
corporate  income  tax  receipts;  32.3%  of  value-
receipts)(35),  which 
added 
the 
efficiency  of  the  tax  system.  Some  47%  of  the 
tax 
foregone 
expenditures 
(e.g. 
pensions).  The  rest  covers  employment  (13.5%), 
real  estate  (15.9%),  R&D  (8.3%)  and  specific 
tax 
(6.4%). 
sector  provisions 
expenditures  are  not  subject  to  spending  reviews 
and do not appear to undergo impact assessments, 
resulting in a low efficiency for some of them (e.g.  
R&D tax schemes – see section 3.4), while others 
create 
environmental 
social 
distortions  (cf.  infra).  The  complexity  of  tax  law, 
also  because  of  tax  expenditures,  weights  in  the 
business environment (see Section 3.4.1). 

from 
social  measures 

In  addition, 

economic, 

resulting 

supports 

or 

Some tax expenditures create a certain number 
of economic and social distortions. For instance, 

(35)  Inventory  of  federal 

tax  expenditures’  available  at 
https://finance.belgium.be/en/figures_and_analysis/figures/
federal_tax_expenditures_report 

26 

                                                           
                                                           
3.1. Public finances and taxation 

2.5% of GDP to 2.7% of GDP in 2018thanks to the 
alignment of excise duties on diesel with those on 
petrol.  However,  energy  taxes  do  not  reflect  the 
carbon content of fuels and therefore do not foster 
the  most  energy-efficient  fuels  and  technologies 
(see  Section  3.5.1).  In  particular,  excise  duties  on 
fossil  fuels  used  for  heating  (gas  oil,  natural  gas, 
etc.) are low and set at the EU minimum level (42).  
Beyond the company car scheme, there are gaps in 
vehicle  taxation  which  do  not  allow  to  fully 
address  negative  environmental  externalities    and 
congestion,  and  to  raise  revenues  (see  Section 
3.5.1).  Professional  transporters  and  agriculture 
still benefit from a reduced excise rates on diesel. 

In spite of recent measures, 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  2018 (43).  According  to  the  2020 
World  Bank  Ease  of  Doing  Business  Report,  the 
process  of  transferring  a  property  has  become  the 
most  expensive  among  the  EU  Member  States  at 
12.7% of the property value (Luxembourg being at 
second  place  with  10.1%).  High  transaction  taxes 
on  immovable  property  contribute  to  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.  Further 
shifting  away  from  transaction  taxes  towards 
recurrent property taxes would maintain a constant 
level  of 
reducing  economic 
revenue  while 
distortions and commuting congestion(44). 

for heavy goods vehicles with a maximum authorised mass 
of more than 3.5 tonnes. The annual revenues of this levy 
in 2018 were estimated at € 712.7. 

(42)  The  Energy  Taxation  Directive  2003/968EC  (ETD)  lays 
down the EU rules for the taxation of energy products used 
as  motor  fuel  or  heating  fuel  and  of  electricity.  It  sets 
minimum  levels  of  taxation  and  lays  down  the  conditions 
for  applying  tax  exemptions  and  reductions.  The  ETD, 
however,  does  not  require  taxation  to  be  based  on  the 
carbon  dioxide  emissions  and  energy  content  of  the 
different fuels covered. 

(43)  Other  taxes  on  property.  Taxation  trend  in  the  European 

Union, 2020. 

(44)  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 and to 6% in 2020 (and even to 
5% for very important energetic renovations) and abolished 
the Woonbonus (mortgage tax relief). 

Graph 3.1.5:  Tax wedge on average wage, single earner 

(2018) 

Source: European  Commission 

participation 

and 
learning.  The 

The  high  level  of  taxation  on  labour  weakens 
discourages 
labour 
participation  on 
tax 
lifelong 
reform  that  took  place  in  several  steps  between 
2016  and  2020 (40)  reduced  the  tax  wedge  for  the 
lowest income earners. In particular, the labour tax 
wedge for those earning 50% of the average wage 
decreased  by  6.2  percentage  points  from  2015  to 
2018.  However,  for  those  earning  the  average 
wage, the tax wedge remains the highest in the EU 
(Graph  3.1.5).  Although  the  personal  income  tax 
system  offers  several  tax  brackets,  the  latter  are 
rather  narrow.  As  a  consequence,  even  average 
income  earners  are  subject  to  the  highest  income 
tax  rates  (45  and  50%), 
real 
progressivity of the system. Moreover, tax brackets 
are not systematically indexed to inflation. Overall, 
high  labour  taxation  not  only  contributes  to  the 
financial  disincentive  to  work,  it  also  discourages 
participation 
learning,  since  an 
important  share  of  the  additional  income  is  taxed 
away (see Section 3.3).   

limiting 

lifelong 

the 

in 

Environmental  taxes  have  increased,  but  there 
is  still  scope  to  better  aligning  taxation  to 
carbon  emissions,  possibly  also  increasing  tax 
revenues (41). Environmental taxes increased from 

(40)  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. 

(41)  Excise duty rates on diesel have been aligned with those on 
petrol.  Moreover,  since  1  April  2016  onwards  the  three 
Belgian  Regions  have  started  levying  a  kilometre  charge 

27 

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

as  compared  to  income  from  other  types  of 
investment.  Rental  income  from  housing  property 
located in Belgium is taxed based on the outdated 
cadastral income (indexed value of 1975 estimated 
income),  which  is  on  average  substantially  lower 
than the actual rental income received. Calculation 
by  the  European  Commission’s  Joint  Research 
Centre  have  estimated  that  taxing  the  net  rental 
income  would  have  a  positive  budgetary  and 
redistributive impact (see Box 3.1.1).  Any reform 
should,  however,  be  carefully  considered  against 
the background of (rental) housing market policies, 
of  the  overall  country  taxation  system  and  the 
possible impact on the real estate market. 

for 

The  current 
tax  rules  governing  housing 
contribute  to  overinvestment  in  real  estate  as 
compared  to  other  types  of  investment  (see 
Section  3.2).  Differentiated  tax  rates  and  tax 
expenditures 
capital 
several 
investment, make the tax system complex and lead 
to  misallocation  of  capital.  While  mortgage  tax 
is  now 
deductibility 
abolished  in  all  regions  except  Wallonia,  it  still 
applies  for  secondary  residences  and  rented 
housing (45).  In  addition,  income  from  rented 
housing  benefits  from  a  favourable  tax  treatment 

for  primary 

residences 

types  of 

(45)  The  mortgage  tax  deductibility  for  primary  residences  is 
governed  at  the  regional  level,  while  the  deductibility  of 
interests on buy-to-let housing loan is a federal matter. 

28 

                                                           
 
3.1. Public finances and taxation 

Box 3.1.2: Unequal tax treatment of rental income taxation 

Unlike in most EU Member States, rental income is taxed based on a fictitious amount rather than the 
received housing rent in Belgium. (1) The tax treatment of rental income depends on the purpose for which 
the  property  is  used.  When  immovable  property  is  rented  out  for  professional  purposes,  the  actual  rental 
income  received  is  added  to  the  personal  income  tax  base.  Related  expenses  are  estimated  to  40%  of  the 
rental income received and tax deductible. When immovable property is rented out for housing purposes, not 
the actual rental income but 140% of the indexed cadastral value (since 1991) is used to calculate the tax 
base.  The  cadastral  value  is  on  average  approximately  20%  to 25%2  of  the  actual  rental  income  received. 
Incurred related expenses are not tax deductible but a standard deduction of 40% applies.  

A substantial amount of tax revenue is lost due to the current tax treatment of rental income. Based on 
EUROMOD,  the  budgetary  and  redistributive  effect  of  the  current  tax  treatment  of  housing  rents  was 
quantified  by  comparing  it  to  a  scenario  in  which  households’  actual  rental  income  is  subject  to  personal 
income  tax.  Results  show  that  taxing  actual  rents  under  the  personal  income  tax  system,  would  generate 
additional tax revenue of approximately 0.15% of GDP on an annual basis. 

Moreover, the overall distributional effects of the current tax system seem regressive3. Given that some 
properties  are  over-valued  while  others  are  under-valued,  the  use  of  outdated  cadastral  values  also  entails 
distributional  concerns.  Since  high-income  earners  own  relatively  more  immovable  property  than  low-
income earners, they benefit most from the favourable tax treatment of rental income. Moreover, given the 
progressive tax rate schedule in Belgium, they benefit proportionally more than high-income earners. Hence, 
taxing actual rental income would mainly affect the highest income groups. 

Finally, the current tax treatment does not incentivise property owners to invest in the maintenance of 
their rented property. Currently only financing costs for acquiring rental housing can be deducted from the 
tax  base.  Other  expenses  related  to  the  rental  activity,  like  maintenance  costs,  are  not  tax  deductible. 
Granting tax deduction to maintenance and renovation costs could stimulate the building sector. Moreover, it 
could  help  reduce  the  informal  economy,  as  invoices  would  be  needed  for  the  tax  deduction  to  apply.  In 
addition, deductibility of renovation costs could improve the quality and the energy efficiency of the housing 
stock and help easing the energy transition.  

(1)  Only  Greece,  Croatia,  the  Netherlands,  Slovenia,  Romania,  Finland  and  Sweden  tax  rental  income  separately  from 
other personal income, often at a flat rate. Italy, Latvia, Malta and Poland have a two track system where the taxpayer 
can chose whether the rental income is taxed separately at a flat rate (without any deductions) or under the personal 
income tax system. 

(2)  European  Commission,  «  Press  Releases  –  Taxation:  European  Commission  asks  Belgium  to  revise  its  taxation  of 
property income from abroad", 22 March 2012, https://europa.eu/rapid/press-release_IP-12-282_en.htm?locale=en 
(3)  EUROMOD simulations are based on survey Statistics on Income and Living Conditions (EU-SILC data) and cover a 

sample of the household population. Using administrative data may provide different simulation results. 

29 

   
 
 
 
 
 
 
 
 
 
3.2.  FINANCIAL SECTOR 

3.2.1.  BANKING SECTOR AND INSURANCE 

The  financial  sector  appears  relatively  sound, 
but  its  profitability  is  under  pressure.  Banks 
solvency  is  good,  with  a  capital  adequacy  ratio 
relatively  stable  at  18.5%  in  June  2019.  Credit 
quality  is  high,  with  low  non-performing  loans 
ratios.  Nevertheless,  banks  are  only  moderately 
profitable, with a return on equity ratio of 8.2% in 
2018,  in  continuous  erosion  since  2016.  Banks' 
challenges  remain  largely  the  same  as  last  year: 
persistently  low  interest  rates,  a  cost-to-income 
ratio among the highest in the EU, 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 
rate  environment, 
interest 
the  current 
digitalisation,  compliance  costs  and 
intense 
competition.  

low 

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 for q1 and q2. 
Source: ECB - CB2 - Consolidated Banking data - European 
Commission calculations 

the 

sector 

financial 

In  order 
to  maintain  profitability  and 
has 
productivity, 
significantly  reduced  its  headcount,  its  number 
of  branches  and  invested  in  digitalisation.  The 
total  employment  in  the  financial  sector  has  been 
declining  from  144,200  employees  in  2001  to 
117,800  employees  in  2018,  and  this  trend  has 
accelerated  since  2015.  Likewise,  the  number  of 
branches  has  dropped  continuously  from  7,358  in 
1997  to  2,983  in  2018.  In  parallel,  banks  have 
embarked on digitalisation. A survey (Bégasse, P., 
2018) shows  that  Belgian  banks  have  a  relatively 
positive  outlook  on  the  way  they  will  manage  the 
challenge of digitalisation. On average, large banks 
tend  to  have  more  developed  approaches  towards 
supporting 
the  new  business  models  and 
significant 
there  are 
technologies,  although 

differences  in  approach  and  maturity  between 
banks. Banks’ biggest weakness is their legacy IT 
systems,  which  make  it  difficult  to  implement 
changes.  It  is  difficult  for  bank  to  attract  the 
necessary staff resources, which leads to a lack of 
in-house  skills  that  are  needed  to  evolve.  Smaller 
Belgian  banks  are  being  forced 
to  act  as 
‘followers’ on the market as they lack the financial 
capacity  to  experiment  with  the  abundance  of 
that  are  being  developed. 
fintech  solutions 
Moreover, 
fintech  companies  are  somewhat 
reluctant  to  collaborate  with  smaller  banks  due  to 
their  limited  customer  base  to  test  innovative 
solution,  despite  the  will  and  interest  shown  by 
these banks to establish such partnerships. 

The  contributions  to  the  Belgian  Deposit 
Guarantee  Scheme (DGS)  are not invested into 
a  segregated  and  diversified  portfolio  of  low-
risk  assets.  As  explained  in  previous  country 
reports (European Commission, 2018a, 2019a) and 
in  the  IMF’s  2017  Financial  Sector  Assessment 
Program, 
the  absence  of  a  ring-fenced  and 
autonomous  DGS  is  not  optimal  from  a  financial 
stability  perspective.  The  annual  contributions  to 
the Belgian  DGS directly enter the  federal budget 
as  tax  revenues  and  contribute  to  improve  the 
government  headline  balance.  However,  if  the 
intervene  and  compensate 
DGS  needs 
depositors, Belgium will have to finance the entire 
cost  of 
the  budget. 
Moreover,  in  light  of  the  delayed  privatisation  of 
Belfius,  state  ownership  in  the  financial  sector 
(namely in Belfius, BNP Paribas, bpost, Dexia and 
Ethias)  remains  substantial  and  aggravates  spill-
over risks between the sovereign and the financial 
sector.  Dexia  still  constitutes  a  sizeable,  but 
relatively  stable  contingent  liability  of  €32.9 
billion (7.4% of GDP) for the Belgian state. 

intervention 

from 

the 

to 

average 

solvency  has 

Insurers’ 
slightly 
deteriorated due to an interest rate curve lower 
than ever, but remains broadly satisfactory. The 
average  Solvency  Capital  Requirement  coverage 
ratio  dropped  from  219%  in  December  2018  to 
196%  in  June  2019,  but  some  individual  players 
present much lower ratios, close to 100%, or even 
below  100%  without  the  volatility  adjustment. 
Like  in  other  Member  States,  this  ratio  may 
sometimes  benefit  significantly  from  particular 
the  Long-Term  Guarantee 
adjustments 

of 

30 

2016201720182019q12019q2Non-performing loans3.22.72.32.12.0o/w foreign entities2.62.32.22.02.0o/w NFC & HH sectors4.23.62.92.92.7o/w NFC sector4.84.33.73.63.4o/w HH sector3.73.02.32.32.1Coverage ratio43.742.744.144.343.1Return on equity(1)8.98.88.25.58.6Return on assets(1)0.60.70.60.40.6Total capital ratio18.819.018.818.218.5CET 1 ratio15.716.215.615.015.2Tier 1 ratio16.216.916.516.016.3Loan to deposit ratio88.090.293.289.190.5 
 
  
 
package (46)  and  may  overestimate  the  actual 
solvency  since  the  shock  for  negative  basic  risk-
free  interest  rates  is  assumed  to  be  nil (47).  As  a 
consequence  of  the  low  interest  rate  environment, 
life  insurers  have  expanded  further  their  unit-link 
business.  They  have  also  increased  their  exposure 
to the  real estate  markets,  which  might  have been 
partly  encouraged  regulatory  arbitrage,  since 
capital  requirements  for  counterparty  risk  can 
sometimes  be  lower  for  insurers  than  for  banks. 
Several  (re)insurers  have  recently  received  a 
license and opened an office in Brussels in order to 
facilitate  their  access  to  the  single  market.  This 
relocation  of  activities  led  to  an  increase  in  non-
life  gross  premiums  of  about  25%  in  2019  and 
represents  a  sizable  additional  workload  for  the 
National Bank of Belgium which has scaled up its 
resources  accordingly.  Furthermore,  the  new  tax 
advantage granted to legal protection insurance as 
of 1 September 2019 is expected to have a positive 
impact on the profitability of those insurers active 
in this line of business.  

Access to finance 

Lending  to  non-financial  corporations  has 
continued to grow in 2019 at a much faster rate 
than  GDP.  Although  it  has  decreased  since  last 
year, the year-on-year growth of loans to euro area 
non-financial  corporations  corrected  for  sales  and 
securitisation  has  been  consistently  the  highest  in 
the euro area for a while (7.2% in December 2019 
compared  to  3.2%  in  the  euro  area).  Against  this 
background, on 28 June 2019 the National Bank of 
Belgium  decided   to  increase  the  countercyclical 
buffer rate for credit risk exposures to the Belgian 
private  non-financial  sector  as  from  1  July 
2020(48).  

(46)  The long-term guarantees (LTG) measures were introduced 
in  the  Solvency  II  Directive  to  ensure  an  appropriate 
treatment  of  insurance  products  that  include  long-term 
guarantees.  

(47)  In  the  standard  formula  of  Solvency  II,  the  Solvency 
Capital  Requirement  for  interest  rate  risk  is  calculated  on 
the  basis  of  two  scenarios:  one  in  which  the  interest  rate 
curve goes up, and the other in which the interest rate curve 
goes down. However, in this latter scenario, if the interest 
rates are already negative for some maturities (which is the 
case today), the negative shock on the curve is assumed to 
be  0  for  those  maturities.  In  other  words,  the  standard 
formula  assumes  that  a  currently  negative  interest  rate 
cannot become even more negative in the future. 

(48)  https://www.nbb.be/en/articles/national-bank-belgium-sets-

countercyclical-buffer-rate-05 

3.2. Financial sector 

to 

any 

attempt 

individual 

in  relation 

Banks’  vulnerabilities 
the 
residential real estate market have deepened in 
a  context  of  deteriorating  credit  standards  and 
rising  household  debt.  The  Belgian  mortgage 
market  is  characterised  by  strong  competition  on 
prices,  where 
to 
significantly  increase  the  commercial  margin  is 
immediately  sanctioned  by  a  decline  in  market 
share.  Faced  with  squeezed  margins,  banks  have 
loosened  credit  standards  like  the  loan-to-value 
ratio or the maturity to increase their volumes (for 
details see National Bank of Belgium, 2019, pages 
24-25).  As  a  consequence,  lending  to  households 
has  grown  dynamically  for  several  years  around 
6%  year-on-year,  which  is  significantly  above 
GDP  growth. (49)  Furthermore,  the  exposure  of 
banks to companies active in the construction and 
the 
increased 
significantly in recent years. 

estate  has 

commercial 

real 

in  recent  years.  The 

Belgian  banks’  exposures  to  the  Belgian  real 
estate  and  construction  sector  has  increased 
significantly 
strong 
dynamism  in  the  residential  real  estate  market  is 
reflected  in  the  significant  increase  of  bank  credit 
to companies in the real estate sector. Between the 
end  of  2007  and  the  end  of  2018,  the  share  of 
Belgian  mortgage  loans  in  total  assets  increased 
from 8% to 21%. At the same time, the importance 
of  loans  to  companies  active  in  the  construction 
and  real  estate  sector  increased  from  2%  to  5.5% 
over  the  same  period  of  time (50).  Belgian  banks 
are also indirectly exposed to the commercial real 
estate market. For instance, they also grant loans to 
companies  active  in  other  sectors  for  which 
commercial real estate (such as offices, shops, etc.) 
is provided as collateral. 

Banks may have become more vulnerable to an 
increase  in  interest  rates.  According  to  the 
National  Bank  of  Belgium,  by  redirecting  their 
balance  sheet  to  more  (fixed-rate)  lending  and 
(retail) deposit funding, banks might have widened 
their  exposure  to  interest  rate  risk.  Although  they 
typically use interest rates derivatives to hedge the 

(49)  In  the  last  months  of  2019,  there  has  been  an  exceptional 
surge in the number of new mortgages, partly explained by 
the  decision  by  the  Flemish  government  to  abolish  the 
‘woonbonus’ 
See: 
https://www.nbb.be/fr/articles/la-banque-nationale-
enregistre-en-octobre-61-de-credits-hypothecaires-de-plus-
quun 

scheme 

2020. 

in 

(50)  National Bank of Belgium, Financial stability report 2019, 

page 24. 

31 

                                                           
                                                           
3.2. Financial sector 

The  Belgian  venture  capital  market  is  close  to 
the  EU  average  in  terms  of  volumes.  Venture 
capital  might  benefit  from  the  launch  of  the 
Belgian  Growth  Fund  in  June  2019  and  from  a 
more  neutral  taxation  framework.  The  Belgian 
Growth  Fund  launched  in  June  2019,  is  a  fund  of 
funds,  and  focuses  on  later  stage  venture  capital 
rather than start-ups. The first closing of July 2019 
delivered  €213  million,  but  the  Fund  targets  an 
ultimate size of € 300-400 million. The goal of the 
Belgian Growth Fund is to increase the size of the 
funds  and  to  provide  diversification  and  leverage 
investors.  The 
institutional 
to  participating 
remaining  major  obstacle  to  equity  financing 
remains  the  biased  tax  framework,  namely  the 
persistence  of  a  debt-equity  tax  bias,  although 
incremental 
partially  corrected  with 
Notional Interest Deduction (53), the existence of a 
tax incentive for savings and the rigid design of the 
long-term savings and pension schemes. 

the  new 

in  order 

Green finance has received more attention from 
the  investors,  the  financial  industry  and  the 
regulators.  Sustainable  investments  are  estimated 
to have increased from €7.7 billion in 2013 to €24 
billion in 2017 (Van den broeck, R., et al., 2018). 
Febelfin (54) 
launched  a  quality  standard  for 
sustainable  and  socially  responsible  financial 
to 
products  on  7  February  2019, 
qualitatively  and  quantitatively  increase  the  level 
of  socially  responsible  and  sustainable  financial 
products, and to mainstream its principles towards 
traditional  financial  products.  From  a  prudential 
perspective, the National Bank of Belgium sent, at 
the  end  of  2018,  a  questionnaire  to  banks  on  the 
various  risks  associated  with  climate  change. 
According  to  their  replies,  although  financial 
institutions seem to be aware of the potential risks, 
they  have  so  far  made  relatively  little  progress  in 
quantifying  and  integrating  them  into  their  risk 
management.  The  share  of  green  investments  in 
limited. 
their 
Nevertheless, 
their 
willingness  to  contribute  to  a  more  sustainable 
economy (National Bank of Belgium, 2019). 

seems 
institutions  are 

very 
indicating 

portfolio 

also 

interest rate risk, “it is not excluded that  banks, in 
their  search  for  yield  in  the  current  low  interest 
rate  environment,  have  been  inclined  to  increase 
their  duration  gaps  by  leaving  a  larger  share  of 
their  positions  unhedged”  (National  Bank  of 
Belgium,  2019,  page  65).  By  doing  so,  their 
transformation margin and net interest income can 
increase when interest rates remain low. However, 
this strategy is risky because a larger duration gap 
makes banks more vulnerable to a large and abrupt 
interest rate increase. 

on 

23 

2019 

targeting 

in  place 

September 

On  25  October  2019,  the  National  Bank  of 
Belgium  urged  the  financial  sector  to  exercise 
more caution in granting risky mortgage loans. 
The  European Systemic Risk Board concluded on 
10  July  2019  that  the  macroprudential  measures 
that  are 
in  Belgium  are  partially 
appropriate  and  partially  sufficient  to  address  the 
vulnerabilities on the residential real estate market. 
it 
Therefore, 
recommended  (51) the activation of legally binding 
borrower-based  measures 
the  new 
production of loans, in complement to the existing 
capital-based measures targeting the existing stock 
of  loans  (see  (European  Commission,  2019a)  for 
details  on  the  existing  national  measure  under 
Article  458  of 
the  Capital  Requirement 
Regulation).  As  a  first  step,  the  National  Bank  of 
Belgium  decided (52)  to  establish  new  prudential 
expectations  based  on  the  ’comply  or  explain‘ 
principle,  asking  banks  and  insurers  to  be  more 
cautious  about  granting  loans  with  a  very  high 
loan-to-value ratio particularly for buy-to-let loans, 
and 
certain 
combinations  of  specific  risks.  These  supervisory 
expectations  came  into  force  on  1  January  2020. 
Activating  binding  borrower-based  measures  will 
only be considered envisaged as a potential second 
step  should  these  supervisory  expectations  prove 
insufficient.  However,  the  introduction  of  such 
binding  measures  could  be  complicated  by 
Belgium’s 
the  macroprudential 
framework,  which  requires  the  government  to 
impose  binding  borrower-based  measures  (on 
recommendation by the National Bank).  

expectations 

setting 

design 

out 

for 

of 

(51)https://www.esrb.europa.eu/news/pr/date/2019/html/esrb.pr1

90923~75f4b1856d.en.html 

(52)  https://www.nbb.be/en/articles/national-bank-urges-

financial-sector-exercise-more-caution-granting-risky-
mortgage-loans 

(53)  However,  in  the  current  incremental  system,  the  Notional 
Interest Deduction is limited to the average annual increase 
in equity over a period of five years. 

(54)  The Belgian federation of the financial sector. 

32 

                                                           
 
                                                           
3.2. Financial sector 

by  2.2%  on  average  annually  in  nominal  terms 
since  2008  and  by  0.7%  per  year  in  real  terms. 
Steadily increasing house prices might explain part 
of the increase in households’ debt, as the latter is 
mostly  mortgage-based.  Traditional 
indicators 
(price to income, i.e. affordability and price-to-rent 
i.e. dividend) signal a potential 20% overvaluation 
gap  of  Belgian  house  prices.  However,  a  more 
sophisticated indicator developed by the European 
Commission (Philiponnet,  N.  et  al.,  2017),  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  moderate 
overvaluation  (5.9%)  (National  Bank  of  Belgium, 
2019).  

Graph 3.2.2:  Households indebtedness, selected indicators 

Source: European Commission 

The  tax  framework  might  also  have  played  a 
role  in  the  increase  in  housing  prices  and  in 
mortgage  debt  by  providing  borrowers  with 
several  significant  tax  incentives  (see  Section 
3.1.6).  The  decision  of  the  Brussels  and  the 
Flemish  regions  to  phase-out  their  mortgage  tax 
advantages  is  a  step  in  the  good  direction  as  it 
reduces incentives to borrow. However, there  still 
remain  tax  incentives  for  borrowers  at  federal (55) 
and regional level (‘chèque-habitat‘ in Wallonia). 

(55)  « Réduction  d'impôt  pour  épargne  à 

/ 
belastingvermindering  voor  het  langeterminsparen »    and 
« deduction fédérale d'intérêts / federale intrestaftrek ». 

terme 

long 

3.2.2.  PRIVATE DEBT 

its  peak 

The  level  of  private  debt  (as  per  cent  of  GDP) 
in  2016, 
to 
declined  compared 
nevertheless  it  remains  high.  The  private  debt 
ratio  set  at  178.5%  of  GDP  in  2018,  down  from 
194.8%  in  2016.  Household  debt  accounted  for 
59.7%  of  GDP  versus  118.8%  for  non-financial 
corporations.  The  decline  was  on  the  back  of  a 
reduction 
in  non-financial  corporations’  debt, 
while  households’  debt  continued  to  increase 
steadily.  High  corporate  debt  is  mainly  driven  by 
the intra-group debt of multinationals (see Section 
1). 

Mortgage  debt  is  the  main  driver  of  household 
debt,  accounting  for  86%  of  total  household 
debt  in  2018.  At  the  end  of  2018,  outstanding 
mortgage  loans  amounted  to  more  than  €  200 
billion,  about  four  times  the  amount  at  the 
beginning of 2000. This increase is explained both 
by  a  rise  in  the  number  of  outstanding  contracts 
and  by  the  constant  increase  in  average  amounts 
borrowed, which is correlated with the increase in 
house prices. Between 2000 and 2018, the average 
amount  borrowed  for  the  purchase  of  a  house 
increased  from 
to  nearly 
€160,000.  

than  €75,000 

less 

Graph 3.2.1:  Evolution of households debt 

Source: European Commission 

Belgian  house  prices  currently  present  signs  of 
limited  overvaluation.  After  a  period  of 
a 
dynamic  growth  between  1998  and  2008  (5% 
average  annual  increase)  house  prices  have  risen 

33 

01020304050607000010203040506070809101112131415161718% of GDPBEEA0%20%40%60%80%100%120%Debt/disposablehousehold incomeDebt/GDPBEEA  
  
                                                           
3.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

the  same 

line  with 

time, 
(in 

the  number  of 
(4.9%).  At 
jobseekers  decreased 
lower 
unemployment rates), leading to a substantial drop 
in the number of jobseekers per vacancy. While in 
2014, there  were five jobseekers for one  vacancy, 
this dropped to only two jobseekers per vacancy in 
2018.  Labour  shortages  are  most  pronounced  in 
Flanders,  where  in  2018  there  was  a  one-to-one 
ratio of jobseekers to vacancies (Graph 3.3.2). 

Graph 3.3.2:  Number of jobseekers per vacancy, by region 

Labour market 

to  74.5% 

to  2017,  driven 

Despite  a  slowdown  in  economic  growth,  the 
labour  market  continued  to  improve,  although 
at  a  slower  pace.  The  activity  rate  increased  by 
0.8  percentage  points 
(2019Q3) 
compared 
in  particular  by 
increased labour market participation among older 
workers  (Graph  3.3.1),  but  remained  well  below 
the  EU  average  (78.7%).  Employment  growth 
continued  to  be  strong,  pushing  the  employment 
rate  up  to  70.6%  in  2019Q3,  one  of  the  highest 
levels  ever.  In  2018  and  the  first  half  of  2019, 
unemployment  fell  faster  than  predicted,  reaching 
5.2%  in  2019Q3  (European  Commission,  2019b). 
A  decline  in  the  unemployment  rate  was  also 
recorded  for  some  of  the  vulnerable  groups, 
including the young (down from 18.5% in 2017Q3 
to 13% in 2019Q3) and the long-term unemployed 
(down from 3.1% in 2017Q3 to 2.2% in 2019Q3). 
Further  improvements  in  labour  market  outcomes 
are  held  back  by  a  gradual  increase  in  labour 
shortages. 

Graph 3.3.1:  Key labour market indicators 

Source: Eurostat 

Population  ageing  and  a  low  level  of  labour 
market  participation  worsen  the  tightening  of 
the labour market. Only three out of four people 
of  working  age  (20-64)  are  active  on  the  labour 
market (74.5%), which is below the EU average of 
78.7%  in  2019Q3.  Activity  rates  are  particularly 
low for young people and older workers. The low 
activity  rate  among  young  people  (20-24)  is 
explained by high enrolment in tertiary education, 
but  also  by  the  fact  that  the  time  students  take  to 
complete  higher  education 
long 
(OECD,  2019a).  Past  reforms  that  strengthened 
conditions  for  early  retirement  resulted  in  a 
gradual  increase  in  the  employment  rate  for  older 
workers  (50.3% 
the  effective 
retirement age (61.7 years for men and 60.1 years 
for  women  in  2017).  However,  the  gap  with  the 
employment  rate  of  prime-age  workers  (30.1  pps) 
and  the  gap  with  the  statutory  retirement  age  (3.3 
years  for  men  and  4.9  years  for  women)  remain 
among the largest in the EU.  

in  2018)  and 

is  relatively 

The  share  of  the  private  sector  salaried 
employment  that  is  absent  from  work  as  a 
result of long-term illness continues to increase 
albeit  at  a  lower  rate.  Between  2001  and  2019, 
the  share  of  private  sector  salaried  employment 
that  was  ill  for  more  than  1  year  increased  from 

Source: Eurostat 

The labour market is tightening as reflected by 
the  high  vacancy  rate  and  the  record  low 
unemployment rate. After reaching a record high 
level of vacancies in the first quarter of 2019, the 
vacancy  rate  (i.e.  number  of  vacancies  per 
occupied job) declined slightly to 3.4% in the third 
quarter  of  2019.  There  are 
large  disparities 
between sectors and occupations,  with the  highest 
vacancy  rates 
technical  and 
in  ICT  (6.2%), 
administrative professions (6.5%) and construction 

34 

6768697071727374750510152025200120022003200420052006200720082009201020112012201320142015201620172018%%Activity rate 20-64 (rhs)Unemployment rate 15-74 (lhs)Long-term unemployment rate 15-74 (lhs)Youth unemployment rate 15-24 (lhs)NEET rate 15-24 (lhs)01234567891020142015201620172018BEBXLFLWAL 
   
   
3.3. Labour market, education and social policies 

In Flanders, the employment rate for workers aged 
25-54  years  old  exceeded  86%  in  2018,  which  is 
higher  than  the  levels  in  the  Netherlands  and 
Germany  (Graph  3.3.4).  However,  the  overall 
employment  rate  (20-64)  was  lower,  held  back  in 
particular by the low employment rates of the low-
skilled,  non-EU  born  and  older  workers  (also 
impacting pension expenditure – see section 3.1.5). 
In Brussels and Wallonia, labour market outcomes 
are significantly worse for all these groups, also as 
compared  to  neighbouring  countries.  Addressing 
unequal  labour  market  outcomes  would  be  an 
important step to make further progress on SDG 8 
(decent work) and 10 (reducing inequality). 

Graph 3.3.4:  Employment rates, by population groups and 

regions (2018) 

trajectory  and 

1.36%  in  2001  to  2.95%  in  2019  (Graph  3.3.3). 
Only  part  of  this  increase  can  be  explained  by 
population  ageing  and  increased  female  labour 
market  participation  (which  increased  eligibility 
for  social  assistance)  (Saks,  2017).  In  past  years, 
the  federal  government  introduced  a  new  re-
integration 
increased  financial 
incentives  to  work  for  beneficiaries  of  disability 
benefits  if  they  took  up  part-time  employment. 
Furthermore,  the  use  of  formal  and  informal  re-
integration  trajectories  increased,  as  well  as  the 
share  of  long-term  ill  workers  who  take  up 
(Verlinden,  2019; 
employment  progressively 
Acerta(56)).  A  drawback  of  the  current  system  is 
that  the  formal  re-integration  trajectory  requested 
by  the  employer  can  only  start  after  4  months  of 
continuous absence, while studies have shown that 
the  chances  of  successful  integration  decline  with 
the  length  of  the  absence  (Belin  et  al.,  2016).  
Moreover, figures on the rising share of employees 
that  report  psychological  fatigue  ('stress  at  work') 
(from  28.8%  in  2007  to  36.8%  in  2019  in 
Flanders)  point  to  the  importance  of  preventing 
sickness absenteeism among those who continue to 
leave 
work  but  are  at  risk  of  future  sick 
(Bourdeaud'hui et al. 2019).   

Graph 3.3.3:  Share of private sector salaried employment 

that is ill, by duration of the illness 

Source: Eurostat 

the  non-EU  born 
Despite  some  progress, 
continue  to  face  poor  labour  market  outcomes. 
In  2018,  the  employment  rate  among  the  non-EU 
born was on the rise (53.9%, compared to 52.0% in 
2017),  in  particular  in  Flanders  (+5  pps)  and 
among  those  that  arrived  recently  (less  than  5 
years)  in  Belgium  (+6.8  pps).  Despite  this  recent 
improvement,  the  employment  rate  of  non-EU 
born  remains  18.1  pps  below  the  level  of  natives 
(compared to 19.0 pps in 2017). In particular, non-
EU born women face a very low employment rate 
(44.9%) and a high gap compared to native women 
(23.8  pps).  The  overall  low  employment  rate  for 
non-EU born is driven both by high unemployment 
rates (three times as high as for natives) as well as 
a  very  low  activity  rate  among  non-EU  born 
women (52%). This impacts strongly on the social 
situation of non-EU born (see below).  

(1) Data refer to the first six months of every year and 
include only employees of companies with fewer than 1000 
employees.  
Source: Securex 

There  are  large  inequalities  in  labour  market 
outcomes  between  population  groups  and 
regions. In 2018, the overall employment rate (20-
64)  for  Belgium  was  69.7%,  well  below  the  EU 
average  (73.2%).  There  are,  moreover, 
large 
disparities between population groups and regions. 

(56)  Available  at:  https://www.acerta.be/nl/over-acerta/in-de-
pers/op-vijf-jaar-tijd-hervatten-bijna-dubbel-zoveel-belgen-
het-werk-geleidelijk-na-ernstige-ziekte-of-ongeval  

The 
labour  market  situation  also  remains 
unfavourable for native-born with foreign-born 

35 

00.511.522.533.520012002200320042005200620072008200920102011201220132014201520162017201820190-1 month1 month - 1 year> 1 year30405060708090Total (20-64)Prime age (25-54)Older workers (55-64)Low skilled (20-64)Non-EU born (20-64)BEBXLDEFLNLWAL   
                                                           
   
3.3. Labour market, education and social policies 

increase the labour market participation of women 
by  1.6%,  while  the  impact  on  the  labour  market 
participation  of  men  is  expected  to  be  negligible. 
The  abolition  of  the  marital  quotient  would 
particularly affect take-up of work by non-working 
spouses  and  second  earners  working  relatively 
little hours (less than 16 hours)(58), while having  a 
small  negative  effect  on  the  disposable  household 
income in all income deciles. (59) 

In  contrast, 

there  are  no 

There  remain  financial  disincentives  to  work 
for  beneficiaries  of  social  benefits  with  a  low 
earning  potential.  In  particular,  beneficiaries 
living  in  a  single  household  receiving  disability 
income  support,  unemployment  (at  the  minimum 
level) and minimum income benefits face financial 
disincentives  to  increase  their  hours  worked.  This 
is  reflected  by  the  flat  curve  up  to  a  labour 
participation of at least 15 days per month (Graph 
3.3.5). 
financial 
disincentives  for  the  beneficiaries  of  disability 
social  insurance  benefits  to  take  up  part-time 
employment  after  the  2018  reform  of  the  benefit 
system.  There  are  differences  in  the  level  and 
financial incentives provided by the various social 
benefit  schemes,  which  do  not  always  reflect 
differences in needs. For example, beneficiaries of 
unemployment  benefits  who  do  not  work  receive 
€170  (or  19%)  more  than  those  earning  the 
minimum  income,  while  income  positions  are 
reversed  from  the  moment  that  the  beneficiary 
works  more  than  3  days  per  month.  In  order  to 
reduce  unemployment-  and  inactivity  traps,  the 
Flemish government plans to make social benefits 
fully  income  dependent  and  no  longer  depend  on 
someone's employment status.  

Furthermore,  while  unemployment  benefits 
decrease  over  time,  Belgium  remains  the  only 
Member  State  in  which  they  are  unlimited  in 
time.  While  this  enables  the  Public  Employment 
Services (PES) to monitor more closely those who 
are  both  without  a  job  and  not  eligible  for 
minimum  income  support,  it  may  potentially 
reduce the effective activation of jobseekers when 

(58)  Household  type  simulations  were  performed  using  the 

OECD tax and benefit model. 

(59)  Calculations  by 

the  European  Commission’s 

Joint 
Research  Centre,  based  on  the  EUROMOD  model,  show 
the impact is expected to be the largest for households with 
a  disposable  income  between  the  second  (-0.7%)  and  the 
fifth  decile  (-0,4%),  leading  to  a  small  increase  in  the  at-
risk of poverty rate (+0.3 pps). 

rates  of 
parents.  This  group  has  higher 
unemployment  and  people  not 
in  education, 
employment  or  training,  explained  partly  by  their 
on  average  lower  educational  outcomes,  but  also 
by other factors including discriminatory practices 
(FOD  Werkgelegenheid,  Arbeid  en  Sociaal 
Overleg, 2020; 2014 ADM LFS). Moreover, when 
in  employment,  they  are  more  often  affected  by 
over-qualification  and  precarious  contracts.  In 
particular,  for  the  children  of  two  non-EU  born 
parents,  the  chance  to  succeed  on  the  labour 
market is lower (Piton and Rycx, 2020).  

The employment rate of people with disabilities 
remains well below the EU average. In 2018, the 
employment  rate  of  people  with  disabilities  (20-
64) was 31.6%, ranging between 46% in Flanders 
and  31.1%  in  Brussels.  According  to  the  Belgian 
labour  force  data,  more  than  one  in  four  (27%) 
non-employed people with disabilities indicate that 
they  would be able to  work if they  would receive 
some support measures, in particular they indicate 
that  adjustments  to  the  type  of  tasks  or  workload 
are  still  lacking.  Another  27%  indicated  that  they 
take  up 
do  not  need  additional  support 
employment.  This  underlines  the  importance  of 
adopting,  in  cooperation  with  the  social  partners, 
effective  and  comprehensive  integration  strategies 
across the different levels of competency. 

to 

income 

Labour 
taxed,  affecting 
is  highly 
incentives  to  work  and  to  participate  in  adult 
learning  (see  Section  3.1.6).  In  its  government 
agreement, the Flemish government announced the 
introduction of a job bonus of maximum €50   per 
month  for  a  full-time  worker  earning  up  to 
€1700   per month and phased out for earnings up 
to  €2500     per  month  .  The  effects  on  work 
incentives  still  have  to  be  analysed,  in  particular 
the  effect  on  existing  low-wage  traps.  High  tax 
rates on labour may reduce incentives to invest in 
lifelong  learning  as  they  reduce  the  return  on 
investment.  For  second  earners,  disincentives  to 
work  are  aggravated  by  the  existence  of  the 
’marital quotient‘. (57) Overall, calculations by the 
European  Commission’s  Joint  Research  Centre 
show  that  abolishing  the  marital  quotient  could 

(57)  This  feature  of  the  personal  income  tax  calculation  for 
couples  assigns  part  of  taxable  earned    income  from  the 
partner  with  the  highest  earned  income  to  the  partner 
without  a  low  or  not  earned  income.  The  transferred 
amount  is  capped  to  30%  of  the  couple's  total  earned 
income and to 11110 € for 2020 (yearly indexed amount). 

36 

                                                           
                                                           
 
system 

combined with relatively lenient benefit eligibility 
(OECD, 2018). Moreover, unemployment benefits 
for  long-term  unemployed  are  not  means-tested. 
The  announced  reform  of  the  unemployment 
benefit 
(i.e.  making  benefits  more 
degressive) has been put on hold and will need to 
be  monitored  in  terms  of  work  incentives.  In 
is  available  on  the 
addition,  no 
potential  spillovers 
income 
scheme  if  unemployment  benefits  were  limited  in 
time.   

the  minimum 

information 

to 

Graph 3.3.5:  Low wage traps for different social benefits (for 

a single earner household working at the 
minimum wage), (2019)) 

Source: Mimosis micro simulation model  

the 

rate 

transition 

in  particular  for 

There  are  concerns  about  the  effectiveness  of 
activation measures. This is reflected by the  fact 
that  despite  high  participation  in  active  labour 
market  policies, 
from 
unemployment to employment remains low (Graph 
the  most  vulnerable 
3.3.6), 
jobseekers.  As  a  result,  long-term  unemployment 
remains  relatively  high,  at  around  48.7%  of  total 
unemployed  people  in  2018.  However,  there  are 
large  regional  differences.  In  Flanders,  33.9%  of 
all  unemployment  is  long-term  unemployment, 
while 
it  accounts 
for  56.9%  and  56.2%  of  all 
respectively 
the 
unemployment.  Flanders  has  announced 
introduction of community work for those actively 
looking  for  employment  while  unemployed  for 
more  than  2  years  despite  having  followed  a 
to  employment.  However, 
guided 
several studies have pointed to the negative effects 
of  similar  measures,  including  crowding  out  of 
regular  employment  and  low  transitions  to  the 
regular  economy  (e.g.  Schepers  and  Nicaise, 
2015). 

in  Brussels  and  Wallonia 

trajectory 

3.3. Labour market, education and social policies 

the  provision  of 

The  introduction  of  a  system  to  determine  a 
jobseeker’s  distance  to  the  labour  market  may 
strengthen 
individualised 
support.  In  Flanders,  the  Public  Employment 
Service  (PES)  has  rolled  out  a  pilot  project  to 
assign  a  profiling  score  to  each  jobseeker  using 
data-mining 
’statistical 
techniques,  so  called 
profiling‘. This  score  measures the  likelihood that 
a  jobseeker  will  find  employment  in  the  next  6 
months. It can be used to strengthen the provision 
of  individualised  guidance  and  the  type  of  action 
required  to  ensure  a  swift  (re-)entry  to  the  labour 
market  (Desiere  et  al.  2019).  In  Wallonia,  the 
Forem 
its 
provision of individualised support by 2021. 

to  further  strengthen 

is  planning 

Graph 3.3.6:  Correlation between the transition rate (2018) 
and participation in ALMPs (2017) 

Source: DG EMPL LMP database and Eurostat 

and 

available 

Public employment services offer a wide variety 
of measures, suggesting that there may be scope 
to  streamline  the  offer.  There  is  a  lack  of 
systematic 
impact 
publicly 
evaluations of key programmes in all regions (see 
for  example  Desiere  et  al.,  2019).  Increasing 
labour  shortages  will  further  strengthen  the  need 
for  a  comprehensive  approach  coordinated  across 
policy domains to target those that are the furthest 
from the labour market and help them to get back 
into work. 

The  regions  continued  to  take  measures  on  the 
integration  of  recently  arrived  third-country 
nationals.  In  Flanders,  on  the  one  hand  some 
measures  provided  for 
the  new  coalition 
agreement may make the integration process more 
difficult (e.g. by making the newly arrived pay for 
the integration courses and delaying their access to 
certain 
long-term  care  allowances  or  social 
housing). On the other hand, measures announced 
in  the  new  coalition  agreement  such  as  the  

in 

37 

800100012001400160018002000012345678910111213141516171819202122Net income (Euro per month)Number of days worked in a monthDisability social insuranceDisability income supportUnemploymentMinimum incomePoverty thresholdBGCZDKEEIEESFRHRCYLVLTLUHUMTNLATPLPTROSISKFISEBE051015202530354045010203040506070Transitions from unemployment to employment (% of unemployment)LMP participants per 100 persons wanting to work  
 
   
3.3. Labour market, education and social policies 

market.  There  are  considerable  shortages  in 
professional,  technical  and  scientific  occupations 
due  to  the  low  number  of  graduates  in  science, 
technology, engineering and mathematics (STEM) 
(see Section 3.3.2). Shortages are also observed in 
health  care,  education  and  training.  However, 
increasing  shortages  in  some  sectors  are  not 
reflected  in  wage  developments.  In  2016-2018, 
there was no correlation between the change in the 
vacancy  rate  and  the  change  in  hourly  wages 
across  sectors.  In  STEM (62)  occupations 
in 
particular, the wage premium is among the lowest 
in the EU (Graph 3.3.7).         

The  overall  level  of  basic  skills  is  good  in 
Flanders,  but  skills  are  under-used  in  the 
workplace. Adults in Flanders are more proficient 
in  literacy,  numeracy  and  problem  solving  in 
technology-rich  environments  than  adults  in  most 
other  OECD  countries.  However,  particularly  in 
small  and  medium-sized  enterprises  (SMEs),  the 
use  of  literacy  and  especially  numeracy  skills  at 
work  is  relatively  weak  (OECD  2019b).  The  lack 
of PIAAC (63) data for Brussels and Wallonia does 
not allow for these regions to be assessed.  

25 

engineering 

(Information 

professionals), 

ISCO-88  codes  21 

associate  professionals) 

(62)  STEM  professions  are  defined  by  as  those  working  in 
(Science  and 
occupations  with 
and 
engineering 
communications  technology  professionals),  31  (Science 
and 
and  35 
(Information and communication technicians) cfr Caprile et 
al. (2015) and De Coen et al. (2018). The STEM premium 
measures the adjusted wage premium based on the monthly 
earnings  of  a  full-time  employed  worker  controlling  for 
age,  gender,  education  level  and  sector.  Non  cash-
payments are included in the analysis, while managers and 
part-time  workers  are  excluded  from  the  non-STEM 
workers. 

(63)  The Programme for the  International Assessment of Adult 
Competencies (PIAAC) is a programme of assessment and 
analysis of adult skills. 

likely 

language 

language 

training  are 

automatic registration  with the  PES and increased 
provision  of 
to 
improve the chances for migrants to find a job. In 
Wallonia, the Forem has put together a number of 
services  available  to  migrants  (including  skills 
screening, 
training,  recognition  and 
validation of qualifications) and improved capacity 
building as well as collaboration with other public 
organisations.  In  Brussels,  Actiris  will  deploy 
specialised job coaches to support recently arrived 
migrants, improve access to language training, put 
in place ‘social interpretation’ (60) and partnerships 
with  civil  society  organisations  to  promote  the 
recognition  of  foreign  diplomas  or  to  support 
mentoring.  

jobseekers 

fight  discriminatory 
to 
Further  measures 
practices  are  being  implemented.  Actiris  is 
tackling  discrimination  based  on  a 
regional 
‘diversity  plan’,  an  anti-discrimination  desk (61) 
facing  discriminatory 
supporting 
practices  and  a  reform  of  the  regional  diversity 
instruments  will  come  into  effect  on  1  January 
2020  focusing  on  raising  awareness  among 
businesses about diversity, tackling discrimination 
and  taking  corrective  action  in  the  event  of  a 
conviction.  There  is  no  evidence  yet  about  the 
impact  of 
social 
“mystery 
the  Royal  decree 
inspectorates”  measure  or 
(approved end 2018) regarding positive actions by 
employers.  

calls  by 

the 

Graph 3.3.7:  STEM wage premium (as% of the wage of a 

non-STEM worker; average 2014-2017) 

Source: Commission calculations based on EU SILC 
microdata 

Education  and  training  systems  may  not  be 
delivering  all  the  skills  needed  in  the  labour 

(60)  Enables the jobseeker to be accompanied by an interpreter 
during his first face-to-face contacts with PES’ job coaches 
(Actiris). 
(61)  Guichet 

anti-discrimination 

/  Anti-discriminatieloket 
/fr-

diversite/tabid/959/language 

http://www.actiris.be/ 
BE/Guichet-anti-discrimination.aspx.   

38 

01020304050607080NLELSKDKBEFRSEITATFIESIECZLUUKPLHRCYLTROHULVBGPTWage premium (%)   
                                                           
                                                           
3.3. Labour market, education and social policies 

Graph 3.3.8:  Potential wage and productivity growth by 
sector from increased training (2008-2017) 

that  would  benefit  the  most,  such  as  the  low-
educated and older workers (OECD, 2019b). 

the 

introduction  of 

The  2017  Law  on  Workable  and  Agile  Work 
changed the training obligations for employers, 
but  it  is  still  too  early  to  evaluate  its  impact. 
Before 
the  Law,  private 
companies  needed  to  invest  1.9%  of  the  yearly 
wage mass in training. The 2017 Law replaced this 
system by a training obligation of minimum 5 days 
on average per full-time  equivalent at the  sectoral 
level (target to be achieved through a growth path). 
However, the Law does not include an enforceable 
individual  entitlement  (except  in  some  cases)  nor 
the guarantee that the training will be provided for 
those  most  in  need.  Small  and  medium-sized 
than  10  employees)  are 
companies 
exempted from the training obligation.  

(fewer 

for 

lifelong 

learning  where 

The Flemish government announced in October 
2019  a  plan  to  introduce  individual  learning 
accounts  (individuele  leer-  en  loopbaanrekening) 
It  also  announced  the  intention  to  establish  a 
platform 
the 
Departments of Work, Education and Economy in 
cooperation with the social partners will develop a 
common  vision,  ambitions  and  goals.  These 
measures  aim  to  promote  a  culture  of  lifelong 
learning  and  to  stimulate  willingness  to  learn.  In 
this sense, these  initiatives build upon and  further 
develop  the  reformed  Flemish  training  incentives 
(including  paid  educational  leave  and  training 
vouchers),  which  were  launched  in  September 
2019.  They  complement  the  educational  database 
that gives an overview of all training programmes 
which  can  be  paid  for  using  the  Flemish  paid 
educational leave and training vouchers.  

The  recognition  of  skills  is  high  on  the  policy 
agenda. The French-speaking part of Belgium has 
implemented  new  measures  to  support  upskilling 
pathways,  including  an  online  tool  for  validation, 
created partnerships  with  key operators to support 
the  mutual  recognition  of  learning  outcomes,  and 
opened  up  access  to  the  first  certifying  pathways. 
In  Flanders,  measures  include  the  development  of 
a  validation  instrument  and  the  creation  of  a 
register  of  all  the  centres  that  perform  validation. 
Recognition of skills may be an important channel 
to help workers born outside the EU to integrate in 
the labour market.  

Note: The letters refer to the NACE codes. 
Source: Figures updated based on Konings and 
Vannormelingen (2015) 

Participation  in  adult  learning  remains  low.  In 
the  population  (25-64)  had 
2018,  8.5%  of 
participated  in  adult  learning  (compared  to  11.1% 
in  the  EU),  despite  a  large  number  of  training 
courses  on  offer  from  a  variety  of  suppliers, 
including  sector  funds.  Investment  in  training, 
however,  has  a  positive  impact  on  wages  and  in 
particular on productivity in Belgian firms (Graph 
3.3.8). On average across all sectors, increasing the 
trained  work  force  by  10  percentage  points 
increased wages by 20% and productivity by 23% 
between 2008 and 2017. The impact is the largest 
in the non-manufacturing sector. 

countries).  The  main  barriers 

There are several drivers, like seniority pay and 
taxation,  which  may  contribute  to  the  low 
participation  in  adult  learning.  Evidence  from 
Flanders  suggests  that  a  key  driver  behind  low 
participation  rates  is  the 
large  share  of  the 
population  not  willing  to  participate  in  adult 
education (82% vs. 76% on average across OECD-
to 
PIAAC 
participation  are  work,  childcare  and  family 
responsibilities,  while the cost of  training  was the 
least cited across all OECD countries. In addition, 
returns on investments may be smaller in Belgium 
due to low-wage dispersion, high income taxation, 
seniority  payments  and  shorter  working  careers. 
There is also uncertainty on the returns due to low 
levels of pay transparency because of the relatively 
large  share  of  fringe  benefits  (such  as  company 
cars).  Moreover,  there  are  concerns  that  the 
incentives  currently  provided  do  not  reach  those 

39 

CEFGHIJKLMN0.00.10.20.30.400.10.20.30.4Impact Training on ProductivityImpact Training on Wages   
3.3. Labour market, education and social policies 

Graph 3.3.9:  Job seniority by age bracket 

they  confirm  the  long-term  downward  trend, 
especially in the Flemish Community for all basic 
skills  and  all  types  of  achievers.  In  the  French 
Community,  average  outcomes  have  remained 
relatively stable compared to 2015, closing the gap 
with the decreasing EU average.  

Source: European Labour Force Survey (adaptation 
Steunpunt werk) 

pay, 

other 

elements, 
among 
Seniority 
contributes  to  low  job  mobility.  Job  mobility  is 
low as compared to the EU average. The share of 
workers 5 years or more in the same job is 64.5% 
(compared to 59.7% in the EU). The average time 
that  an  employee  has  spent  in  the  same  job  has 
decreased in the past 10 years for all age brackets 
with  the  most  significant  percentage  decrease 
among  older  workers  (50  –  64  ),  (Graph  3.3.9). 
However,  the  average  time  spent  in  the  same  job 
remained  constant  at  11.3  years  as  a  result  of  the 
composition effect due to ageing of the workforce. 
Seniority  pay,  which  is  significant  for  employees 
in Belgium (see European Commission, 2019), can 
in  turn  create  disincentives  to  change  jobs.  Low 
job  mobility  is  also  influenced  by  factors  like 
mobility hurdles (see Section 3.4) and long notice 
periods.  Low  job  mobility  in  turn  contributes  to 
weaker  technology  diffusion  across  firms  and 
increases  the  productivity  dispersion  between  the 
most  and  least  productive  firms  (see  Section. 
3.4.1). 

Education and training 

The competence level of pupils/students in basic 
skills 
is  well  above  EU-average  but  has 
decreased  in  the  Flemish  Community,  while  it 
remains  around  the  EU-average  in  the  French 
and 
Community. 
community-level  assessments  show  a  long-term 
decrease  in  basic  skills.      While  nationally  the 
PISA2018 (64) average outcomes remain above the 
EU  average  in  reading,  mathematics  and  science, 

International 

(PIRLS) 

that 

show 

equity 

(21.3%) 

and  mathematics 

combining  both 

The  shares  of  low  and  high  achievers  in  basic 
the  Communities  have 
skills 
difficulties 
and 
excellence.  Nationally,  about  one  out  of  five  15 
year-olds  is  underachieving  in  science  (20%), 
(19.7%) 
reading 
(European  Commission,  2019a).  While 
the 
Flemish  Community  ranks  second  in  the  EU  for 
the  share  of  top  achievers  in  all  three  subjects,  at 
national level low achievers in all three domains – 
those  failing to  meet  minimum  standards required 
in  all  three  subjects  -  represent  12.5% (65)  (above 
the  EU  average  of  11%) (66).  Reading  has 
worsened  in  all  three  communities,  while  there 
were  some  improvements  for  mathematics  and 
science  in  the  French  Community (67).  However, 
mathematics and science remain above the EU and 
national averages. In the Flemish (68) and German-
speaking (69)  Communities, 
low 
performers  remain  below  the  EU  average  for 
reading  and  mathematics.  Nationally,  the  share  of 
top  achievers  is  increasing  slightly  in  reading 
(9.5%  compared  to  EU  average  of  8.9%).  The 
decrease  in  mathematics  (15.7%  compared  to 
11.2%)   and  science  (8%  compared  to  10%)  is 
worrying for future growth and innovation. 

the  share  of 

The  gap  in  educational  outcomes  linked  to 
socio-economic  and  migration  background 
remains high in both Communities and has not 
significantly  narrowed  over  the  last  decade.  
Educational  inequality  linked  to  socio-economic 
background 
and  French 
Communities is among the highest in the EU (gap 
in  reading  of  respectively  110  and  107  points  on 
the  PISA  scale,  equivalent 
to  2.5  years  of 
schooling)  (see  Graph  3.3.10).  In  the  Flemish 
Community the difference in reading performance 

the  Flemish 

in 

(65)  PISA (OECD), 2018, table BI.B1.27. 
(66)  EU average without Spain. 
(67)  Mathematics (22.8%; -1.2 pps), science (22.6%; -0.5 pps), 

reading (23.8% ; +1.2 pps). 

(68)  Mathematics  (17.3%;  +  0.4  pps),  reading  (19.3%;  +  2.2 

pps) and science (18%; + 0.9 pps). 

(64)  Programme  for  International  Student  Assessment  of  the 

(69)  Reading (20.6%; + 6.3 pps) and science (20 %; + 5.8 pps), 

OECD (OECD, 2019). 

mathematics (15.1%; -2 pps). 

40 

1.51.49.28.421.219.811.211.305101520252007200820092010201120122013201420152016201715-24 year25-49 year50-64 year15-64 year  
 
                                                           
                                                           
3.3. Labour market, education and social policies 

between  pupils  with  a  migrant  and  non-migrant 
background  after  accounting  for  socio-economic 
status  is  among  the  highest  in  the  EU  (32  PISA 
points),  but  is  low  in  the  French  Community  (11 
points). These results suggest that targeted policies 
and  measures  are  needed  to  address  the  diversity 
challenges (see below) and promote equity. 

Graph 3.3.10: Average PISA score for reading, by region, 

gender, type of programme and socio-
economic and migrant background 

40 PISA points correspond to one year of schooling 
Source: OECD PISA results 2018 

The  difference  in  educational  outcomes  of  15-
year  olds  between  schools  is  one  of  the  largest 
within the EU in both Communities. This is the 
case both for schools with a high concentration of 
students with a migrant background (41 compared 
to  EU  average  of  22  points)  and  between 
advantaged  and  disadvantaged  schools 
(155 
compared to EU average of 130 points). The gap in 
reading  performance  between  general 
and 
vocational  programmes  is  significantly  above  the 
OECD  average  (98  compared  to  68  points), 
suggesting that vocational education and training is 
not  delivering  the  necessary  basic  skills  and 
highlighting  the  pitfalls  of  early  tracking  into 
academic  and  vocational  education 
training 
strands.  Addressing 
above-mentioned 
challenges  will  contribute  to  progress  on  SDG  4 
(quality education). 

the 

lower 

Belgium  will 
the  age  of  starting 
compulsory  education  to  five  from  2020/2021. 
Although  enrolment  in  early  childhood  education 
and  care  (ECEC)  increased  further  to  98.7%  in 
2017,  attendance  is  lower  for  children  with  a 
migrant background or with low-skilled parents in 
large cities. The Flemish Community has increased 
the  budget  per  child  to  the  same  amount  as  at 
primary  level,  has  introduced  an  additional  child 
allowance for regular participation and has set up a 

to  monitor 

system 
attendance.  The  new 
government  will  propose  new  measures  to  ensure 
that all children acquire a sufficient level of Dutch 
before  entering  primary  school  and  to  guarantee 
sufficient ECEC staff. The French Community has 
introduced  free  ECEC  for  3-year-olds,  increased 
the  number  of  teachers  and  support  professionals 
first 
over  2017-2019  and  will 
curriculum  of  initial  key  competences  as  of 
2020/2021.   

introduce  a 

Measures are being taken in all Communities to 
further  reduce  early  school  leaving,  which  is 
closely  linked  with  grade  repetition.  In  2018, 
early  school  leaving  dropped  to  8.6%  nationally 
(EU average of 10.6%), with a significant decrease 
in the Brussels region to 10.7% (-2.2 pps). Higher 
rates are  nonetheless recorded among people  with 
a  migrant  background  and  from  disadvantaged 
socio-economic  groups.  Early  school  leaving  is 
also  closely  linked  with  grade  repetition  (among 
the  highest  in  the  EU  at  48%  in  the  French 
Community and 29% in the Flemish Community).  
In  the  French  Community,  a  comprehensive  plan 
to  address  early  school  leaving,  supported  by  the 
European  Social  Fund,  will  be  implemented  as  of 
2021-2022.  In  the  Flemish  Community,  there  are 
plans  to  extend  a  pilot  project  that  links  the 
databases  of  the  Ministries  of  Education  and  of 
Employment  to  allow  a  better  follow-up  of  early 
leavers.  

The  need  to  better  address  increased  diversity 
and  complex  challenges 
is  high.  Belgian 
classrooms are more diverse than the EU average: 
they have high numbers of students with a migrant 
or  disadvantaged  background, 
refugees  and 
students  with  special  needs.  The  proportion  of 
teachers  who report that they are well prepared to 
teach in a multicultural and/or multilingual setting 
is lower than the EU average. School principals are 
more  likely  than  in  other  EU  countries  to  report 
shortages  of  qualified  teachers  (46.5%  versus 
24.6%)  and  teachers  competent  to  teach  students 
with  special  needs  (55.6%  versus  37.8%)  (all 
references  TALIS  (2018)  (OECD,  2019h)).  The 
high  persistent  poverty  and  child  deprivation  rate, 
particularly in the Brussels’ Region and to a lesser 
extent  in  Wallonia,  require  a  “whole  school 
approach”  with  the  support  of  local  authorities 
(Guio and Vandenbroucke, 2019). 

41 

Fl. Fr.sp.De.sp.BeEU av.GirlsBoysAdvantagedDisadvantagedNative born with a migrant backgroundForeign born Native born with a native backgroundVocationalGeneral400420440460480500520540560AverageGenderSocio-economicbackgroundMigrantbackgroundType ofprogrammeAverage PISA score for reading   
3.3. Labour market, education and social policies 

The  shortage  of  well-qualified  teachers 
is 
increasing  and  the  need  for  professionalisation 
is a growing concern. Despite salaries comparable 
to  those  with  a  similar  level  of  education,  only 
5.3%  of  teachers  in  the  French  Community  and 
25.8%  in  the  Flemish  Community  (compared  to 
17.7%  at  EU  level)  feel  their  profession  is  less 
valued.  The  Communities  are  taking  ad  hoc 
measures to address the growing teacher shortages 
(European Commission, 2019c). There is scope to 
strengthen  continuous  professional  development 
(European  Commission,  2019c);  the  latter  is  not 
recognised  as  important  for  career  development. 
Administrative tasks are considered as high. There 
is no attractive career path and the challenges such 
as  very  diverse  classrooms  and 
temporary 
assignments  for  young  teachers  are  substantial.  In 
the  Flemish  Community,  recent  measures  include 
intensive  initial  coaching  and  quicker  permanent 
appointments of young teachers, and collaborative 
teacher  platforms,  while  the  reformed  teacher 
training and the flexible offer for lateral-entry into 
the  teaching  profession  was  implemented  as  of 
September 2019. The planned reform of the initial 
teacher training in the French Community has been 
postponed by 1 year.  

for 

target 

tertiary 

In  2018,  Belgium  reached  its  Europe  2020 
education 
national 
attainment  of  47%,  but  disparities  remain 
strong  between  regions  and  groups.(70)  People 
with tertiary-educated parents are nine times more 
likely  to  complete  tertiary  education  than  those 
with  low-educated  parents.  The  attainment  gap 
between people with disabilities and those without 
far  exceeds  the  EU  average  (25.4%  compared  to 
10.2  pps).  Although  49.2%  of  native-born 
population  had  completed  tertiary  education,  only 
35%  of  the  non-EU  born  population  had  done  so. 
The  gap  in  tertiary  completion  rates  between 
students  with  a  vocational  upper  secondary 
qualification and those with a general qualification 
is one of the largest among OECD countries (38% 
compared to 64% in the French Community, 52% 
compared  to  83%  in  the  Flemish  Community 
compared to 58% compared to 70% across OECD 
countries)(OECD, 2019a).  

(70)  Nationally  47.6%. 

tertiary 
attainment  reaches  56.2%,  while  this  is  48.2%  and  42.5% 
in Flanders and Wallonia, respectively. 

the  Brussels 

region, 

In 

is 

on 

rates 

scope 

research, 

knowledge 

improving 

2019).  Completion 

There 
equity, 
for 
effectiveness and efficiency in higher education. 
Belgian  universities  (11  out  of  12)  perform 
transfer, 
strongly 
international  orientation  and  regional  engagement 
(U-Multirank, 
at 
bachelor’s  level  (within  the  theoretical  duration) 
are  below  the  OECD  average  (OECD,  2019b). 
Course  dropout  and  year  repetition  remain  high 
(De Witte and Hindriks, 2018), reflecting the lack 
of  appropriate  student  guidance 
in  an  open 
education  system  and  the  difficulty  of  excluding 
applicants with inadequate skills. The development 
of graduate tracking is still at an early stage. There 
is  also  scope  for  a  (further)  development  of  dual 
learning  and  more  and  better  targeted)  adult 
learning  (e.g.  STEM,  OECD  2019b  in  both 
Communities.  An  evaluation  of 
the  higher 
education decree (“décret paysage”) is planned in 
the  new  government  programme  of  the  French 
Community.  The  new  Flemish  government  is 
planning measures to improve graduation time, the 
rationalisation  of  the  study  offer  and  the  funding 
system.  

The Communities are taking action to increase 
the  uptake  of  science,  technology,  engineering 
and  mathematics  (STEM)  studies,  but  there  is 
scope  for  more  comprehensive  strategies  to 
meet  future  labour  market  demand.  In  2017, 
Belgium  remained  26th  in  the  EU  for  tertiary 
graduates  in  STEM  (16.7%)  and  last  for  female 
graduates in ICT. The lack of STEM graduates and 
adequate STEM skills among the broader working 
population  hampers  Belgium's  growth  prospects, 
in a context of digitalisation and the transition to a 
low-carbon  economy.  In  the  French  Community, 
though a  number of initiatives are being launched 
to promote STEM  uptake, but an overall strategic 
plan  is  lacking.  In  the  Flemish  Community, 
implementation of the STEM action plan for 2012-
2020  is  progressing  well  (Onderwijs  Vlaanderen, 
2019),  but 
the  number  of  STEM  secondary 
graduates  in  technical  and  vocational  paths  has 
stagnated  since  2010,  leading  to  shortages  on  the 
labour market (see infra). The STEM-platform has 
issued  recommendations  for  a  new  Action  Plan 
2020-2030 
2019). 
Belgium  could  face  additional  shortages  in  ICT 
graduates  by  2030  (Gonzalez  Vazquez,  I.,  et  al., 
2019.  

(Onderwijs  Vlaanderen, 

42 

                                                           
3.3. Labour market, education and social policies 

them 

implementation  of 
the  Pact  will  depend  on 
continuous  political  commitment  and  financing, 
but  also  on  finding  sufficient  and  committed 
stronger  pedagogical 
teachers,  giving 
support, and on the new initial training programme 
for teacher.  The first positive reforms of the Pact 
are  currently  being  rolled  out  They  aim  at 
reinforcing the school and system governance and 
reducing  performance  gaps  between  schools,  as 
well  as  measures  to  strengthen  French  language 
learning  for  newly  arrived  pupils  and  vulnerable 
French-speaking  pupils  (see  also  Education  and 
Training Monitor (European Commission, 2019c)). 
The Flemish Community has implemented positive 
reforms  in  secondary  education  and  in  all  other 
sectors  for  the  2019/2020  school  year.    They 
the  decrees  on  Higher  Vocational 
include 
education  and  on  the  reform  and  financing  of 
Adult  Education;  the  modernisation  of  secondary 
education:  new  attainment 
targets  should  be 
gradually  rolled  out  between  2019  and  2024, 
starting  with  the  1st  year  of  secondary  education 
and  better  transition  to  labour  market  and  higher 
education;  full  roll  out  of  dual 
in 
secondary  education  and  special  needs  education 
(see ETM 2019 and Annex A). 

learning 

Participation  in  work-based  learning  remains 
low.  In  2017,  the  employment  rate  of  recent 
vocational  educational  and  training  graduates  was 
76.7%, below the EU average of 79.5%. The share 
of learners in work-based learning in 2017 stood at 
only 6%, far below the EU average of 27% (UOE, 
2017). All regional entities in charge of vocational 
education  and  training  in  Belgium  have  initiated 
reforms  to  develop  dual  learning  in  recent  years, 
but  it  is  important  that  the  quality  of  these 
initiatives,  the  adequacy  of  coaching  support 
provided  by  companies,  guidance  provided  by 
schools  and 
the 
apprentices  are  closely  monitored,  with  corrective 
measures  taken  when  needed.  According  to  a 
recent analysis (Cedefop, 2019), there are concerns 
that the reform in the French Community resulted 
in 
and  more  bureaucratic 
procedures.  The  Cedefop  analysis  makes  several 
recommendations  to  improve  the  dual  learning 
system.  The  ratio  of  graduates  to  enrolment  is 
much  below  the  EU  average  (16% compared  to 
31%), suggesting high dropout rates and a need to 
strengthen 
and 
training.   

learning  outcomes  of 

initial  vocational 

flexibility 

education 

less 

the 

in 

Education  spending  in  Belgium  is  among  the 
highest 
in  the  EU.  Public  expenditure  on 
education  represented  6.3%  of  GDP  in  2017,  just 
behind  Sweden  and  Denmark.  Belgium  has  the 
second  highest  share  of  spending  on  employee 
compensation 
the  EU  (80.9%  of  public 
education expenditure in 2017 compared to the EU 
average of 62%). The pupil/teacher ratio in schools 
is below the EU average at 10.7 compared with the 
EU average of 12.9 (OECD 2017). There  is room 
to  rationalise  the  educational  offer  in  secondary 
education,  including  in  vocational  education  and 
training,  to  develop  synergies  between  networks, 
to  improve  teachers’  time  allocation  for  their 
different tasks and to conduct policy evaluation.  

for  modern 

education 
Investment  needs 
infrastructure  and  digital  equipment  are  high, 
but  there  is  no  inventory  of  infrastructure 
(Court  of  Auditors,  2019b).  At  5.5%  of  public 
education spending, the share devoted to education 
infrastructure  is  below  the  EU  average  of  6.4%. 
The  school  population  is  expected  to  grow  in 
waves  until  2035.  Despite  significant  investments 
in school infrastructure in the Flemish Community 
and the adoption in 2018 of the Digital Strategy for 
Education  by  the  French  Community,  there  is  a 
further  need  for  innovative  learning  environments 
infrastructure, 
in 
equipment  and  related  training  for  teachers  are 
particularly needed in the French Community.  

all  Communities.  Digital 

Reforms  promoting efficiency and effectiveness 
could  release  resources  for  urgently  needed 
investment (and contribute to progress on SDG 4). 
Comparing  Belgium’s  spending  with  other  ‘high 
spending’ countries suggest that better educational 
outcomes  should  be  possible  (see  also  the  2019 
country 
the  French  Community, 
budgetary  plans  show  that  education  expenditure 
from  2019  to  2024  will  increase  sharply  (71), 
suggesting  that  feedback  effects  and  savings  will 
be needed to implement successfully the ambitious 
the  Community  Policy 
list  of  priorities  of 
successful 
Declaration 

(2019-2024) (72).  The 

report). 

In 

(71)  Lecuivre, E. and oth. 2019 
(72)  These  priorities 

include:  strengthening 

the  Pact  for 
Excellence in Education; reforms of vocational educational 
and  training  and  work-based  vocational  training;  special 
needs  education;  the  teacher  enrolment  procedure  (decree 
‘Titres  et  fonctions’);  funding  of  higher  education; 
increased  support  for  principals;  adaptation  of  Initial 
teacher training; and sustainable school infrastructure. 

43 

                                                           
3.3. Labour market, education and social policies 

Social policies 

Belgium  scores  well  in  terms  of  equality  (SDG 
10).  The  income  quintile  ratio  (S80/S20)  in  2018 
remained  constant  at  3.8,  well  below  the  EU 
average  of  5.2.  The  tax  and  benefit  system  has  a 
high impact on reducing inequality, bringing down 
market income inequality by 10.7 pps.  

People  with  disabilities  face  challenges  with 
respect  to  poverty,  educational  attainment  and 
employment  outcomes.  The  transition  to  a  more 
is  no 
rights-based  approach 
coordinated 
strategy, 
although  increased  autonomy  for  people  with 
disabilities  is  included  in  the  reform  agenda  of 
every federated entity.  

de-institutionalisation 

is  slow.  There 

some 

groups 

However, 

The at-risk of poverty or social exclusion rate is 
below  the  EU  average,  but  pockets  of  poverty 
remain. The at-risk-of-poverty or social exclusion 
rate  (AROPE)  further  decreased  and  reached 
19.8% in 2018, which is below the EU average of 
21.9%. 
are 
disproportionally affected and the impact of social 
transfers  on  poverty  reduction  is  flagged  as  ‘to 
watch’ on the Social Scoreboard. For example, the 
AROPE  rate  of  non-EU  born  is  more  than  32pps 
higher  than  for  natives,  the  largest  gap  across  the 
EU  in  2018.  While  severe  material  deprivation  is 
very  low  for  natives  (3.1%)  it  is  rather  high  for 
non-EU  born  (14.7%).  Monetary  poverty  (AROP) 
increased slightly from 15.9% in 2017 to 16.4% in 
2018  for  the  general  population  and  it  should 
remain  stable  in  2019(73).  The  AROP  rate  is  high 
among  people  with  low  qualifications  (18-64) 
(32.1%),  the  non-EU  born  (18+)  (42.3%),  people 
with  disabilities  (16-64)  (21.7%  in  2017)  and 
low-work-intensity 
very 
people 
households  (0-59)  (72.8%),  suggesting  a  strong 
correlation between low employment rates and the 
prevalence of poverty. Addressing these pockets of 
poverty  would  lead  to  further  progress  on  SDG  1 
(no poverty) and 10 (reducing inequalities). 

living 

in 

The  at  risk  of  poverty  or  social  exclusion  rate 
for  children  remains  high  and  continues  to 
increase  (23.2% in 2018 compared to 22.0% in 
2017). In particular, the risk of poverty for children 
with  foreign-born  parents  (39.5%  in  2018)  is 
around four times higher than among children with 
native-born parents. Child poverty and deprivation 
is  particularly  high  in  Brussels  with  more  than 
40%  of  children  living  in  a  poor  household  and 
more  than  30%  lacking  three  or  more  basic  items 
(Guio  et  al.  2019).  Moreover,  there  is  a  strong 
increase  in  the  persistent  at-risk  of  poverty  rate, 
which  increased  from  9.1%  in  2013  to  14.8%  in 
2018.  

(73)  Experimental  flash  estimates  produced  by  Eurostat  for 

income year 2018. https://bit.ly/34HOcIG. 

it 

is 

than 

lower 

The  Belgian  health  system  performs  well  in 
providing  acute  care  in  hospitals,  but  many 
aspects of broader public health and prevention 
improve 
policies  could  be  strengthened  to 
health  and  reduce  health 
inequalities. Life 
expectancy at birth reached 81.6 years in Belgium 
in  2017  and  remains  above  the  EU  average, 
in  many  western 
although 
European countries. Inequalities in life expectancy 
in  Belgium  exist  not  only  in  terms  of  gender  but 
also  of  socioeconomic  status.  Life  expectancy  for 
men  with  the  lowest  level  of  education  at  age  30 
was  about  6  years  lower  than  for  those  with  the 
highest  level;  the  difference  was  a  little  smaller 
among Belgian women but still more than 4 years. 
This  education  gap  is  lower  than  the  EU  average 
for men and similar to the EU average for women, 
but  higher  than  in  most  other  western  European 
countries (European Commission/OECD, 2019). It 
can  be  explained  at  least  in  part  by  differences  in 
living standards and exposure to risk factors. 

A  stronger  and  more  co-ordinated  prevention 
policy  could  help  to  bridge  some  of  the  health 
inequalities.  Heath  inequalities  can  be  explained 
at  least  in  part  by  differences  in  living  standards 
and  exposure  to  environmental  and  behavioural 
risk  factors.  Some  behavioural  risks  have  been 
addressed  (e.g.  tobacco),  but  challenges  remain 
(e.g.  alcohol,  obesity).  Preventable  mortality  is 
slightly lower than the EU average, while treatable 
mortality  is  much  lower.  There  remains  scope  for 
more  coordination  between  the  federal  level, 
which is responsible for healthcare and the regions, 
which are responsible for prevention. 

Self-reported  unmet  need  for  medical  and 
dental  care  are  significantly  higher  for  people 
with  a  low  income.  In  2018,  6.8%  of  the 
population (16+) in the lowest income quintile (vs. 
2.2%  in  the  total  population  and  0.5%  in  the 
to  have 
highest 
for 
experienced  a  self-reported  unmet  need 
financial 
medical  care,  mainly  because  of 

income  quintile) 

reported 

44 

                                                           
3.3. Labour market, education and social policies 

social  housing 

Social housing remains a concern, in particular 
for  those  on  the  private  rental  market.  About 
8.6% of the population spends 40% or more of its 
household income on housing, which is below the 
EU  average  of  10.4%.  However,  there  are  large 
differences  between 
regions  and  population 
groups. The housing cost overburden rate is higher 
for  those  renting  on  the  private  market  (33.8%  as 
compared to 27.4% for the EU average) and those 
living in Brussels. There are long waiting lists for 
social housing in 2018.  In Brussels, the number of 
households  on  waiting  lists)  even  exceeded  the 
stock.  The 
actual  available 
government  agreements  of  all  federated  entities 
have  announced  investments  in  social  housing.  In 
Brussels,  for  example,  a  ’Housing  Emergency 
plan‘ will be drawn up in 2020. This plan aims to 
provide  effective  housing  solutions  for  15,000 
households. 
additional 
investments in social housing as well as extending 
the  social  rental  agencies  and  providing  housing 
allowances.  In  Flanders,  the  government  proposes 
to 
the 
municipality  (10  years  of  residence  of  which  5 
years  uninterrupted)  for  social  housing.  This 
condition  risks  reducing  access  for  vulnerable 
groups,  such  as  refugees,  and  having  a  negative 
impact on labour mobility.  

introduce  a  residence  requirement 

consist  of 

It  will 

in 

the 

constraints  (Graph  3.3.11).  This  is  a  decrease  as 
compared  to  the  level  in  2016  (8.5%),  but  an 
increase of 1.5 pps as compared to 2011. The gap 
in  self-reported  unmet  medical  needs  between  the 
poorest  and  the  richest  quintile  is  above  the  EU-
average  and 
largest  of  all  western  EU 
countries. The self-reported unmet need for dental 
care is even larger (10.8% in the lowest vs. 1.4%. 
in  the  highest  income  quintile).  Self-reported 
unmet need for medical care in the lowest income 
quintile 
low-work 
is  highly  correlated  with 
intensity, growing financial constraints and severe 
material  deprivation.  Several  recent  measures  and 
initiatives aim to limit the total amount of personal 
contributions  that  a  patient  has  to  pay,  and  to 
improve 
and 
affordability  of  healthcare  for  vulnerable  groups, 
including  by  a  right  to  increased  health  insurance 
reimbursement (Van Lancker et al., 2017). 

accessibility 

financial 

the 

Graph 3.3.11: Self-reported unmet needs for medical 

examination by main reason declared ("Too 
expensive") and income quintile (2018 data, % 
quintile population, inter-quintile differences 
(Q1-Q5)) 

Source: European Commission calculation based on EU-SILC 
data 

45 

0.01.02.03.04.05.06.07.0EUBEDEFRLUNLFirst quintileSecond quintileThird quintileFourth quintileFifth quintileQ1-Q5  
 
3.3. Labour market, education and social policies 

Box 3.3.3: The importance of skills in the Belgian labour market 

In  a  context  of  a  tightening  labour  market,  employers  are  finding  increasingly  difficult  to  find  employees 
with the right skills (see Section 3.3). Moreover, globalisation, demographic and technological changes are 
having  a  profound  impact  on  labour  markets  across  the  Member  States,  including  Belgium.  A  declining 
working age population means that, addressing skills shortages will become more and more challenging, but 
also more important for spurring the sluggish Belgian productivity growth, facing digital transformation, as 
well as enabling the green transition. It is therefore a key lever for sustainable economic and wage growth.  

In  2018,  in  spite  of  recent  reforms,  Belgium  recorded  the  highest  level  of  macro-economic  skills 
mismatches (1)  across  the  EU  (25 %).  This  result  is  driven  primarily  by  the  combination  of  a  low 
employment  rate  of  low-educated  people  and  a  relatively  high  share  of  low-educated  people  in  the 
population.  This  result  holds  across  the  entire  working-age  population,  including  for  young  individuals 
(Graph 1). The low employment rate of low-skilled people is linked to financial disincentives to work, the 
low effectiveness of activate labour market policies, the poor attractiveness of some low-skilled professions 
in terms of working conditions, and people lacking the appropriate skills. In addition, the high vacancy rate 
in Belgium indicates that there are considerable labour shortages (2), in particular in some sectors. 

Challenges related to macro-economic skills mismatches 

The level of basic and digital skills among young people is worrying. About one out of five pupils at the 
age of 15 (more than one out of five in  the French Community and less than one out of five in the Flemish 
Community)  failed  in  2018  to  perform  basic  mathematics,  reading  or  science  tasks  (PISA  2018).  This 
strongly  affects  individuals’  chances  of  coping  with  fast-paced  technological  change,  and  developing  as 
citizens (see Section 3.3). For pupils with a socio-economic disadvantage or migrant background, this share 
increases to 37.1% and 37.6% in reading. In parallel, results for digital skills across language communities 
also dropped over 2015-2017, in particular for young individuals. The root causes of some skills mismatches 
and  loss  of  talent  can be  traced back  to  early  education  and  care.    Access  to  high quality  early  childhood 
education and care and to inclusive and equitable compulsory education reduce the risk of a delay in literacy 
competences, grade repetition and early school leaving.  

Belgium performs only on EU average in terms of entrepreneurial skills. While Belgium has a specific 
strategy, entrepreneurial education and training in compulsory schooling only scores 2.0 (EU average of 1.9) 
on a scale of 1-5 best (3). The 2018 EU Entrepreneurship Education Survey shows that respondents scored 
below the EU average on self-efficiency and entrepreneurial activity in the last 12 months. 

Overall,  while  multilingual  skill  levels  in  Belgium  are  above  the  EU  average,  a  better  knowledge  of 
Dutch outside Flanders would help fill in vacancies in this region and increase job mobility. In 2016, 
78.5% of the Belgians know at least one additional foreign language, which is well above the EU average of 
64.6%,  while  33%  know  two  or  more  foreign  languages.  88%  of  students  were  learning  two  or  more 
languages.  However,  there  are  large  regional  disparities.  In  bilingual  Brussels,  there  has  been  a  gradual 
decline in the share of the population with a good knowledge of  Dutch. This is partly linked to increased 
migration, but knowledge of Dutch is also declining among native Belgians. Moreover, while French is the 
obligatory second language in Flemish secondary  schools, Dutch as a second language is optional only in 
the  French-speaking  Community,  with  the  exception  of  Brussels  (where  Dutch  is  the  obligatory  second 
language  in  all  French-speaking  schools,  just  as  French  is  obligatory  in  all  Flemish  ones).  A  better 
knowledge  of  Dutch  outside  the  Flemish  region  could  help  address  skills  mismatches  in  Flanders  and 
increase cross-regional job mobility to which also the collaboration between the regional public employment 
services  (PES)  is  contributing.  In  particular  in  Flanders,  the  large  volume  of  vacancies  combining  both 
technical and language skills remains a challenge. 

Shortages persist in professional, ICT, technical and scientific occupations as the number of graduates 
in  science,  technology,  engineering  and  mathematics  (‘STEM’)  remains  low  (see  Section  3.3). 
Moreover, a substantial share of STEM graduates (25%) in Flanders started in a non-STEM occupation (De 
Coen et al., 2018). Overall, STEM workers experience lower unemployment rates and higher wages (Goos 
et al. 2013). However, in Belgium the wage premium for those working in STEM occupations is relatively 

46 

3.3. Labour market, education and social policies 

low  and  those  working  in  STEM  occupations  work  longer  hours  and  experience  more  stress  at  work. 
Information on the potential of STEM studies remains scattered and is mainly limited to young secondary 
school students. Furthermore, previous studies have shown the importance of triggering interest in STEM at 
an early age in pre-primary and primary education, which is not systematically the case in Belgium. 

ICT  has  the  highest  vacancy  rates  in  Belgium,  but  also  outside  the  ICT  sector  digital  skills  are 
becoming  increasingly  important.  While  there  are  small  improvements  in  terms  of  the  number  of  ICT 
specialists,  upskilling  and  reskilling  of  workers  to  meet  the  challenges  posed  by  digitisation  remains  an 
issue. Also, for several years now there are no real improvements in terms of the basic digital skills (61%) 
and basic software skills (62%) of the population.  There is a slight improvement in terms of the above basic 
digital skills (34%) (Digital Scoreboard).  

Forward looking actions 

Apart from the current skills mismatches and labour shortages, stock needs to be taken of the challenges and 
opportunities that lie ahead.  

Skills anticipation and foresight in Belgium is fragmented and dispersed over all levels of governance with 
little co-ordination at the federal level. At federal level, the Federal Planning Bureau, the High Council for 
Employment and the FOD WASO are the leading authorities, including for providing socio-economic and 
employment studies. At regional level, each authority is responsible for the main skills anticipation activities 
and  dissemination  of  relevant  results.  In  addition,  the  regional  Public  Employment  Services  and  Skill 
Centres provide information designed to support the study choices of prospective students by the up-skilling 
and re-skilling of workers and/or jobseekers; the provision of education and training offers; and job search 
activities (Skill Panorama, 2017).  

The  large  number  of  actors  involved  and  the  low  level  of  cooperation  leads  to  a  variety  of  different 
forecasting and intelligence outputs. This makes it difficult for target groups to extract relevant information, 
especially  at  the  national  level.    However,  in  particular  in  the  digital  sector,  the  pace  of  transformation 
requires  coordinated  efforts  from  all  public  and  private  stakeholders  to  address  the  growing  labour 
shortages. There is no evidence that skills anticipation intelligence is used in policy-making at national level, 
but  it  is  used  to  develop  regional  and  sectoral  training  strategies,  and  education  and  training  offers  at 
regional and provider levels. In addition, regional campaigns have been launched to raise awareness of jobs 
where there are shortages (Skill Panorama, 2017). There is scope to optimise further the role of sector funds 
in this context, through additional cooperation and exchange of best practices and trainings available both 
among sector funds and between sector funds and other key lifelong learning actors, such as the PES, the 
regions, and competency centres. 

The  need  for  environmentally  sustainable  growth  and  thus  a  green  transition  will  inevitably  have  an 
impact  on  the  skills  required  across  a  wide  range  of  sectors.  Such  skills  relate  to  knowledge  and 
competences  required  by  resource-efficient  processes  and  technologies  (Skill  Panorama,  2017).  It  is 
becoming increasingly important to include such future skill requirements and the policy implications of the 
green  transition  in  Belgium’s  skills  planning  and  anticipation  activities,  especially  since  climate  action 
policies  are  expected  to  create  about  60.000  additional  jobs  in  Belgium  (increase  by  up  to  1 %  of  total 
employment) (European Commission, 2019d). This would make Belgium the Member State benefitting the 
most from climate action policies. 

47 

3.3. Labour market, education and social policies 

Note. The size of the balloons represents the weight of each group in the population.  
Source: European Commission calculations based on microdata from the Labour Force Survey.  

(1)  Macro-economic skills mismatches refer to the relative dispersion in employment rates across population groups with 

different educational attainment. 

(2)  Labour shortages reflect a market equilibrium where the demand for labour exceeds the available supply, at particular 

wage and working conditions. 

(3)  European Innovation Scoreboard 2019. 

48 

High-generalHigh-educationHigh-humanitiesHigh-social and businessHigh-nat. scienceHigh-ICTHigh-engineeringHigh-agricultureHigh-healthHigh-servicesMedium-generalMedium-vocationalLow0510152025405060708090100Unemployment rateEmployment rate Graph 1: Labour market outcomes of young (25-35 years by level and field of education, 2017-2018   
 
 
3.3. Labour market, education and social policies 

Box 3.3.4: Monitoring performance in light of the European Pillar of Social Rights 

The European Pillar of Social Rights is a compass  for a renewed  process of upward convergence towards 
better working and living conditions in the European Union. 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.  

The  Social  Scoreboard  supporting  the  European  Pillar  of  Social  Rights  points  to  some  employment 
and social  challenges in Belgium. In the last  years,  economic growth as  well as reduced possibilities for 
early  retirement  have  contributed  to  a  record  high  level  of  employment.  However,  the  employment  rate 
remains  significantly  below  the  EU  average.  Moreover,  there  are  large  disparities  between  regions  and 
population  groups.  In  particular,  low-skilled  people, 
older workers, people with a migrant background and 
people  with  disabilities  are  under-represented  on  the 
labour  market.  Tackling  low  employment  rates  will 
require  effective  activation  of  jobseekers  as  well  as 
part  of  the  inactive  population.  Effective  activation 
measures  could 
remaining 
financial disincentives to work, further tightening the 
conditions  for  early  retirement,  raising  job  mobility, 
upskilling,  and  increasing  participation  in  lifelong 
learning  On  the  positive  side,  Belgium  performs 
better  than  the  EU  average  in  terms  of  gender 
equality  and  childcare  provision.  The  gender  gap  in 
inactivity due to care responsibilities is below the EU 
average.  However,  financial  disincentives  to  work 
remain, including for second earners.  

include  addressing 

Low  labour  market  participation  contributes  to 
poor social outcomes for specific groups as well as 
to inequalities of opportunities. Although declining, 
the share of people living in very low-work intensity 
households  (12.1%)  is  still  well  above  the  EU 
average  (9.1%)  and  the  large  majority  of  them 
(72.8%)  is  at  risk  of  poverty.  Child  poverty  remains 
high,  in  particular  in  Brussels,  with  one  of  the 
greatest differences in the EU between children with 
highly  and 
low  educated  parents.  Educational 
outcomes  are  still  strongly  determined  by  the  socio-
economic and migrant background of pupils. 

Belgium  has  increased  flexibility  with  regard  to 
parental  leave,  leave  for  medical  assistance  and 
palliative care to support the work-life balance of employees. Since June 2019, more flexibility has been 
introduced  for  parental leaves.  This  can now  be  taken  in  the  form  of  half  a  day  per  week  or  a  whole day 
every two weeks, whereas before it could only be taken full time, part-time or one day per week. In addition, 
employees can take full-time parental leave on a weekly basis, whereas previously this was only possible for 
a minimum of one month. An employee wishing to take part-time parental leave is able to take leave on a 
monthly  basis,  as  opposed  to  the  two-month  minimum  applied  in  the  past.  Flexibility  has  also  been 
introduced  on  full  compassionate  leave,  which  can  be  taken  up  on  a  weekly  basis,  whereas  previously  it 
needed to be taken in periods of minimum one month.  

49 

 
3.4. COMPETITIVENESS AND INVESTMENT 

most  other  sectors,  but  mostly  in  the  years  before 
the  onset  of  the  crisis  in  2008  (see  Graph  3.4.2), 
and now  face the  major challenge  of transitioning 
towards a low-carbon economy (see Section 3.5).  

Graph 3.4.2:  Market dynamism and competitiveness of 

goods exports for top-10 sectors (2000-2018) 

3.4.1.  COMPETITIVENESS, PRODUCTIVITY AND 

INNOVATION  

External trade performance  

Belgium’s  export  market  share  has  stabilised 
since  2012.  As  shown  on  Graph  3.4.1  almost  a 
fifth  of  its  export  market  share  was  lost  between 
2005  and  2012,  as  other  exporting  countries  (in 
particular  China)  were  emerging.  However,  its 
export  market  share  has  broadly  stabilised  since 
then.  While  the  downward  trend  has  come  to  a 
halt, the accumulated losses remain substantial.  

The  trend  of  falling  market  shares  was  driven 
by  goods  exports,  with  the export  performance 
of services remaining broadly stable. As services 
account  for  only  a  small  share  of  total  exports, 
their performance did not offset losses in the goods 
balance.  The  relatively  weak  growth  in  goods 
price 
exports 
developments (see also National Bank of Belgium, 
2019). 

volume 

reflects 

both 

and 

Graph 3.4.1:  Export market share 

Source: European Commission 

Belgium  is  facing  difficulties  to  take  advantage 
its  product  specialisation.  Belgium  has 
of 
products for which world demand has grown at an 
above-average rate. This favourable initial product 
specialisation  could  not  prevent  heavy  market 
share  losses,  as  Belgian  products  were  generally 
outcompeted, suggesting non-cost competitiveness 
issues. Important sectors such as the chemical and 
refined  petroleum  sectors  performed  better  than 

Note: The size of the bubbles indicates the weight of this 
destination on total export of the country at the end of the 
period. Market dynamism stands for the difference between 
the annualized growth rates of World imports (proxied by 
World exports) per market and global World imports (proxied 
by World exports). Competitiveness stands for the difference 
between the annualized growth rates of the selected 
country exports per market and World imports (proxied by 
World exports) per market.  1 chemical products; 2 vehicles, 
aircraft & vessels; 3 machinery & electrical; 4 mineral 
products; 5 metals; 6 plastics & rubber; 7 foodstuffs; 8 
precious stones; 9 textiles; 10 instruments & watches; note: 
the size of the bubble reflects the relative importance of the 
sector for BE exports (only the 10 biggest sectors labels are 
displayed) 
Source: Comtrade, European Commission calculations 

Productivity 

Belgian  productivity  growth  has  slowed  down 
compared  to  its  neighbouring  countries.  While 
Belgian  labour  productivity  is  among  the  highest 
in the EU, it has grown at a slower pace since 2010 
compared to France, Germany and the Netherlands 
(see Graph  3.4.3), particularly  since 2015. Labour 
productivity dynamics  has been less  favourable in 
the last years in services, where Belgium has been 
and 
compared 
underperforming 
Germany, than in manufacturing. Furthermore, this 
lacklustre  labour  productivity  growth  has  been 
accompanied  by  a  low  total  factor  productivity 
growth  (TFP),  which  has  grown  at  slower  pace 
than in the Netherlands, France and Germany since 
2011. 

to  France 

50 

7580859095100105110115120125-8-6-4-2024680506070809101112131415161718Contribution to EMS: servicesContribution to EMS: goodsExport market share (y-on-y change)EMS (2005=100)12345678910-3.0-2.0-1.00.01.02.03.04.0-10.0-8.0-6.0-4.0-2.00.02.04.0Market Dynamism (pps.)Competitiveness (pps.) 
  
  
3.4. Competitiveness and Investment 

23%,  respectively)  and  broadly  in  line  with  the 
Netherlands  (25%).  The  market  services  used  in 
Belgian final production of manufacturing are to a 
similar extent domestically produced and imported 
(see Graph 3.4.4). 

Graph 3.4.4:  Services content of manufacturing (in 2015) in 

percent 

Source: European Commission based on OECD ICIO tables 

Cost developments in both domestic and foreign 
services sectors could weigh heavily on Belgian 
competitiveness.  Given  that  across  countries, 
services  tend  to  be  characterised  by  a  lower 
productivity  growth  than  manufacturing  sectors, 
the  high  weight  of  the  services  sectors  in  the 
economy and their relatively high costs negatively 
affect  the  evolution  of  the  aggregate  unit  labour 
cost.  While  the  foreign  cost  evolution  in  market 
services  is  an  external  factor  for  the  Belgian 
economy, the domestic labour cost in Belgium has 
increased  faster  than  in  most  of  the  neighbouring 
countries since the 2000s and remained among the 
highest  in  the  EU(76).  High  domestic  unit  labour 
costs in the service sectors, partly driven by market 
the 
rigidities, 
competitiveness of the manufacturing sectors(77). 

indirectly 

impacts 

also 

Productivity  dispersion  between  the  most  and 
the  least  productive  firms  has  increased  in 
Belgium. The performance of the least productive 

(76)  Recent  wage  moderation  could  have  contributed 

to 
improve the cost-competitiveness of the Belgian firms (see 
also Cheliout S. and oth; 2019). 

(77)  See Connell et al. (2019) for an application using Belgian 
data  as  to  how  wholesalers  have  an  important  role  in  the 
export performance of manufacturing firms. 

The  Belgian  slowdown  in  productivity  can  be 
explained  both  by  structural  factors,  factors 
common  across  developed  countries,  and  by 
some country-specific characteristics. According 
to  a  recent  report  by  the  OECD, (74)  factors 
common to other developed economies include the 
growing  importance  of  services  in  the  overall 
economy,  the  weaker  technology  diffusion  across 
firms,  the  growing  dispersion  of  productivity 
performance  between  the  most  and  the  least 
productive firms, the structural decline in business 
dynamism,  and  the  ageing  of  the  population. 
the 
Specific  national  factors 
presence  of  large  skill  mismatches  (see  Section 
3.3),  the  structurally  low  public  investment  (see 
Section  3.1)  and  the  relatively  weak  efficiency  of 
R&D (see below).  

include  notably 

Graph 3.4.3:  Productivity growth (2010 = 100) 

Note: Real productivity per hours worked 
Source: European Commission 

Services  sectors  are  particularly  important  in 
the  Belgian  economy.  The  share  of  services  in 
terms  of  activity  and  employment  in  Belgium  is 
higher  than  in  the  neighbouring  countries,  with 
services representing 78% of value added in 2018 
and 81% of total employment in 2017. Moreover, 
Belgian intermediate use of market services (75) in 
its  manufacturing  production  remained  broadly 
stable between 2000 and 2014 (from 24% to 25%), 
but higher than in Germany and France (19% and 

(74)  OECD, 2019, In-depth productivity review of Belgium. 
(75)  Market  services  cover  sectors  G-K  in  ISIC  Rev.  3 

classification. 

51 

98100102104106108110201020112012201320142015201620172018IndexBEDEFRNL0%5%10%15%20%25%30%NLDBELITAESPFRADEUForeignDomestic  
 
                                                           
 
  
                                                           
3.4. Competitiveness and Investment 

performance, 
issues').  

including 

the  box  on 

'selected 

Productivity at regional level 

There  are  significant  productivity  gaps  both 
within  and  between  Belgian  regions.  The  most 
productive  region  is  the  Brussels-Capital  Region 
(hereafter  ‘Brussels’),  where  labour  productivity 
per  capita  reached  164%  of  the  EU  average  in 
2017. Among other factors, the composition of the 
labour  force  (high  share  of  tertiary  educated 
workers)  and  the  economic  concentration  (linked 
to  the  metropolitan  role  of  Brussels)  might  help 
explain the high productivity in Brussels. Flanders 
comes  behind,  notably  with  Antwerp  as  the  third 
most productive province of the country (154% of 
the  EU  average).  Wallonia  has  a 
lower 
productivity on average. In addition, intra-regional 
instance, 
disparities 
significant. 
in 
productivity 
Flanders  stands  only  at  117%  of  the  EU  average, 
while  the  Walloon  Brabant  is  at  158%  of  the  EU 
average,  ranking  as  the  second  most  productive 
province  of  Belgium.  The  labour  productivity  of 
the  other  Walloon  provinces  ranges  between  104 
and 111% of EU average.  

the  province  of  Limburg 

are 
in 

For 

regions 

to 
aim 
competitiveness 

increase 
The  Belgian 
productivity  and 
through 
regional  cluster  policies,  which  help  create 
innovative tools and boost the abilities of firms. 
Since  2016,  Flanders  has  focused  on  spearhead 
clusters  and  innovative  business  networks.  For  its 
part,  Wallonia  has  presented 
its  2019-2024 
Investment  Plan  (€5  billion)  in  which  about  €1 
billion is earmarked for R&I projects. In Brussels, 
thematic  clusters  aim  at  accompanying 
six 
business in their developments.  

The reform of the wage norm 

In  2017,  Belgium  reformed  its  process  of  wage 
determination (79).  The  principal  aim  of 
the 
reform  was 
cost 
competitiveness and keep wage growth in line with 
that  in  Belgium’s  main  trading  partners  (the 
Netherlands, France and Germany), and eventually 

safeguard 

better 

to 

is 

the 

total 

important 

productivity 

firms 
in  explaining  aggregate 
productivity  growth  given  that  they  account  for  a 
considerable  share  of  the  economy.  In  Belgium, 
factor 
and 
labour 
productivity  gap  between  the  top  10%  and  the 
bottom  10%  of  firms  have  increased  in  the  last 
decade, which might be a signal of weak diffusion 
of  technological  advances  and/or  low  resource 
reallocation.  For  example,  using  Belgian  data, 
Dhyne.  E.  et  al.  (2018)  find  that  IT  investment 
explains  around  10%  of  productivity  dispersion 
across  firms.  Finally,  the  average  share  of  high-
growth  enterprises  in  Belgium  is  lower  than  the 
average (see infra). 

The churn rates of firms in Belgium are among 
the  lowest  in  the  EU,  pointing  to  insufficient 
market  responsiveness.  Business  dynamism  is 
important  for  productivity-enhancing  reallocation, 
which  affects  the  aggregate  productivity.  Firms’ 
churn  rates  in  Belgium,  i.e.  the  sum  of  the  birth 
rates and death rates of firms in a given period, are 
among  the  lowest  in  the  EU.  The  entry  rates 
decreased  particularly 
the  market  service 
in 
sectors,  which  are  affected  by  high  regulatory 
burden  and  complexity,  including  sector-specific 
regulation  hindering  growth  in  a  number  of 
services  (see  Section  3.4.2)(78).  In  addition,  the 
increasing  number  of  firms  that  are  ’distressed‘ 
(so-called ’zombies‘) has increased since the crisis, 
pointing  to  possible  bottlenecks  in  the  exit  or 
restructuring of firms.  

high-skilled 
can 

the 
the  OECD, 

High skills shortages and skills  mismatches are 
weighing  on  potential  growth.  Belgium 
is 
characterised  by  a  high  vacancy  rate,  which  can 
largely  be  attributed 
lack  of  skilled 
to 
labour 
to 
workforce.  According 
shortages in Belgium arise primarily, but not only, 
skills 
in 
imbalances 
labour 
affect 
productivity,  as  they  slow  down  the  adoption  of 
new  technologies,  delay  production  and  increase 
labour market turnover. Job mobility in Belgium is 
low  as  compared  to  the  EU  average  (see  Section 
3.3). As a result, potential output would be higher 
if skills were usedmore effectively (see Section 3.3 
for  more  details  on  labour  market  and  education 

occupations.  These 

aggregate 

(78)  Business dynamism has declined in Belgium between 2000 
and 2014 in both manufacturing and services. However, the 
decline  in  number  of  companies  being  set  up  has  been 
reversed since 2014 and 2019 saw a record number of new 
companies being set up. 

(79)  At  national  level,  the  Loi  relative  à  la  promotion  de 
l’emploi  et  à  la  sauvegarde  préventive  de  la  compétitivité 
(‘Law of 1996’) specifies the basis on which social partners 
set the ‘wage norm’ every two years. 

52 

                                                           
                                                           
to 
recover  part  of 
competitiveness losses.  

the 

cumulated  past 

the  wage 
A  preliminary  assessment  of 
developments  confirms  that  the  reform  has 
largely accomplished its goals. The official wage 
gap  between  Belgium  and  its  three  neighbouring 
countries was estimated at 1.2% in 2017. (80) This 
gap  is  expected  to  have  contracted  in  2018  to 
0.9%,  as  the  labour  cost  growth  in  Belgium  was 
more moderate than in the neighbouring countries. 
In  this  regard,  the  Interprofessional  Agreement 
covering  2017-2018,  the  first  one  to  reflect  the 
new  and  stricter  rules  of  the  revised  wage  norm 
bill (81), set an upper limit of 1.1% for sectoral and 
company-level  wage  increases for the following 2 
years.  

Graph 3.4.5:  Unit labour cost decomposition 

3.4. Competitiveness and Investment 

report  of 

the  Central 
competitiveness.  The 
Economic  Council  estimated 
the  wage  gap 
corrected  for  differences  in  the  level  of  labour 
productivity  at  1.2%  in  2017,  signalling  that  the 
recent  wage  moderation  policies  contributed  in 
almost  closing  the  labour  cost  gap  with  the 
neighbouring countries.(82) 

Overview  of  the  business  environment  and 
business dynamics   

of 

spite 

efforts, 

In 
the 
government 
administrative burden on firms remains heavy, 
notably in tax and labour law.  While 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,  the  Federal  Planning 
Bureau  estimates  the  administrative  burden  at 
some  €7  billion  (1.6%  GDP),  most  of  which 
resulting from compliance with tax and labour law 
tax  system  is  also 
(Kegels,  C.,  2018).  The 
complex,  also  because  of 
tax 
the  various 
expenditures  (see  Section  3.1.6)  and  its  burden  is 
increasing.The payroll management for a company 
in Belgium is complex, in particular for companies 
that need to  manage the  various regional systems. 
There  is  room  to  improve  the  quality  of  the 
legislation  and  of  the  legislative  process  (Conseil 
Central  de  l’Economie,  2020  –  see  also  section 
3.4.4). 

Source: European Commission 

However, the revised wage norm does not take 
account  of  productivity  trends.  The  current  set-
up of the  wage-setting process does not guarantee 
against wage growth outpacing productivity, as the 
wage  norm  focuses  on  nominal  wage  trends, 
linking  them  to  wage  trends  in  neighbouring 
countries. Expanding the monitoring of labour cost 
competitiveness  to  include  unit  labour  costs  as 
well  would  ensure  that  macroeconomic  wage 
policies  factor  in  all  relevant  determinants  of  cost 

(80)  Conseil  Central  de  l’Economie,  2019,  Rapport  technique 
sur la marge maximale disponible pour l’évolution du coût 
salarial, pages 11-12 

(81)  The revised wage norm bill was approved by Parliament in 
March 2017. The Inter-professional Agreement was signed 
by  the  national  social  partners  and  the  National  Labour 
Council in February 2017. 

Business creation has been eased in the previous 
legislature,  notably  thanks  to  reforms  of  the 
company  law  and  the  digitisation  of  public 
services.  A  revision  of  the  company  code (83) 
entered  into  force  in  2019.  It  simplifies  the 
creation  of  companies,  substantially  reduces  the 
number of legal forms for companies, removes the 
minimal capital requirements for setting up private 
limited  liability  companies  and  cooperatives,  yet 
strengthens the protection of creditors (e.g. through 
financial plans, liquidity tests). The involvement of 
a  notary  is  required  for  business  registration. 

(82)  Conseil  Central  de  l’Economie,  2019,  ‘Le  handicap  des 
coûts salariaux’.  In this regard, it is worth to note that the 
report  from  the  Central  Economic  Council  draws  the 
attention  towards  some  methodological  issues  in  the 
estimation of productivity as used in the note. 

(83)  The  new  Code  of  Companies  and  Associations 

is 
applicable  since  1 May  2019.  For  existing  companies, the 
new  code  will  apply  as  from  1  January  2020,  with  the 
possibility to opt in earlier and with a transitional period to 
adapt companies’ statutes until 2024. 

53 

-4-3-2-101234560506070809101112131415161718Rate of change y-o-y (%)Inflation (GDP deflator growth)Real Compensation per EmployeeProductivity Contribution (negative sign)Nominal unit labour costAverage BE, DE and FR   
                                                           
                                                           
3.4. Competitiveness and Investment 

performed by SME’s is among the  highest in EU. 
SMEs  are  strong  innovators  and  have  strong 
linkages  with  their  partners  according  to  the  EU 
innovation  scoreboard.  Enterprises  providing  ICT 
training are also amply represented. Belgium R&D 
intensity increased remarkably from 1.9% in 2007 
to  2.8%  in  2018,  mostly  thanks  a  growth  in 
business  R&D  intensity  (from  1.3%  to  2.0%). 
However,  non  R&D  innovation  expenditures  are 
relatively low. The public R&D intensity increased 
too  (from  0.54%  in  2007  to  0.8%  in  2018),  but 
remains slightly below that of most other Member 
level  of  economic 
States  with  a 
development. 

similar 

the  OECD (2019b)  and 

The  efficiency  of  government  support  for 
business  R&D  could  be  improved.  Belgium  has 
the second highest level of government support for 
business  R&D  among  OECD  countries.  Direct 
government  funding  of  R&D  is  close  to  OECD 
average,  while  indirect  R&D  support  through  tax 
incentives  is  especially  large.  Recent  analyses  by 
Dumont  (2019), 
the 
Belgian  Court  of  Auditors  (2019a)  show  that  the 
efficiency  of  public  R&D  schemes  could  be 
improved.  The  OECD  points  in  particular  to  the 
fact that these schemes do not demonstrate  strong 
‘additionality’, in terms of extra R&D expenditure 
expected  to  translate  in  net  job  creation,  new 
investment  and  innovation.  Digitalisation  of  the 
economy  was  also  identified  in  the  National  Pact 
for  Strategic  Investment  as  one  of  the  priority 
avenues for boosting productivity and innovation.  

is 

system 

in  Belgium 

the  Belgian 

Improving  R&D  governance  by 
increased 
coordination  and  systematic  assessment  of 
policies  remain  a  challenge  for  the  system 
(Cincera, M. & Kelchtermans, S., 2020). The R&I 
governance 
rather 
complicated with multiple governments at federal, 
regional  and  community  level  responsible  for 
(parts of) R&I policy. This multi-level governance 
of 
specific 
system 
challenges (Boekholt,  P.  et  al.,  2011)  such  as  the 
risk  of  sub-optimal  scale  of  public-private 
investments  that  may  create  disincentives  for 
structural  co-operation  between 
leading 
research  performers  and  businesses  at  an  inter-
regional 
level.  Co-operation  and  coordination 
mechanisms for international issues exist mainly at 
operational 
and 
coordination on national issues is more sporadic. 

level,  while 

co-operation 

creates 

the 

to 

and 

facilitate 

Belgium  has  launched  initiatives  to  promote  e-
government 
business-to-
government  transactions  in  some  procedures  (see 
infra-section  on  digital  public  services).  For  the 
year 2019 this reform seems to have created many 
liberal 
additional  business,  principally 
professions.  Social 
currently 
partners 
reviewing the system of collective dismissal. 

in 
are 

the 

to 

to 

be 

The  insolvency  framework  has  undergone  a 
major  reform in 2018, but certain features still 
need 
facilitate 
addressed 
entrepreneurship. The  expansion of the scope of 
the  insolvency  framework  to  all  business  is  a 
positive  development.  However,  there  is  room  to 
improve  certain  features.  For  example,  currently 
only  debtors  can  initiate  insolvency  procedures 
(not creditors), and most cases continue to require 
court 
special 
involvement.  Furthermore,  no 
(simplified)  out-of-court  settlement  procedure 
exists for SMEs.  

The  heavy  administrative  burden,  the  low 
quality  of  some  public  services  and 
late 
payments weigh on entrepreneurship. However, 
overall  Belgium  ranks  only  45th  out  of  190 
assessed  economies,  with 
for 
long  delays 
electricity  connections 
(171  days),  building 
permits  (212  days,  hence  ranking  168th  –  see 
section  3.4.2.  -  including  75  days  for  water 
connection),  notably  because  of  long  duration  of 
appeals  (see  Section  3.4.4)  and  low    performance 
in registering property (ranking 143). The  process 
of transferring a property is the third slowest in the 
EU at 56 days and the most expensive in the EU at 
12.7%  of  the  property  value.  The  Belgian  State’s 
slow 
deteriorated 
compared to the previous year and is a liability to 
its business environment. 

businesses 

payments 

to 

Innovation and business dynamics 

There  is  room  to  further  improve  the  already 
well  performing  Belgian  R&I  system.  In  the 
2019 European Innovation Scoreboard, Belgium is 
part  of  the  group  of  ’strong  innovators‘  in  6th 
place  in  the  EU.  Belgium  has  a  very  attractive 
research  system  with  a  strong  science  base  and 
strong  universities 
(see  Section  3.3).  R&D 
expenditure in the private sector is relatively high, 
although  mainly 
few 
multinational  companies.  On  the  other  hand,  at 
level  of  business  R&D 
0.7%  of  GDP 

concentrated 

the 

in 

a 

54 

3.4. Competitiveness and Investment 

enterprises in 2016, Belgium is well under the EU 
average of 5.2% and ranks 25th in the EU for this 
indicator.  Moreover  employment 
in  all  fast-
growing enterprises as a share of total employment 
in  2015  was  10.2%  compared  to  15.2%  for  the 
EU28 (see Graph 3.4.6).  

in 

terms 

weaknesses 

Belgium’s 
of 
entrepreneurship  and  company  dynamics  do 
not allow it to draw maximum economic benefit 
from  the  strength  of  its  R&I  system.  The 
renewal  of  the  Belgian  company  population  is 
slower  than  in  peer  countries.  With  only  2.8%  of 
innovative 
people  employed 

fast-growing 

in 

55 

3.4. Competitiveness and Investment 

Box 3.4.5: Investment challenges and reforms in Belgium 

Section 1. Macroeconomic perspective 

The total investment in Belgium in 2018 was above the average of the euro area (23.8 % of GDP compared 
to 20.8%) and higher than in neighbouring countries. Moreover, over the last decade investment in Belgium 
increased by 1 percentage point of GDP, while by contrast in neighbouring countries investment as a share 
of  GDP  remains  below  its  pre-crisis  level.  However,  despite  the  relatively  overall  good  performance  of 
private  investment,  the  level  of  public  investment  remains  low.  More  specifically,  while  investment  in 
equipment  and  construction,  as  a  share  of  GDP,  have  remained  broadly  stable  over  the  past  decade,  the 
investment in intellectual property increased by 0.9 % of GDP, contributing largely to raising the investment 
ratio. Amid benign financing conditions, investment is expected to increase and account for a slightly higher 
share of GDP in 2020.  

Section 2. Assessment of barriers to investment and ongoing reforms 

Even though progress has been made to reduce barriers to private investment in Belgium (for example, by 
reducing  the  labour  cost  handicap),  a  more  ambitious  liberalisation  of  regulated  professions  and  business 
services is needed in light of the increasing importance of services as input for the manufacturing sector (see 
Section  3.4.2).  Furthermore,  Belgium  low  labour  participation,  limited  job  mobility  and  a  high  degree  of 
skill mismatches result in one of the highest job vacancy rates in the EU. As a result, job offers for critical 
occupations take longer to fill (see section 3.3). In addition, regional disparities are significant and they need 
to be taken into account (see Section 3.4.3).  

Selected barriers to investment and priority actions underway  

The  complex  investment  decision-making  process  due  to  fragmentation  of  competencies  regarding 
investment between multiple layers of government combined with the need to pursue fiscal consolidation, 
has led to a low level of public investment for a protracted period of time (see Section 3.1). In addition to 
this,  the  deteriorating  quality  of  the  country's  public  infrastructure,  affects  the  country’s  competitiveness. 
Regional governments plan to boost their investment, however at cost of loosening their fiscal discipline by 
announcing the exclusion of some large investment projects from their deficit targets. 

Impact of the Juncker Plan in Belgium 

The EU supports investment in Belgium also via the European Fund for Strategic Investments (EFSI). By 
October  2019  total  financing  under  the  EFSI  amounted  to  EUR  1.6  billion,  intended  to  trigger  EUR  8.4 
billions in additional investments. By the end of 2020, EFSI and other EU financial instruments will come 
under the roof of the new InvestEU programme that promotes a  more coherent approach to financing EU 
policy objectives  and increases the choice of policy implementation options and implementing partners to 

56 

Regulatory/ administrative burdenCSRTaxationPublic administrationAccess to financePublic procurement /PPPsCooperation btw academia, research and businessJudicial systemFinancing of R&D&ICSRInsolvency frameworkBusiness services / Regulated professionsCSRCompetition and regulatory frameworkRetailCSREPL & framework for labour contracts ConstructionWages & wage settingDigital Economy / TelecomCSREducation, skills, lifelong learning CSREnergyCSRTransportCSRLegend:No barrier to investment identifiedSome progressCSRInvestment barriers that are also subject to a CSRSubstantial progressNo progressFully addressedLimited progressNot assessed yetPublic administration/ Business environmentFinancial Sector / TaxationR&D&ISector specific regulationLabour market/ Education 
3.4. Competitiveness and Investment 

tackle country specific market failures and investment gaps. In addition, under InvestEU, Member States can 
set-up  a  national  compartment  by  allocating  up  to  5%  of  their  structural  funds  to  underpin  additional 
guarantee  instruments  supporting  the  financing  of  investments  with  a  higher  level  of  local  specificities. 
InvestEU  will  be  policy-driven  and  focus  on  four  main  areas,  all  relevant  for  Belgium:  Sustainable 
Infrastructure, Research, Innovation, and Digitisation, Small Businesses, and Social Investment and Skills. 
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.  The 
Flemish region’s promotional institution, PMV, has shown interest in becoming an implementing partner for 
InvestEU.   

(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. 

According  to  a  recent  analysis,  the  average 
share  of  high  growth  enterprises  in  Belgium  is 
about  9%  compared  to  11% 
in  the  EU 
(Flachenecker,  F.  et  al.,  2020).  Moreover,  in  the 
period 2009-2017, more than half of Belgian firms 
that  became  ‘high  growth  firms’  in  terms  of 
employment  only  remained  in  that  category  for  3 
years.  Hence,  it  is  difficult  to  become  a  high 
growth firm, but even more challenging to remain 
one.  This  phenomenon  could  be  traced  back  to 
several sources, including rigidities in the business 
environment,  heavy  administrative  burden,  a 
limited  appetite  for  private  risk  as  well  as 
limitations  in  the  availability  of  highly-skilled 
professionals who could be either recruited by fast-
growing enterprise or themselves create innovative 
enterprises.  

Graph 3.4.6:  Employment in fast-growing enterprises in 50% 
most innovative industries and employment in 
all fast-growing enterprises, both as % of total 
employment, 2016 

Source: European Commission 

the  current 

support  entrepreneurship 

lack  specific  support  and 

Start-ups 
face 
personnel  shortages  Recent  policy  schemes  to 
encourage  and 
in 
Belgium has been developed, and in the final years 
of 
legislature  additional  policy 
initiatives were taken to improve the guidance for 
fast  growing  enterprises.  However,  there  is  no 
specific  policy  instrument  targeting  fast  growing 
enterprises  in  Belgium,  but  numerous  policy 
schemes to support innovative firms that can grow 
at high rates or for high growth firms that often are 
engaged  in  innovative  activities (Cincera,  M.  & 
Kelchtermans,  S.,  2020).  Attracting  the  right 
people  seems  to  be  by  far  the  most  significant 
barrier  that  impedes  firms  from  growing  faster, 
followed by increased competition and the lack of 
management capacities. 

57 

EUBEBGCZDKDEEEIEESFRHRITCYLVLTLUHUMTNLATPLPTROSISKFISEUK024681004812162024Employment in fast-growing enterprises(1) in 50% most innovative industries as % of total employment, 2016(2)  Employment in all fast-growing enterprises(1) as % of total employment, 2016(2) 
 
  
3.4. Competitiveness and Investment 

The  shortage  of  highly  skilled  professionals, 
notably  in  sciences  and  engineering,  and  the 
lack  of  ’knowledge  entrepreneur‘  hampers 
Belgian  growth  prospects.  The  share  of  the 
population  aged  25-64  which  completed  tertiary 
education  was  at  47.4%  in  2018,  which  is 
relatively  high  compared  to  the  EU  average  of 
40%.  However,  Belgium  lags  behind  in  terms  of 
graduates  in  science,  technology,  engineering  and 
mathematics  (STEM)  (see  Section  3.3).  Belgium 
also  scores  below  the  EU  average  in  terms  of 
entrepreneurial skills (see Box 3.3.1). 

Digitalisation 

in  the 

Belgium  scores  well 
integration  of 
enabling  digital  technologies  into  businesses, 
but  it  stagnates  in  e-commerce.  Belgium  is  one 
of the best ranked in the EU for the integration of 
digital technologies into business (84). In important 
areas such as cloud computing and big data, there 
has been a clear increase compared to the previous 
years:  3%  increase  in  big  data  and  11%  in  cloud 
computing.  In  2019  28%  of  Belgian  SMEs  were 
selling online. However, the figures are stagnating 
in terms of e-commerce turnover and online cross-
border sales.  

Digitisation  is  actively  supported  by  several 
public  and  private 
initiatives  (e.g.  Digital 
Wallonia  and  Radicaal  Digitaal  in  Flanders) 
and  there  are  efforts  to  make  the  regulatory 
framework  fit  for  digital  transformation.  In 
order to further promote digitisation for SMEs, an 
awareness raising campaign was launched in 2019.  

3.4.2.  MARKET INTEGRATION AND INVESTMENT 

QUALITY 

Regulated Professions/Services 

The  regulatory  restrictiveness  of  professional 
services  remains  fairly  high.  At  federal  level, 
liberal professions continue to be highly regulated 
(including  accountants,  tax  advisors,  real  estate 
agents,  architects,  etc.),  as 
the 
Commission’s  Restrictiveness  Indicator (85)  and 
confirmed  by  the  OECD  Indicators  of  Product 

indicated  by 

(84)  Digital Economy and Society Index Report 2019 - 
Integration of Digital Technology. 
(85)  COM/2016/0820final. 

to 

(see 

assess 

reforms 

potential 

insurance 

investment 

requirements 

Market  Regulation  2018 (86).  Among  the  most 
problematic  restrictions  are  mandatory  training 
requirements,  mandatory  chamber  membership 
and 
requirements, 
corporate  structure  requirements,  which  could 
obstacle 
also  European 
Commission,  2019a).  The  analysis  carried  out  by 
of 
Belgium 
requirements specifically imposed on legal persons 
providing  services  has  not  yet  led  to  concrete 
reforms.  The  2019  merger  between  the  two 
professional  bodies  regulating  and  supervising 
accounting  and  tax  advice  services  is  a  welcome 
step,  however  it  did  not  lead  to  the  expected 
simplification  of 
these 
professions.  Finally,  although    notaries  seem  to 
have a similar degree of regulation to that of many 
other Member States (except the Netherlands) and 
are  present  throughout  Belgium,  their  regulated 
fees for real estate transactions are at the very high 
end of the scale. Notaries charge regulated fees for 
the registration of companies. 

rules  on  access 

to 

Construction sector  

Labour  shortages  and  cumbersome  building 
permit  procedures  are  holding  back  growth  in 
the construction sector. Belgium faces a shortage 
of  about  20 000  construction  workers  every  year. 
Posted  workers  account  for  up  to  20 %  of  the 
construction  workforce.  The 
labour  shortage 
hamper  the  potential  important  role  that  the 
construction sector could play in reaching the 2030 
target  for  reducing  greenhouse  gas  emission  by 
contributing  to the renovation of the old and low-
energy  performing  Belgium  housing  stock  (see 
Section 3.5). Access to finance does not appear to 
be  a  problem  (see  Section  3.2).  Companies  of  all 
sizes  perceive  credit  constraints  as  low  and 
according 
financing 
latest 
conditions are positively assessed. 

surveys, 

the 

to 

the 

these 

reforming 

there  are 

shortages, 
in 

large 
Despite 
discrepancies 
entry 
requirements  for  craft/construction  services 
abolished 
across 
qualification  requirements  for  a  large  range  of 
professions (27). Wallonia only for five of them. In 
Brussels  there  has  been  very  little  reforms  on 
requirements.  Discussions  have 
qualification 

Flanders 

regions. 

the 

(86)  http://www.oecd.org/economy/reform/indicators-of-

product-market-regulation/. 

58 

                                                           
                                                           
3.4. Competitiveness and Investment 

The sector has among the lowest churn rates of 
all  Member  States.  While  the  merger  between 
Delhaize  and  the  Dutch  retailer  Ahold  as  well  as 
the  market  entry  of  the  Dutch  supermarket  chain 
Jumbo  onto  the  Belgian  market  had  a  positive 
impact  on  market  dynamics  in  the  large-scale 
grocery  retail  sector (88),  non-food 
large-scale 
retail  still  displays  a  high  level  of  concentration 
and very low churn rates.   

to 

The  retail  sector  remains  highly  regulated. 
According 
the  OECD  Product  Market 
Regulation indicator 2018, Belgium has the fourth 
highest level of retail restrictions in the EU. These 
results are not far from those of the Commission’s 
Retail Restrictiveness Indicator (89) where Belgium 
scored as one of the most restrictive Member State 
for the operational environment for retailers (but is 
average  for  establishment  restrictions).  Rules  on 
shop  opening  hours,  sales  promotions,  discounts 
and  distribution  channels  for  non-prescription 
medicines  contribute  to  this  score.  Regulations 
governing the authorisation process to open a shop 
are  the  competence  of  the  regions  and  have  been 
simplified in recent  years. Wallonia  has evaluated 
the  system  in  place  to  further  amend  the  rules. 
Flanders has planned to set up a monitoring system 
to assess the efficiency of the 2018 reform.  

High prices in retail affect consumers. The 2018 
report of  the  Price  Observatory  showed  that  retail 
prices in supermarkets are significantly higher than 
in neighbouring Member States. In addition to the 
identified  operational  restrictions  and  structural 
issues of the Belgian market (its small size), other 
underlying 
labour  market 
rigidities,  commercial  strategies  of  main  market 
players,  the  prohibition  to  sell  at  loss  as  well  as 
territorial  supply  constraints (90)  (practices  of 
private operators resulting in high purchasing costs 
for retailers). The effects of new market entries on 
consumer prices have not been analysed.  

reasons 

include 

(88)  The  5  biggest  players  account  for  86%  of  the  modern 
grocery retail market compared to 66% in France, 64% in 
Germany  and  58%  in  the  Netherlands.  Modern  grocery 
retail  market  covers  hypermarkets,  supermarkets,  discount 
stores, 
stores. 
Euromonitor, 2018. 

convenience 

forecourt 

stores 

and 

(89)  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. 

to 

the 

far. 

free 

facilitate 

in  any  progress  so 

started  between  the  regions  on  a  cooperation 
agreement 
flow  of 
professionals  across  the  regions  but  this  has  not 
In  2018, 
resulted 
uncollectable 
receivables  were  most  often 
associated with the insolvency of customers in the 
construction  sector.  In  2014,  61%  of  construction 
companies wrote off debt, as they were not able to 
collect it. A 2018 survey showed that for 30.4% of 
Belgian  construction  firms,  this  was  due  to  the 
high costs associated with pursuing a payment. 

Long delays to obtaining a building permit are 
a barrier to investment in construction, notably 
for the renovation of the existing housing stock. 
On  national  scale,  the  average  number  of  permits 
issued  per  month  has  hardly  increased  since  2000 
and  has  stabilised  between  2,000  and  2,500  new 
homes  and  buildings  to  renovate  and  about  4,500 
authorised  projects  on  a  monthly  basis.  In  2016, 
the  renovation  rate  of  the  housing  stock  stood  at 
0.44%.(87)  In  Brussels,  the  recent  reform  of  the 
Code  on  Land  Use  (CoBAT)  has  tightened  the 
deadlines  for  the  administration  to  respond  to 
building  permit  requests,  while  in  Flanders  the 
digitalisation  of  building  permits  is  on-going.  In 
Wallonia,  the  timeframe  for  obtaining  a  building 
permit  was reduced by the reform of the  land  use 
code. 

Retail 

The cumulated effect of a high regulation, high 
wage  costs  and  labour  market  rigidities  is 
weighing  on  the  performance  of  the  retail 
sector.  In  a  context  of  deep 
technological 
transformation  and  increasing  global  competition, 
cost  competitiveness  and  regulatory  flexibility  are 
crucial  factors  for  retailers  to  respond  to  these 
challenges.  In  retail,  the  wage  cost  handicap  in 
Belgium  compared  to  the  neighbouring  countries 
the  sector’s  external 
has 
competitiveness.  The  low  flexibility  of  labour 
regulation  as  well  as  discrepancies  between  rules 
the  complex  business 
across  regions  add 
innovation 
environment,  potentially  affecting 
sector’s 
capacity 
and  weighing 
performance, 
  E-
commerce  sales  of  Belgian  firms  are  stagnating 
(cf. infra). 

in  particular  productivity. 

increased  affecting 

the 

on 

to 

(87)  Conseil  Centrale  de  l’Economie,  2019,  Etat  des  lieux  en 

(90)  Belgian  authorities  are  actively  participating  in  a  Benelux 

matière de soutenabilité environnementale, page 12. 

working group on this issue. 

59 

                                                           
                                                           
3.4. Competitiveness and Investment 

investments  to  achieve  the  objectives  of  modal 
shift  towards  public  transport,  collective  modes 
and  active  modes.  Investments  in  rail,  a  federal 
competence, remain to be defined in the context of 
the  formation  of  a  new  federal  government  and  a 
new  management  for  NMBS-SNCB.  However, 
major 
the  RER-GEN  regional 
train  network  around  Brussels  will 
express 
continue until 2031, as well as the implementation 
of 
the  European  Rail  Traffic  Management 
Signalling System, connection to ports and new of 
upgraded cross-border rail infrastructure projects.    

investment 

in 

rail 

Belgium’s  rail  freight  market  is  competitive. 
infrastructure  manager 
Belgium’s 
is 
institutionally 
independent  of  any  freight  or 
passenger  railway  undertaking.  In  recent  years 
Belgium  has  experienced  a  significant  increase  in 
the number of competitors in the rail freight sector, 
which has resulted in Belgium ranking among the 
top five Member State in terms of the market share 
of non-incumbent freight operators in 2016 (almost 
50%).  In  the  passenger  sector  the  most  recently 
available  information  shows  that  in  domestic 
traffic  the  market  share  of  the  incumbent  NMBS-
SNCB  is  still  100%  (2016),  indicating  a  lack  of 
competition in the market. 

Forum 

Economic 

The quality of passenger rail services has room 
for improvements and uncertainty remains over 
their  opening  to  competition.  Belgium  scores 
rather  poorly  in  railway  services  efficiency  in  the 
2019  Global 
World 
Competitiveness  Report.  The  market  share  of  the 
incumbent  NMBS-SNCB  is  still  100%,  while 
98.2%  of  all  services  are  provided  under  public 
service  obligations  (PSO) 
through  a  directly 
awarded  contract  rather  than  through  competitive 
tendering  like  in  the  Netherlands  and  Germany. 
The  PSO  compensation  per  train-kilometre  is  the 
second  highest 
the  EU,  behind  France. 
Furthermore,  a  comparatively  low  share  (36%)  of 
the  PSO  compensation 
through 
passenger fares, weighting on public finances. The 
Belgian State and the NMBS-SNCB have still not 
reached an agreement on an updated version of the 
management contract,  which  sets out the different 
PSO  and  their  remuneration.  Such  contract  could 
be 
introducing  wide-ranging 
reforms  in  the  operator.  Finally,  there  is  room  to 
improve  interconnection  between  rail  and  urban 
and  regional  public  transport  (TEC,  De  Lijn, 
MIVB-STIB). 

is  recovered 

instrumental 

in 

in 

Transport 

Belgium  has  a  dense  road  and  rail  network, 
supported  by  an  excellent  port  infrastructure, 
which is well integrated in  European transport 
networks.  According  to  the  World  Economic 
Forum’s Global Competitiveness Report 2019, the 
quality  of  the  transport  infrastructure  is  good.    In 
particular,  port  infrastructure  has  been  highly 
regarded  over  the  years  and  scores  high  in  the 
World  Economic  Forum’s  ranking.  However, 
Belgium  scores  rather  poorly  in  terms  of  road 
quality and efficiency of rail services. 

Growing commuter and freight  traffic volumes 
are putting land transport infrastructure under 
increasing  pressure,  leading  to  congestion  and 
declining  air  quality  in  inner  cities.  Increasing 
the size  of infrastructure, however, is only part of 
the  answer.  Traffic  volumes  are  boosted  by  large 
tax 
commuting  subsidies  (e.g.  company  car 
advantage  -  see  sections  3.1.6  and  3.5).    Policy 
options  such  as  congestion  pricing 
in  road 
transport as well as the introduction of smart road 
pricing for private vehicles could be used to reduce 
the  problem  and  address  negative  externalities  in 
terms  of  environmental  impact  and  cost  to  the 
economy. 

The  level  of  investments  in  inland  transport 
infrastructure is among the lowest in the EU. In 
2017,  Belgium’s  investment  rate  of  0.4%  of  GDP 
was  the  third  lowest  in  OECD.  It  was  below  the 
level of the neighbouring countries, namely France 
which invested 0.8% of its GDP in 2017, Germany 
at  0.6%  and  the  United  Kingdom  at  1.1%. 
Investment in roads declined significantly in 2017 
(from €810 million in 2016 to €656 million). 

and 

urban 

transport 

transport 

The  regions  are  planning  to  invest  in  the  road 
network, 
inland 
waterways, and Flanders has started to reform 
its public urban transport.  The three regions, in 
particular  Brussels,  have  designed  and  launched 
major  multiannual 
infrastructure 
investment plans. In Flanders, the government has 
lifted  the  exclusive  monopoly  of  the  urban  and 
urban-rural  public  transport  operator  De  Lijn  on 
intercity  coach  services  and  has  announced  that  it 
intends to tender some parts of De Lijn’s network. 
Investment in urban-rural transport is important to 
ensure  access to business parks,  which are  mostly 
only  accessible  by  car.  Wallonia  has  planned 

60 

3.4. Competitiveness and Investment 

infrastructure, telecommunication operators expect 
a  saturation  of  mobile  networks  in  Brussels  by 
2020.  

Energy market 

(NECP)93,  Belgium  will 

Belgium committed to fully phasing out nuclear 
energy  by  2025,  which  will  cause  a  major 
change  in  the  present  generation  capacity  mix. 
According to its final National Energy and Climate 
Plan 
therefore 
increasingly  depend  on  gas  and  renewable  energy 
complemented  by  imports  to  ensure  security  of 
supply.  This  situation  further  emphasises  the 
importance  of  applying  the  energy-efficiency  first 
principle  to  counter  this  trend.  As  regards  the 
diversification  of  energy  sources  and  supply  from 
third  countries  and 
import 
dependency,  the  NECP  foresees  an  increase  in 
overall  import  dependency  from  71%  in  2020  to 
86% in 2030 and an increase in net imports of gas 
by  about  46%.  In  order  to  ensure  security  of 
electricity  supply  following  the  nuclear  phasing 
out,  Belgium  intends  to  introduce  a  capacity 
remuneration mechanism. (94)  

the  reduction  of 

At  the  same  time,  discussions  continue  on 
whether  to  further  extend  the  operation  of  a 
limited number of nuclear power plants beyond 
2025.  If  Belgian  authorities  would  consider  this 
option, such a decision would need to be taken in a 
timely  manner  to  allow  for  the  implementation  of 
measures  to  ensure  continued  adherence  to  the 
highest standards of nuclear safety and to create a 
more predictable energy investment environment. 

imports 

Extended  maintenance  outages  at 
five  of 
Belgium’s seven reactors in 2018 raised security 
of  supply  concerns.  The  outages  were  offset 
the 
mainly  by 
Netherlands,  with  net 
in  December 
increasing  by  168% (95).  Under  the  new  outage 
schedule presented by Electrabel in January 2019, 
Doel 3, Doel4, Tihange 2 and Tihange 3 would all 
be available  in the  winter 2019-2020, providing 4 

from  France  and 

imports 

93   The  Commission  will  assess,  in  the  course  of  2020,  the 
final  National  Energy  and  Climate  Plan  submitted  by 
Belgium on 26  December 2019. 

(94)  On  21  November  2019,  Belgium 

implementation  plan  of 
the  capacity 
mechanism to  the  Commission  for review. 

submitted 

its 
remuneration 

Telecom 

The Belgian telecommunication market remains 
characterised  by  a  high  level  of  concentration 
and weak competition. In any part of the country, 
the  combined  market  share  of  Proximus  (the 
incumbent  operator)  and  of  the  regional  cable 
operator 
the  fixed 
market. (91)  The  provision  of  regulated  access  to 
fixed  networks  on  terms  permitting  sustainable 
competition should also be conducive to enhanced 
competition  on  the  mobile  side  and  could  be 
is 
beneficial  for 
currently still dominated by bundles. 

the  Belgian  market,  which 

than  95% 

is  higher 

in 

Belgian  households  pay  higher  prices  than  in 
peer  countries.  Belgium  scores  relatively  low  in 
the  broadband  price  index,  and  stabilises  at  the 
19th  place,  4  points  below  the  EU  average. (92) 
The  Belgian  market  is  the  second  most  expensive 
for  triple  play  bundles  including  broadband,  fixed 
television.  Take-up  of  mobile 
telephony  and 
broadband 
least 
expensive  offer  in  Belgium  for  a  basket  of  1  GB 
and  300  calls  is  slightly  below  the  EU  average. 
Consumers  seeking  data-only  subscriptions  of 
5GB  and  above  find  prices  much  more  expensive 
than the EU average (IBPT, 2019).  

low,  although 

remains 

the 

Belgium risks lagging behind in 5G deployment, 
a  critical  enabler  for  attaining  the  Green  Deal 
sustainability  goals.  Coordinated  efforts  between 
the federal level, the Regions and the Communities 
are  needed  to  roll  out  5G.  Several  factors  are  at 
play:  the  delay  in  the  authorisation  of  the  5G 
pioneer bands, mainly due to the lack of consensus 
over the auction design, the division of 5G auction 
proceeds  between  the  federal  and  community 
levels,  the  strict  radiation  limits  (in  particular  in 
Brussels) different in each of the three regions, and 
the  timely  delivery  of  environmental  permits  for 
the  deployment  of  antennae  governed  by  the 
regions,  as  well  as  taxation  of  antennae  by 
municipalities, in particular in Brussels, which can 
go  to  up  to  €10,000  per  year  per  antenna. 
According to Belgian authorities, without adequate 
telecommunication 
the 
investment 

in 

(91)  DESI 

- 

2019 

Belgium 
https://ec.europa.eu/digital-single-market/en/news/2019-
desi-report-electronic-communications-markets-overview-
member-state-telecom-chapters. 

Telecom 

Chapters, 

(92)  European  Commission,  2019  DESI 

index,  Telecom 

(95)  PLATTS Power In Europe, 2019-01-28. 

chapter. 

61 

                                                           
                                                           
 
3.4. Competitiveness and Investment 

0.02  and  0.13.  The  Flemish  provinces  excluding 
Flemish Brabant, on their side, range between 0.45 
to 0.61. R&D and innovation intensity appear to be 
among  the  factors  explaining  the  difference  in 
performance. 

Graph 3.4.7:  GDP per head, 2017 – Index EU=100 

Source: Eurostat 

3.4.4.  GOVERNANCE AND INSTITUTIONAL 

QUALITY 

The fragmentation of policy action is not offset 
by effective coordination, seeking out synergies, 
which  makes  the  business  environment  more 
complex.  Policy  action  is  fragmented  across  the 
several  levels  of  government  (see  Table  3.4.1). 
This  increases  the  importance  of  effective  and 
operational  cooperation  across 
the  different 
government  tiers.  Seeking  out  and  implementing 
possible economies of scale is also rendered more 
difficult in this way, because of the duplication of 
structures  in  a  context  of  constrained  public 
finances  (see  Section  3.1).  A  recent  report 
(European 
Public  Administration  Country 
Knowledge, 2018) confirms that Belgium is one of 
the Member States that combines a high degree of 
fragmentation  and  a  low  level  of  coordination. 
Social  partners  consider 
lack  of 
coordination and cooperation between the different 
government 
fragmented 
results 
is  lacking.  This 
legislation,  where  coherence 
situation  adds  to  the  complexity  of  the  business 
environment (see section 3.4.2). A recent report of 
the  Central  Council  of 
the  Economy  also 
highlighted  that  businesses  find  it  difficult  to 

levels 

that 

the 

in 

GW  of  baseload  capacity  to  the  market,  thereby 
alleviating security of supply concerns, next to the 
commissioning  of  the  NEMO  cable,  the  1  GW 
interconnection with the United Kingdom.  

in  December,  but 

Retail  electricity  prices  are  above  the  EU 
average.  In  2018,  the  energy  supply  component 
was higher than in 2017, notably due to the nuclear 
plants  outages 
the  price 
difference  mainly  comes  from  the  distribution 
costs (96) which were among the highest in Europe 
in  2018.  According  to  CREG,  the  energy  bill 
remains  high  for  low-revenue  households,  in 
particular  single-parent  homes,  and  for  those  who 
rely on electric  heating. (97) In addition, the Court 
of Auditors found that the flanking measures of the 
Flemish  region  to  combat  energy  poverty,  while 
being  well  supported, 
  only  partially  reach 
vulnerable households and so far lead too rarely to 
housing energy efficiency works (98). 

3.4.3.  REGIONAL DIMENSION 

Although the average GDP per capita is higher 
in Belgium than in the EU,  disparities between 
and within regions are significant. GDP per head 
in Flanders reaches 132% of the EU average while 
in  Wallonia  is  around  the  EU  average  (with  large 
differences ranging from the 131% of the province 
of Walloon Brabant  to 73%  of the  EU average  of 
the province of Luxembourg) (see Graph 3.4.7). It 
is  important  to  highlight  the  specific  performance 
of Brussels, where GDP per capita corresponds to 
216% of the EU average (cf. 3.4.3). However, real 
GDP  growth  between  2003  and  2017  has  been 
higher in Flanders (+1.8%) and Wallonia (+1.3%) 
than in Brussels (+0.8%), which GDP growth rate 
is  well  below  the  national  average  (+1.5%). 
According  to  the  2019  Regional  Competitiveness 
Index (99), the three most competitive provinces of 
Belgium  are  Brussels-Capital,  Walloon  Brabant 
and  Flemish  Brabant,  all  scoring  0.67.  Hainaut  is 
at  -0.01,  while  the  three  Walloon  provinces  of 
Namur,  Liège  and  Luxembourg  range  between 

(96)  Eurostat,  electricity  price  components  for  an  annual 
consumption in the range 2500 to 4999 kWh in 2018. 

(97)  CREG study 14 November 2019. 
(98)  Report of the Court of Auditors of October 2018 on results 
and evaluation of energy poverty measures in Flanders. 
(99)  More  information  about  the  methodology  is  available  at: 
https://ec.europa.eu/regional_policy/en/information/maps/r
egional_competitiveness/. 

62 

                                                           
 
 
3.4. Competitiveness and Investment 

operate  in  a  context  where  it  is  difficult  to 
determine which rules are applicable to them (100).  

Table 3.4.1:  Distribution of competences between 

government tiers - Funding 

Furthermore,  not  always  effective  policy 
coordination  complicates  the  delivery  of  a 
certain  number  of  policies  and  reforms.  In  the 
area  of  public  finances  and  in  particular  public 
investment  there  is  still  no  agreement  on  annual 
targets  at  all  levels  of  government,  in  spite  of  the 
cooperation agreement signed in 2013 (see Section 
3.1).  Real  estate  taxation  takes  place  at  federal, 
regional and local level. Concerning health, scope 
remains for improving the coordination across the 
federal  and 
to  strengthen 
federated  entities 
prevention. In the area of digital policy, the federal 
levels,  regions  and  communities  need  to  find 
common  ground  for  the  roll  out  of  5G  and  the 
regulation  of  telecom  network  and  digital  content 
(see  infra).  The  municipalities  and  their  taxation 
power on antennae and small cells also impact the 
5G  roll-out,  as  well  as  the  competence  of  the 
regions  in  the  area  of  radiation  standards  and 
environmental  permits  (see  Section  3.4).  Close 
cooperation  between 
the  French  Community, 
competent  for  education,  and  the  Brussels  and 
for  vocational 
Walloon 
infrastructure 
training,  activation  and  digital 
investments, 
skills 
mismatches  and  labour  market  needs  (see  Section 
3.3).  Similarly,  as  already  indicated  in  the  2019 
country  report,  coordination  between  the  federal 
level and the three regions is essential to deliver a 
consistent mobility vision, address climate change 
and  implement  a  comprehensive  environmental 
fiscal policy (see Section 3.5). 

regions,  competent 

is  essential 

to  address 

(100) Conseil  Central  de 

l’Economie,  Rapport  Emploi-
pp.87-88.  
2018-2019, 

Compétitivité 
https://www.ccecrb.fgov.be/p/fr/697/lignes-directrices-
pour-faire-face-aux-defis-socio-economiques-de-la-
belgique 

Based on the note 'Public administration characteristics in 
Belgium', PPMI EY, 2018 
The "Regional" level also covers Regions and Communities. 
Source: European Commission 

The lack of effective evaluation  processes in the 
policy-making  process  further  contributes  to  
administrative and regulatory burden.  Belgium 
adopted in the first half of the decade a number of 
reforms  that  strengthened  the  formal  set  up  of  its 
federal policy-making process (ex-ante and ex-post 
evaluations,  consultations  with  social  partners, 
sunset  clauses  –  OECD,  2015).  In  spite  of  this 
reform,  social  partners  still  consider  that  impact 
assessments and evaluations are performed too late 
and  incorrectly,  weakening  their  influence  in 
policy-making. Lacking resources pose challenges 
for the Council of State in ensuring the quality of 
legislation,  given  its  significant  workload  and 
frequent  short  deadlines  for  delivering  opinions. 
The  Court 
concrete 
recommendations  to  give  a  central  role  to  policy 
evaluations in the policy, management and budget 
cycle  (Court  of  Auditors,  2018).  Social  partners 
have  jointly  urged  the  federal  authorities  to 
introduce a comprehensive strategy to improve the 
evaluation framework and the quality of regulation 
in  order 
the  administrative  and 
regulatory  burden  in  Belgium  (Central  Economic 
Council,  2020).  To  ensure 
independence  of 
assessments,  the  OECD  has  suggested  to  involve 
the competition authority in ex-ante evaluations of 
new laws and regulations on regulatory restrictions 
in services (OECD, 2019b). 

of  Auditors  made 

reduce 

to 

Some  key  enforcers  and  public  bodies  are 
understaffed  to  perform  their  tasks.  Belgium 
carries  an  important  responsibility  in  terms  of 
market surveillance for the whole European Union, 

63 

FederalRegional LocalEconomic affairs**Defence*Internal affairs (incl. Police)***Justice**Finance/tax**Environmental protection**Public utilites***Social welfare***Health**R&D (incl. universities)**Education**External affairs***  
                                                           
 
  
 
3.4. Competitiveness and Investment 

information officer (CIO) has been created in 2019 
to pilot the Digital Wallonia Action Plan. 

Justice 

Improving  the  quality  of  the  justice  system,  in 
particular  regarding  digitalisation,  will  require 
additional  action.  By  the  end  of  2019,  a  unified 
coding system for court cases had been adopted by 
the College  of  Courts and Tribunals for nearly all 
courts.  This  will  enable  the  first  comprehensive 
collection  of  court  data  in  2020,  thus  allowing 
data-led  management  of  human  and  financial 
resources  in  the  judiciary.  However,  migration  to 
the  unified  case-management  system  (MaCH)  has 
not  progressed  due 
in  public 
procurement.  By  November  2019,  a  significant 
number of courts had not yet moved to MaCH (e.g. 
civil  tribunals  of  first  instance,  commercial  and 
appeal courts). 

to  delays 

Lacking  resources  pose  a  challenge  for  the 
functioning  of  the  justice  system.  A 
joint 
memorandum of the Constitutional Court, Court of 
Cassation  and  the  Council  of  State  highlights  this 
issue. (102)  A  lack  of  resources  and  insufficient 
digitalisation  hampers  the  efficient  functioning  of 
the  prosecution  services.  The  High  Council  of 
Justice continues its efforts to improve the quality 
of the justice system, including by promoting clear 
language in court rulings, better auditing of annual 
reports  by  court  presidents,  and  developing  a 
the 
system 
centralised 
functioning of the justice system.  

for  complaints  on 

The  rate  of  online  publication  of  judgments  is 
currently 
legislation 
low.  Recently  adopted 
provides  for  the  online  publication  of  judgments 
from  2020  onward,  which  currently  remains  low 
(2020  EU  Justice  Scoreboard  (forthcoming)). 
However,  the  modalities  of  publication  remain  to 
be  defined  in  consultation  with  the  judiciary  (e.g. 
anonymisation method, search tools).  

Lacking  resources  for  administrative  justice 
in  particular  for 
cause  significant  delays, 
building  permits  and  procurement  procedures. 
Judicial review in cases involving building permits 
takes  about  34  and  28  months  for  Brussels  and 

(102) Joint  Memorandum  by  the  Constitutional  Court,  Court  of 
State. 

Cassation 
the 
http://www.raadvanstate.be//?action=doc&doc=1095 

Council 

and 

of 

as  it  is  one  of  the  main  importers  of  goods  in  the 
Union,  representing  7%  of  all  EU  product  import 
goods. Market surveillance of the single market for 
goods  is  essential  to  protect  consumers  and  to 
ensure  a  level  playing  field  for  businesses  to 
compete.  While 
some 
recruitments,  the  Belgian  Competition  Authority 
still suffers from inadequate staffing, compared to 
competition 
neighbouring 
countries. (101)  There  are  also  important  staffing 
needs  in  the  area  of  justice  (see  infra)  and  rail 
transport regulation. 

authorities 

there 

been 

have 

in 

Digitalisation of public services 

Belgium  launched  initiatives  to  promote  e-
prescriptions,  medical  data  exchange  and 
digital  interactions  with  public  administration, 
yet  the  overall  value  of  users  of  e-Government 
reaches  only  53%  of  the  population  –  there  is 
certainly  room  for  improvement  there.  The 
relatively  average  ranking  among  EU  member 
States  is  due  to  the  fact  that  while  Belgium 
performs very well in specific health related areas, 
such  as  medical  data  exchange  (70%)  and  e-
prescriptions  (79%),  other  fields  where  citizens 
interact  with  public  administration  are  lagging 
behind.  

transactions 

The  Digital  Transformation  Office,  at  the 
federal level, has introduced services for digital 
identification (itsme) or to facilitate  business to 
(Mercurius).  The 
government 
recently 
introduced  “e-box”,  a  secure  digital 
mailbox  for  all  Belgian  citizens  and  companies 
could  be  an  important  opportunity  to  further 
improve  electronic  public  administration  services 
for  business  (currently  20th  among  EU  Member 
States).    In  addition,  the  Flemish  government 
continues  to  promote  digital  public  services  with 
the  second edition of the Flanders Radical  Digital 
program  and  continues  the  development  of  the 
digital  platform  www.vlaanderenonderneemt.be. 
The  Brussels  Region  adopted  in  April  2019  an 
operational  plan  for  the  application  of  the  "once 
only" principle in the collection by all regional and 
local  administrations  through  the  regional  service 
integrator  (Fidus).  A  new  function  of  chief 

(101) See  also  the  opinion  of  the  Central  Economic  Council  to 
the  2019  report  of  the  National  Productivity  Board  (page 
34). 

64 

                                                           
                                                           
3.4. Competitiveness and Investment 

(Raad 

instance 

Wallonia, respectively. For Flanders, the length of 
judicial  review  has  been  reduced  to  16  months  at 
first 
voor 
Vergunningsbetwistingen),  and  takes  about  10 
months in appeal (before the  Council of State).  A 
case  management  reform  envisages  to  allocate 
voor 
cases 
the 
their 
Vergunningsbetwistingen  depending  on 
complexity,  which  could  further  improve  the 
efficiency.  

before 

Raad 

65 

 
3.5.  ENVIRONMENTAL SUSTAINABILITY 

3.5.1.  CURRENT STATE OF PLAY 

target  under 

While  Belgium’s 
the  Effort 
Sharing Regulation is to reduce greenhouse gas 
emissions by 35% below 2005 levels by 2030, it 
remains  not  on  track  to  reach  its  2020  climate 
change  target  of  a  15%  reduction  below  2005 
levels.  In  sectors  not  covered  by  the  EU  ETS 
reductions were limited to -10% in 2017. They are 
expected to go down further to -12% or 3 pp. short 
of  the  2020  target  of  -15%.  By  2030  Belgium 
expects  GHG  emissions  to  drop  by  -14%  below 
2005 levels in the absence of additional measures. 
This suggests that significant additional efforts will 
be  required  to  reach  the  Belgian  effort  sharing 
target  of  -35%.  Some  regions  have  put  forward 
higher  levels  of  ambition.  Brussels  intends  to 
reduce its emissions by 40% and Wallonia has set 
itself  an  economy-wide  greenhouse  gas  reduction 
target  of  55%  below  1990  levels.  Meanwhile,  the 
20.2%  reductions  achieved  by  2017  relative  to 
1990 mostly materialised in the electricity and the 
industry  sectors.  The  final  Belgian  National 
Energy  and  Climate  Plan  adopted  in  December 
2019  sets  out  these  measures  as  well  as  specific 
energy target, including a renewables share in final 
energy  consumption  of  17.5%  (EU-wide  target  of 
32%)  and  a  12%  improvement  in  final  energy 
consumption (EU ambition of 32.5%). These  new 
energy  targets  are  less  ambitious  than  the  targets 
set  out  in  the  draft  Belgium  National  Energy  and 
Climate  Plan  adopted  in  December  2018.  The 
presence  of  a  caretaker  federal  government  could 
delay adoption and implementation of new federal 
policy commitments. 

3.5.2.  TACKLING CLIMATE CHANGE 

Belgium’s intermediate and longer-term climate 
commitments  will  require  political  decisiveness 
to work out concrete measures and benefit from 
the opportunities in  terms of economic growth, 
job  creation  and  health  benefits.  The  inter-
federal  energy  pact  of  December  2017  contains  a 
number of preparatory elements for the  integrated 
National Energy and Climate Plan, adopted in late 
2019.  In 
its 
commitment  to  implementing  the  Paris  agreement 
and  evolve  towards  a  carbon-free  society.  This 
transition relies heavily on investments in all GHG 
emitting  sectors,  including  the  share  of  renewable 
energy  in  the  energy  mix,  in  a  context  of  nuclear 

this  plan,  Belgium  reconfirms 

transport 

phase-out (see Section 3.4.2). Crucial in its success 
will  be  the  transformation  of  energy-intensive 
industries, such as the petro-chemical pole around 
Antwerp  and  steel  around  Liège  and  Ghent, 
decarbonisation  of 
through 
road 
electrification  and  modal  switch,  and  accelerating 
renovation  rates  in  what  is  one  of  the  oldest 
building  stocks  in  Europe.  Tapping  opportunities 
in  the  circular  economy  can  help,  where  Belgium 
is  doing  well  despite 
in 
promoting  eco-innovation.  A  stable,  predictable 
and  coordinated  legislative  framework  will  be 
essential  to  mobilise  the  required  private  sector 
investments.  

insufficient  efforts 

to 

The  employment  impact  of  the  Paris  Climate 
Agreement is positive and among the highest in 
the  EU.  A  study  that  investigates  employment 
impacts in the EU of the policies necessary to meet 
the  2°C  limit  by  2050  shows  a  1%  increase  in 
employment  in  Belgium  or  an  additional  60,000 
jobs  as  compared 
the  baseline  scenario 
(European  Commission,  2019d).  The  sectors 
which  are  expecting  to  benefit  the  most  from  the 
sectors 
green 
producing  renewable  technologies,  construction, 
the circular economy as well as the service sector. 
The  greening  of  the  economy  will  create  skills 
needs to be matched by adaptation of existing and 
future  occupations.  As  such,  the  transition  to  a 
greener economy provides opportunities and needs 
for  upskilling  and  reskilling  of  the  workforce 
(European Commission, 2019d). 

are  manufacturing 

transition 

ETS sectors – energy production and industry 

involve 

sector  will 

Achieving  emission  reduction  targets  in  the 
substantial 
energy 
investment. Belgium is committed to phasing-out 
its  nuclear  energy  production  by  2025,  which 
would 
involve  developing  alternative  energy 
generation  capacity  from  renewable  sources  and 
from  gas-fired  power  stations,  as  well  as 
investments  to  increase  energy  efficiency  and 
extend cross-border interconnections. The National 
Pact for Strategic Investment estimates the energy-
related  investment  needs  at  €60  billion  over  the 
period  2017  to  2030  (or  around  1%  of  GDP  per 
annum).  

A significant share of greenhouse gas emissions 
in  Belgium  comes 
from  energy-intensive 
industries,  among  other  the  petro-chemical 

66 

 
3.5. Environmental sustainability 

initial 

developing  innovative  financing  mechanisms  will 
be important, in particular for households that will 
be  faced  with  high 
investment  costs. 
Furthermore, the Court of Auditors underlined that 
the  prescribed  energy  norms  of  new  buildings  in 
Wallonia  are  too  low  for  meeting  the  renovation 
objectives  (Court  of  audit,  2019).    Renovation  is 
the 
also  held  back  by  bottlenecks  affecting 
long  building  permit 
construction  sector  like 
in  adequately  skilled 
delays  and  shortages 
construction  workers 
3.4.3). 
(see  Section 
Furthermore, the energy consumption of the sector 
still mostly relies on fossil fuels. 

Graph 3.5.1:  Contribution of non-ETS sectors (%, 2016) 

Source: European Commission 

The  transport  sector  is  responsible  for  35%  of 
non-ETS  greenhouse  gas  emissions  in  Belgium. 
A  recent  study  by  the  European  Commission (105) 
estimates  the  total  external  costs  of  transport  for 
road, rail and inland waterways in Belgium at €27 
billion  annually,  which  corresponded  to  7%  of 
Belgium’s  GDP  in  2016.  These  external  costs 
include costs related to accidents, environment (air 
pollution,  climate  change,  the  costs  related  to 
energy production, i.e. the  well-to-tank emissions, 
noise,  habitat  damage)  and,  only  for  road, 
congestion  costs  amount  to  some  €9  billion (106). 
Moreover, Hoornaert and Van Steenbergen (2019) 

(105) European  Commission,  June  2019,  Study  on  sustainable 
transport  infrastructure  charging  and  internalisation  of 
transport 
at: 
available 
externalities, 
https://ec.europa.eu/transport/themes/sustainable-
transport/internalisation-transport-external-costs_en. 
(106) Handbook on the external cost of transport, 2019, p.128. 

industry 

remaining 

to  11.8%  of 

industry  around  Antwerp,  but  also  traditional 
industries in Wallonia. Industrial emissions non-
related  to  energy  consumption  make  up  17.2%  of 
industrial 
emissions  compared 
combustion.  The  petro-chemical 
in 
Antwerp (the second largest cluster in the world as 
indicated  in  Section  3.4,  and  one  of  the  most 
important  sectors  in  the  Belgian  economy)  faces 
the  double  challenge  of  substantially  reducing 
emissions  (or  purchasing  emission  allowances) 
while 
competitive. 
Beyond  investments  in  renewable  energy  and 
improved energy efficiency, in a context of nuclear 
phase-out important investments in carbon capture, 
hydrogen  and  biomass-based  feedstock  might  be 
needed  to  accompany  the  transformation  of  the 
sector.  In  parallel,  greenhouse  gases  emissions 
intensity  is  higher  in  Wallonia,  where  traditional 
industries  are  located  and  where  there  is  an  on-
going  economic  transformation  (see  infra).  The 
highest  greenhouse  gas  emission  intensities  are  in 
Waremme  (lime  and  plaster),  Virton  (pulp)  and 
Mons (cement, fertilisers and electricity). 

internationally 

Non-ETS 
agriculture and waste management 

–  building, 

sectors 

transport, 

the 

Renovation  of  the  building  sector  is  moving 
slowly in spite of proactive policies. The building 
sector  is  responsible  for  more  than  30%  of  non-
ETS GHGs emissions in Belgium. Belgium ranked 
low  in  relation  to  the  energy  performance  of  its 
existing  housing  stock (103),  which  is  rather  old 
with 80% of the stock built before the introduction 
of  energy  norms.  In  the  existing  plans  and 
strategies, 
renovation  of  buildings  and 
sustainable  construction  take  a  central  part,  and 
renovation  rates  should  gradually  increase  above 
the  meagre 0.4% recorded in 2016.  The  National 
Pact for Strategic Investment estimated (with some 
significant  degree  of  uncertainty) 
total 
required  investment  for  public  buildings  at  about 
€33  billion  by  2040,  corresponding  to  an  annual 
investment  of  more  than  €1.6  billion.  Investment 
needs  to  the  complete  building  stock  (including 
residential  buildings)  are  an  order  of  magnitude 
higher,  around  €325  billion (104).  To  achieve  this, 

that 

(103) According 

to 

the  European  Commission’s  Building 
Database of the, in 2014 Belgium ranked 25th in relation to 
the energy performance of its building stock. 

(104) Energy National Investment Pact-Final Report, 2018, p.13 

https://www.npsi-
pnis.be/sites/default/files/final_report_energy.pdf 

67 

Non-ETS industry7%Agriculture16%Waste6%Others5%Construction31%Transport35%                                                           
  
                                                           
3.5. Environmental sustainability 

well  as  investing  to  improve  rail  users’  customer 
satisfaction.  It  would  also  involve  measures  to 
further  promote  rail  freight,  notably  by  adapting 
key infrastructure. However, the uptake of electric 
or  hybrid  electric  vehicles  remains  slow 
in 
Belgium.  The  market  share  of  new  passenger 
battery electric vehicles and plug-in hybrid electric 
vehicles has increased from below 0.5% in 2014 to 
more than 2.5% in 2017, but has slightly decreased 
in  2018  again.  The  need 
for  considerable 
infrastructure  investment  to  adapt  roads  to  soft 
mobility (cycle lanes, park and ride schemes, etc.), 
to  improve  the  quality  and  access  to  mobility-
related data, notably to better allocate demand, has 
also  been  identified.  According  to  the  National 
Strategic  Investment  Pact,  total  investment  needs 
in  low-carbon  transport  could  amount  to  €27 
billion  or  0.5%  of  GDP  per  year  over  the  next 
decade. 

There  is  room  to  make  tax  and  the  carbon 
pricing  systems  and  subsidy  structures  more 
environment-friendly.  Belgium  annually  spends 
€2.5 billion on fossil fuel subsidies compared with 
€1.5  billion  on  sustainable  energy  subsidies. 
Taxing fuels according to their carbon content and 
their full life cycle greenhouse gas intensity would 
help  reduce  GHG  emissions,  foster  energy-
efficiency and generate tax revenue. Certain excise 
duties  for  fossil  fuels  do  not  provide  the  right 
signal  in  terms  of  carbon  emissions  and  energy-
efficiency  (see  Section  3.1.6).  On  the  other  hand, 
electric  cars  are  exempted  (Flanders)  or  benefit 
from 
the  Walloon 
regions) purchasing and circulation tax. 

low  (Brussels-Capital  and 

Agriculture  is  responsible  for  16%  of  the  non-
ETS  GHGs  emissions  in  Belgium.  The  total 
emissions  of  greenhouse  gasses  from  agriculture 
(including  cropland  and  grassland)  decreased 
between  1995  and  2016  by  13%.  However,  the 
share  of  agriculture  in  the  total  net  emissions  has 
increased  from  8%  in  1995  to  9%  in  2016.  The 
(non-CO2) emission of CH4 and N2O per hectare 
of  UAA  in  Belgium  is  7.4  kilo  tonnes  of  CO2 
equivalent  per  1000  hectare  in  2015,  which  is  far 
above the EU-average of 2.4. 

3.5.3.  ENSURING A JUST TRANSITION 

In  the  absence  of  mitigating  measures,  the 
transition  towards  a  low-carbon  economy  will 

estimate the welfare gains from full internalisation 
of environmental and (road) congestion costs to be 
€  2.3  billion,  of  which  €  1.3  billion  in  time  gains 
and € 0.1billion in environmental gains by 2024. 

Graph 3.5.2:  Building stock energy consumption, KWh/m² 

(2016) 

Source: BPE 

External costs are not reflected in the same way 
across the different means of transport. Looking 
at  taxes  and  charges  paid  by  transport  users 
(excluding  fixed  infrastructure  costs),  rail  users 
pay  109%  of  their  total  external  and  variable 
infrastructure  costs,  whereas  freight  users  only 
cover  20%  of  those  costs.  Road  users  pay  around 
43%  (passenger)  and  27%  (freight)  of  their 
external 
costs. 
According to the 2018 Baromètre de l’Attractivité 
belge (107),  43%  of  companies  think  that  traffic 
congestion has a negative impact on their decision 
to  invest  in  Belgium.  Baert  and  Reynaerts  (2018) 
find that congestion costs in Brussels and Antwerp 
start to outweigh the usual agglomeration benefits, 
and  thus  negatively  impact  firm  productivity  in 
these regions. 

infrastructure 

variable 

and 

Belgium  plans  to  invest  in  developing  low-
carbon  transport,  but  is  lagging  behind  in 
electric mobility. Belgian regions have announced 
major  multiannual  investments  plans  in  transport 
(see  Section  3.4.3).  Belgium’s  objective 
to 
increase  the  share  of  low-carbon  transport  will 
involve investing in multimodal mobility  systems, 
strengthening  and  improving  public  transport  and 
encouraging  the  use  of  soft  (i.e.  zero  emission) 
mobility.  This  comprises  completing  the  RER 
suburban  train  network  around  Brussels  by  2031 
and  the  purchase  of  the  related  rolling  stock,  as 

(107) EY 2018, page17. 

68 

 
                                                           
3.5. Environmental sustainability 

together 
to  create  a  range  of  "employment-
environment"  clusters  (“alliances”)  in  the  area  of 
construction,  renewable  energy,  agriculture  and 
food. 

Given  its  high  emission  intensity,  and  taking 
into account the large regional and productivity 
disparities in Belgium, the likely socioeconomic 
impact of the low carbon transition and the fact 
that the former industrial transformation is still 
ongoing, the intervention of the Just Transition 
Fund    would  need  to  be  concentrated  on  the 
Hainaut  region.  Many  workers  are  employed  by 
the emissions emitting industries in the province of 
Hainaut.  The  industrial  sector  employs  17.7%  of 
the  province (109), 
the  414,905  employees  of 
notably  in  metal  production,  chemical  industry, 
electricity  sector  and  extractive  industries  (8,169, 
3,662, 1,734 and 962 employees respectively). The 
province of Hainaut notably produces two-third of 
the  Belgian  cement (110).  It  should  promote 
economic  diversification  and 
reskilling  and 
increase 
the  attractiveness  of  the  region  for 
investments  in  line  with  its  smart  specialisation 
strategy  (RIS3),  which  identifies  the  sectors  and 
activities with most potential. The Wallonia region 
(which  includes  Hainaut)  is  focussing  its  RIS3 
investments  on  industrial  processes  and  materials; 
sustainable  development; 
food; 
and 
health 
mobility; and ICTs. 

3.5.4.  CIRCULAR ECONOMY  

Belgium is among the best performers in the EU 
as  regards  waste  management  and  has  already 
reached  the  EU’s  2020  municipal  waste  recycling 
target.  However,  there  are  differences  in  separate 
collection  rates  between  the  regions,  with  the 
Brussels  region  performing  much  worst  (43%  in 
2017  versus  Flanders  and  Wallonia  at  70%).  This 
has been attributed to governance issues. 

Belgium performs well on resource productivity 
(how  efficiently  the  economy  uses  material 
produce  wealth).  Circular 
resources 
(secondary)  use  of  materials  in  Belgium  stood  at 

to 

(109) Available 

at: 
http://www.hainautstat.be/hainautstat/commentaires/Emplo
i.pdf 

(110) Available  at:  https://www.rtbf.be/info/regions/detail_le-

hainaut-plus-gros-producteur-national-de-
ciment?id=8205512. 

impact  vulnerable  consumers.  A  gradual  phase-
out with long term visibility and adequate flanking 
measures  to  ease  the  transition  is  likely  to  be 
necessary to ensure a successful transition. This is 
particularly  the  case  for  vulnerable  consumers, 
where  the  impact  could  be  mitigated  through 
energy  poverty  measures,  including  where  these 
are part of social policy. Higher energy costs could 
also  create  distributional  effects.  A  study  by  the 
Federal  Planning  Bureau (108),    on  the  impacts  of 
respecting the non-ETS 2030 target of a reduction 
of 35%, projected that energy costs for households 
would  rise  by  3%  per  year  on  average  in  2015-
2040, compared to 2.4% in the reference scenario. 
In  the  context  of  the  transition  towards  a  low 
carbon  mobility,  investments  in  urban  and  urban-
rural  mobility  are  essential  to  ensure  access  to 
business  parks,  which  are  mostly  only  accessible 
by  car  (see  section  3.4.2).  From  its  side,  the  EU 
will  monitor  the  impacts  of  climate  policy  on 
energy prices and expenditure, and has proposed a 
Just  Transition  Fund  designed  to  ensure  that  the 
transition towards EU climate neutrality is  fair by 
helping  the  most  affected  regions  in  Belgium  to 
address the social and economic consequences and 
to alleviate transition costs. 

relatively 

Limburg), 

The  transition  to  a  low-carbon  economy  will 
also  impact  economic  activity  in  regions  that 
combine energy-intensive industries and higher 
unemployment. This could include such sectors as 
energy  intensive  industries,  the  oil  and  gas  sector 
and  more.  Regions  formerly  dependant  on  steel, 
textile  or  coal  are  still  undergoing  an  economic 
transformation  (e.g.  provinces  of  Hainaut,  Liège 
and 
higher 
with 
unemployment rates. It will be crucial to anticipate 
and  mitigate  these  effects  e.g.  by  monitoring 
possible  distributional  effects  of  climate  policies 
and  by  introducing  re-skilling  and  up-skilling 
measures.    For  Belgium,  an  objective  formula  in 
order  to  identify  a  region  eligible  for  the  just 
transition  was  based  on  the  following  criteria:  a) 
emissions  of  regions  with  high  carbon  intensity 
(calculated  according  to  an  emissions/GVA  ratio) 
and b) industrial employment in these regions. The 
Walloon government intends to bring stakeholders, 
including  companies,  trade  unions,  associations, 
research  institutes,  citizens  and  public  authorities 

(108) FPB 

(2018) 

WORKING 
https://www.plan.be/uploaded/documents/2018051712450
60.WP_1805_11575.pdf. 

PAPER 

5-18 

69 

                                                           
                                                           
3.5. Environmental sustainability 

introducing  an  ambitious  carbon  and  energy 
taxation. A reform  which  would increase energy-
related  consumption  taxes  by  removing  reduced 
VAT  rates  on  energy  products  and  differentiate 
excise  duty  rates  based  on  the  GHG  and  energy 
content  of  each  energy  product  has  been 
simulated (112).  In  the  case  of  Belgium,  additional 
budgetary  revenues  would  range  between  0.2% 
and 0.9% of GDP.  

 A  comprehensive  and  coherent  environmental 
fiscal  policy  requires  effective  coordination 
between  Belgium  federated  entities.  The  three 
different  regions  have  made  separate  declarations 
reflecting  their  plans  and  ambitions  to  address 
climate change. While the Brussels Capital Region 
plans  to  achieve  a  GHG  emission  reduction  of 
minimum  40%  by  2030  compared  to  2005  and 
commits  to  achieve  the  European  goal  of  carbon 
neutrality  by  2050,  the  Flemish  government  aims 
for  a  GHG  emission  reduction  in  the  non-ETS 
sectors  of  85%  by  2050  compared  to  2005.  In 
Wallonia,  the  government  intends  to  reduce  GHG 
emissions  by  55%  by  2030  compared  to  2005. 
Both  Wallonia  and  the  Brussels  region  intend  to 
shift  environmental  taxation  to  encourage  the  use 
of  less  polluting  cars.  Flanders  intend  to  further 
discourage  the  use of polluting cars, by basing its 
taxation  as  from  2021  on  the  new  “Worldwide 
Harmonised Light Vehicle Test Procedure” which 
better measures pollution.  

Other environmental challenges  

Road transport congestion makes air quality in 
Belgium to be a cause for severe concern. As the 
European Environment Agency report for the year 
2016  shows,  there  is  a  significant  health  burden 
due  to  poor  air  quality  with  75,800  years  of  life 
loss  (YLL)  attributable  to  fine  particulate  matter 
concentrations (with 6.7 YLL/1000 residents). For 
2017,  limit  values  were  reported  as  having  been 
exceeded  for  nitrogen  dioxide  in  two  air  quality 
zones 
in  Brussels  and  Antwerp.  Substantial 
progress  was  made  in  reducing  particulate  matter 
emissions  with  no  exceedance  of  target  values 
reported  for  2017.  Measures  taken  to  reduce  air 
low 
pollution 

the  establishment  of 

include 

(112) European  Commission,  2019,  Environmental  taxes  for 
sustainable  and  inclusive  growth,  Technical  background 
note  by  Commission  services  for  the  Tax  Dialogue  of  the 
Economic Policy Committee. 

18.9% in 2016, compared with the EU-28 average 
of  11.7%.  However,  Belgium  performs  below  the 
EU  average  for  people  employed  in  the  circular 
economy  (1.12%  of  total  employment  in  2015 
versus  an  EU  average  of  1.73%).  The  lack  of 
specific  skills  continues  to  be  an  obstacle  to 
innovation  and  entrepreneurship  in  the  area  of 
circular  economy.  In  terms  of  notable  regional 
initiatives on circular economy, Flanders launched 
new  Green  Deals  on  circular  purchasing  and 
circular 
three 
competitiveness  clusters  created  a  common 
platform  for  plastic  recycling  and  a  Green  Deal 
launched  for  circular  purchasing.  The  Brussels 
Regional  Programme  for  Circular  Economy  was 
on 
the  halftime  evaluation. 
Furthermore,  the  Brussels  Regional  Innovation 
Plan  is  supporting  innovative  projects  on  green 
economy,  and  in  this  context  has  funded  projects 
focusing  on  green  chemistry  and  sustainable  food 
production.  

the  outcome  of 

In  Wallonia 

construction. 

support 

signals  can 

the 
Effective  price 
investments  needed 
to  achieve  Belgium’s 
ambitions  in  terms  of  energy  efficiency  and 
renewable  energy.  One  of 
the  measures 
considered  in  the  Belgian  NECP  is  to  come  to  an 
agreement  across  the  federated  entities  on  fiscal 
reforms  to  underpin  the  energy  transition.  An 
analysis  will  be  conducted  together  with  the 
regional  governments 
federal  and 
regarding 
climate  energy 
is  a  positive 
taxation.  This 
ambition,  notably  given  that  fossil  fuel  subsidies 
are  still  at  a  substantial  level  in  Belgium. (111)The 
effectiveness  of  such  initiatives  notably  depends 
on 
incentives, 
accessibility to citizens, and on measures to ensure 
investment decisions are made also in cases where 
only  long  term  returns  are  expected. To  illustrate, 
energy  efficiency  investments  can  benefit  from 
mechanisms  in  line  with  the  EU’s  Smart  Finance 
for  Smart  Building  Initiative  and  from  access  to 
mechanisms already in place, at European, national 
or regional level. 

the  definition  of 

adequate 

In  budgetary  terms,  Belgium  is  among  the 
countries  that  could  benefit  the  most  from 

(111) Commission  Staff  Working  Document  Accompanying  the 
document  "Report  From  The  Commission  To  The 
European  Parliament,  The  Council,  The  European 
Economic And Social Committee  And The Committee Of 
The  Regions  Energy  prices  and  costs 
in  Europe", 
COM(2019)1, p. 215 

70 

                                                           
                                                           
3.5. Environmental sustainability 

in 

concentrations of phosphates  in Belgian rivers are 
the  highest 
the  EU.  Such  concerns  are 
significant  considering  the  transition  towards  a 
more sustainable agriculture. The agricultural area 
used  for organic  farming  has  increased during the 
last  years  and  was  in  2017  6.3%  of  utilised 
agricultural  area  which  is  still  below  the  EU 
average (7.03%, 2017).  

Land is under intense pressure in Belgium and 
had  the  second  most  fragmented  landscape  in 
the EU in 2015 (113). There is a small Natura 2000 
network  comprising  13%  of  the  national  territory, 
mainly  south  of  the  Meuse  where  it  is  a  tourist 
attraction.  The  network  is  also  found  in  urban 
areas  such  as  the  Brussels  Region  and  Antwerp 
providing  flood  protection  and  human  health 
benefits.  The  Flemish  Government  Agreement 
2019-24 indicates that the “betonstop” initiative is 
no  longer  being  pursued (114),  whereas  Wallonia 
to  stop  urban  sprawl  by  2050 (115). 
intends 
However,  in  Flanders,  first  steps  have  been  taken 
towards  the  Strategic  Vision  on  spatial  planning 
including  goals  reducing  additional  land  take  and 
spatial  efficiency  within  existing 
increasing 
settlement area.   

(113) European  Environment  Agency,  Landscape  fragmentation 
pressure and trends in Europe, 2019. The most fragmented 
is Malta. 

(114) Flemish Government Agreement, p. 216. 
(115) Walloon Government Agreement, p. 70. 

a 

In  Wallonia 

emission  zones  (LEZs)  with  putative  fines  in  the 
Brussels Region and Antwerp and the extension of 
pedestrianised areas. A similar zone is planned for 
Ghent for 2020, and one is under consideration for 
Mechelen-Willebroek. 
legal 
framework  allowing  municipalities  to  propose  the 
creation  of  LEZs  has  been  recently  adopted. 
Regarding  the  company  car  regime,  progress 
remains limited due to the low take-up of the cash 
for  car  system  (which  in  addition  has  been 
annulled  by  the  Constitutional  Court)  and    of  the 
mobility  budget  (see  section  3.1.6).  Progress  has 
been  limited  as  well  concerning  the  reduction  of 
congestion  and  promotion  of  more  sustainable 
modes  of  transport  (see  section  3.4.2  and  infra). 
Plans for a Belgian-wide  km charge for passenger 
cars to follow the km-charge for lorries seem to be 
currently  frozen  due  to  policy  contrasts  between 
the three regions. 

Belgium  has  launched  several  initiatives  in 
green  financing  and  adopted  a  wide  range  of 
tools 
that  raise  awareness,  promote  and 
systematise  green  public  procurement  at  the 
federal and regional levels.   In 2018, the federal 
level launched green bonds, Flanders sustainability 
bonds,  and  the  Brussels  region  a  fund  for  the 
circular economy. 

Agriculture and land use 

Belgium  receives  €  648  million  from  the 
for  Rural 
European  Agricultural  Fund 
Development  (EAFRD)  for  rural  development 
for  the  2014-2020  period.  EAFRD  funding 
leverages a further €678 million of public funding 
in Belgium.  Approximately €500 million  supports 
restoring,  preserving  and  enhancing  ecosystems 
related to agriculture and forestry. 

In its government agreement for the legislature 
2019-2024, Flanders has expressed its will to use 
funds  from  its    allocation  under  the  Common 
Agricultural  Policy  (CAP)  to  promote  circular 
agriculture  and  ecological  programmes.  One  of 
its  ambitions  is  to  reduce  nitrate  and  phosphate 
in  ground  waters  and  rivers. 
concentrations 
Nitrates  diffuse  pollution 
agriculture 
from 
pressures  is  still  significant  in  Flanders  and 
reduce  nutrient 
requires 
pollution.  In  Wallonia  the  measures  currently  in 
place  to  control  nitrate  levels  have  not  yet  fully 
their  purpose.  Furthermore,  average 
achieved 

serious  efforts 

to 

71 

 
                                                           
ANNEX A: OVERVIEW TABLE 

Commitments 

Summary assessment (116) 

2019 Country-Specific recommendations (CSRs) 

CSR 1: Ensure that the nominal growth rate of 
net  primary  government  expenditure  does  not 
exceed  1.6  %  in  2020,  corresponding  to  an 
annual  structural  adjustment  of  0.6  %  of  GDP. 
Use windfall gains to accelerate the reduction of 
the  general  government  debt  ratio.  Continue 
reforms to ensure the fiscal sustainability of the 
long-term  care  and  pension  systems,  including 
by  limiting  early  exit  possibilities  from  the 
labour  market.  Improve  the  composition  and 
efficiency  of  public  spending,  in  particular 
through spending reviews, and the coordination 
of fiscal policies by all levels of government to 
create room for public investment.  

  Ensure  that  the  nominal  growth  rate  of  net 
primary  government  expenditure  does  not 
exceed  1,6  %  in  2020,  corresponding  to  an 
annual  structural  adjustment  of  0,6  %  of 
GDP. 

  Use  windfall  gains 

the 
reduction  of  the  general  government  debt 
ratio. 

to  accelerate 

  Continue  reforms 

to  ensure 

the 

fiscal 

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): 

The  compliance  assessment  with  the  Stability  and 
Growth Pact will be included in Spring when final 
data for 2019 will be available. 

The  compliance  assessment  with  the  Stability  and 
Growth Pact will be included in Spring when final 
data for 2019 will be available. 

Limited Progress. Competences for long-term care 
have  been  devolved  to  the  regional  level.  Flanders 
intends  to  pursue  a  strict  budgetary  follow-up  of 

(116)  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. 

72 

 
 
 
 
 
 
                                                           
 
A. Overview Table 

sustainability of the long-term care 

  and  pension  systems,  including  by  limiting 
labour 

early  exit  possibilities  from 
market. 

the 

 

Improve  the  composition  and  efficiency  of 
public  spending, 
through 
spending reviews, 

in  particular 

  and the coordination of fiscal policies by all 
levels  of  government  to  create  room  for 
public investment 

on 

to  ageing 

based 
related 

spending 
spending 

ageing. 
government 
Furthermore, 
is 
regulated within a framework in which the 'growth 
norm'  has  been  agreed  and  can  be  enforced.  The 
Walloon  region  has  put  in  place  actions,  including 
the  adoption  of  decrees,  to  improve  preventive 
cares.  Moreover, 
the 
obligation for hospitals to be part of a network from 
1 January 2020. 

it  has  been 

introduced 

job’  could  not  be 

Limited  Progress.  Measures  to  contain  pension 
expenditure  have  been  adopted  throughout  the 
period  2014-2019.  In  spite  of  these  measures,  the 
projected increase in pension expenditure is one of 
the largest in the EU (European Commission 2018b 
Ageing  report).  An  agreement  on  the  reform  of 
reached.  The 
‘arduous 
introduction of partial pension,  which allow taking 
up  a  part of  the  pension  rights  while  accumulating 
pension rights for the (partially) continued actvitity, 
will  be  discussed  in  the  Parliament  next  year.  In 
addition, to increase incentives to work, Flanders is 
planning  to  introduce  of  a  'job  bonus',  which  aims 
to grant to all workers with a gross wage lower than 
EUR  1700,  with  an  additional  income  of  EUR  50 
per  month,  with  the  bonus  tapering  off  as  wage 
increase  and  disappearing  altogether  for  wage  of 
EUR 2500 or higher. 

Limited Progress The Bruxelles Capital region has 
announced  plans  to  conduct  a  comprehensive  gap 
analysis of its public financial management (PEFA) 
in order to introduce a multi-annual approach and to 
increase  the  link  between  budget,  policies,  and 
results.  The  completion  of  the  PEFA  review  is 
planned by spring 2021 at the latest. Flanders, after 
completing  a  pilot  project  on  spending  review,  is 
implementation  of  a 
preparing 
spending review approach in its budgetary process. 
The Walloon region plans to start the evaluation of 
a  number  of  policy  measures,  with  a  view  to 
complete the exercise by 2021. 

the  structural 

No  Progress.  No  agreement  has  been  found 
between  the  different  entities  to  coordinate  fiscal 
policies.  Flanders  investment  ambitions  have  been 
reflected  in  the  2020  budget,  where  an  additional 
investment of EUR 100 million has been budgeted. 
The  Walloon  region 
to 
finance/refinance  projects  in  favour  of  the  climate 
and  energy  transition  in  the  region.  However,  the 
planned  increase  in  regional  investment  is  not 

issued  green  bonds 

73 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A. Overview Table 

covered  by  additional  revenues  or  saving  in  other 
expenditure, therefore it is expected to translate in a 
higher deficits. 

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

CSR  2:  Remove  disincentives  to  work  and 
strengthen  the  effectiveness  of  active  labour 
market policies, in particular for the low-skilled, 
older  workers  and  people  with  a  migrant 
background.  Improve 
the  performance  and 
inclusiveness  of  the  education  and  training 
systems and address skills mismatches. 

  Remove 

to  work 

disincentives 

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

Limited  Progress.  In  2019,  some  measures  have 
been  implemented  with  the  aim  to  increase  labour 
market  participation.  However,  most  of 
these 
measures are part of earlier reforms and are already 
taken  into  account  in  previous  assessments.  At  the 
federal  level,  the  fall  of  the  Belgian  federal 
government  in  December  2018  and  the  ongoing 
negotiations  for  the  formation  of  a  new  federal 
government  since  the  elections  of  May  2019, 
resulted  in  stand-still  of  the  federal  government  in 
current affairs in terms of the development of  new 
initiatives to address the  CSR. Some measures that 
were foreseen in the Jobsdeal, such as the increase 
in the degressivity of the unemployment benefits or 
the  discussions  to  revise  the  system  of  seniority 
payments,  have  been  put  on  hold.  At  the  regional 
level, several measures have been announced in the 
2019-2024 regional coalition  agreements, in  which 
all  regional  governments  aim  for  a  substantial 
increase in their employment rates. However, at this 
stage  it  is  too  early  to  make  an  assessment.  In 
Wallonia,  a  reform  is  foreseen  to  increase  the 
effectiveness  of  the  public  employment  services 
(PES)  by 
to 
jobseekers.  This  is  aimed  to  allow  the  PES  to 
provide  a  more  holistic  approach  for  the  most 
a  new 
vulnerable 
employment incentive will be implemented for very 
long-term  (more  than  24  months)  unemployed.  In 
Flanders, a job bonus for low wage workers will be 
introduced  in  2021  to  increase  the  net  return  from 
employment.  In  addition,  reduced  tariffs  for  social 
services such as child care and public transport will 
be  made  income  dependent  to  reduce  the  financial 
disincentive  to  take  up  low  wage  employment. 
Furthermore,  access 
to  PES  services  will  be 
expanded  to  inactive  individuals  who  are  not 
eligible  for  unemployment  benefits.  A  strategy  to 
reach  these  individuals  will  be  developed  in  the 
spring  of  2020.  To 
labour  market 
participation,  the  potential  of  long-term  ill  persons 

individualising  support 

jobseekers. 

addition, 

increase 

further 

In 

74 

 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Improve  the  performance  and  inclusiveness 
of the education and training systems 

A. Overview Table 

to 

to  return  to  work  will  be  assessed  earlier.  In 
Brussels,  the  government  plans  to  introduce  a 
"solution  guarantee",  which  should  ensure  that 
every  jobseeker  is  offered  a  job,  a  traineeship,  a 
training  or  a  recognition  of  competences.  In 
addition,  Brussels  plans 
introduce  several 
measures  to  support  the  integration  of  vulnerable 
jobseekers,  including  older  unemployed  (55+)  and 
people  with  disabilities.  The  ordinance  of 
11/16/2017 authorised the Brussels Region’s labour 
inspection  service,  as  of    1/1/2018  and  strictly 
within  the  Brussels  competences,  to  use  practical 
tests and mystery calls as additional tools to detect 
discrimination on the Brussels labour market. Until 
today,  no  mystery  calls  have  been  used  yet.  In 
2018,  four  practical  tests,  which  did  not  deliver 
substantial proof of discrimination, were sent out by 
post. 

Limited  Progress.  The  overall  assessment  for 
Belgium  is  "limited  progress"  in  addressing  the 
2019  CSR.  The  detailed  assessment  for 
the 
Communities is  the following: Limited progress  in 
the  French  Community.  Some  progress  has  been 
made in adoption (legal framework for the extended 
common  curriculum)  and  (partial)  implementation 
of  reforms  (  early  childhood  education  and  care, 
governance  of  schools,    principals  and  working 
time  of  teachers)  to  improve  the  performance  and 
inclusiveness  of  compulsory  education  (Pact  for 
Excellence in Education) in the French Community, 
but a sustained continuous and considerable amount 
of  work  is  still  needed  to  implement  the  ‘Pact  for 
Excellence’,  the  French  Community’s  flagship 
systemic  school  reform  to  improve  basic  skills, 
efficiency,  governance  and  tackling  inequalities. 
Elaboration,  adoption  and 
implementation  of 
different  measures  under  the  different  axes  of  the 
Pact  are  still 
reforming 
vocational  education  and  training  (VET).  While 
some  reforms  are  still  being  elaborated,  no  to 
limited  progress  was  achieved  in  the  other  sectors 
of education and training. The reform of the initial 
teacher training has been postponed by one year to 
2021/2022.  Some  progress  was  achieved  in  the 
through 
Flemish 
implementation  from  September  2019  of  measures 
and reforms agreed under the previous government 
in  all  sectors  of  education.  These  measures  should 
show some results in the medium to long term, but 
a significant amount of work is still needed to fully 
the  CSR.  No  new  measures,  except 
address 

Community, 

including 

required, 

mainly 

75 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  and address skills mismatches. 

A. Overview Table 

increasing  the  budget  for  pre-primary  and  primary 
education,  have  been  taken  since  the  May  2019 
elections.  

to 

its 

for 

lifelong 

intention 

learning  where 

Limited  Progress.  In  2019,  some  measures  have 
been  implemented  with  the  aim  to  address  skills 
mismatches, including by increasing the number of 
STEM graduates. However, most of these measures 
are part of earlier reforms and are already taken into 
account for in previous assessments. At the federal 
level, the fall of the Belgian federal government in 
December  2018  and  the  ongoing  negotiations  for 
the  formation  of  a  new  federal  government  since 
the elections of May 2019, resulted in stand-still of 
the federal government in current affairs in terms of 
the  development  of  new  initiatives  to  address  the 
CSR.  At  the  regional  level,  measures  have  been 
announced  in  the  2019-2024  regional  coalition 
agreements, but at this stage it is too early to make 
an assessment. In Flanders, the Flemish government 
introduce  an 
has  announced 
individual  learning  account  and  to  establish  a 
platform 
the 
Departments  of  Work,  Education  and  Economy  in 
cooperation  with the social partners  will develop a 
common  vision,  ambitions  and  goals.  These 
measures  aim  to  promote  a  culture  of  lifelong 
learning  and  to  stimulate  the  willingness  to  learn. 
They  complement  the  educational  database  that 
gives  an  overview  of  all  training  programs  for 
which the Flemish can use educational vouchers. In 
Brussels,  the  government  plans  to  attract  more 
participants in trainings by strengthening its policy 
on  the  "Poles  de  formation"  and  by  introducing  a 
"training  income",  which  complements  the  benefit 
of  the  jobseeker  with  income  that  is  related  to  the 
successful completion of the training. Furthermore, 
Brussels wants to strengthen language competences 
in  cooperation  with  the  other  Communities.  In  all 
regions,  the  recognition  of  skills  is  high  on  the 
policy  agenda.  The  French-speaking  community 
support 
has 
Upskilling  Pathways,  including  an  online  tool  for 
validation,  partnerships  with  key  operators  to 
support 
learning 
outcomes, and fostered access to the first certifying 
pathways.  In  Flanders,  measures 
the 
development  of  a  validation  instrument  and  the 
creation of a register of all the centres that perform 
validation. 

implemented  new  measures 

recognition  of 

the  mutual 

include 

to 

CSR  3:  Focus  investment-related  economic  Belgium  has  made  Limited progress in addressing 

76 

 
 
 
 
 
transport, 

policy  on  sustainable 
including 
upgrading rail infrastructure, the low carbon and 
energy  transition  and  research  and  innovation, 
into 
in  digitalisation, 
in  particular 
account regional disparities. Tackle the growing 
mobility  challenges,  by  reinforcing  incentives 
and removing barriers to increase the supply and 
low  emission 
demand  of  collective  and 
transport.  

taking 

  Focus  investment-related  economic  policy 
including 

sustainable 

transport, 

on 
upgrading rail infrastructure, 

 

the low carbon and energy transition 

A. Overview Table 

country-specific recommendation 3. 

launched  multiannual 

Some  Progress.  Some  progress  has  been  made  on 
investment-related  economic  policy  on  sustainable 
transport, including upgrading rail infrastructure. At 
federal  level,  major  investment  in  the  RER-GEN 
regional express train network around Brussels will 
continue  until 2031, as  well  as the implementation 
the  European  Rail  Traffic  Management 
of 
Signalling  System,  connection  to  ports  and  new 
upgraded  cross-border  rail  infrastructure  projects. 
The  three  regions,  in  particular  Brussels,  have 
transport 
designed  and 
infrastructure 
investment  plans.  The  updated 
version  of  the  Brussels  multi-year  public  transport 
investment  plan  was  updated  and  will  involve  €6 
billion for the 2015-2028 period. The draft Brussels 
Sustainable  Urban  Mobility  Plan  was  adopted  in 
April  2019  and  has  been  submitted  for  public 
enquiry till October 2019. In Wallonia, the mobility 
and infrastructure plan for investment in cycle path, 
water  transport  and  increasing  the  quality  and 
security  of  the  existing  road  network  was  adopted 
in  April  2019.  In  Flanders,  the  Flemish  transport 
administration committed to invest €600 million in 
improving the traffic flow, and in cycling and water 
borne  transport.  Meanwhile  though,  Belgium  still 
scores poorly in terms of road infrastructure. 

Limited  Progress.  Belgium  has  made  limited 
progress in implementing policies and  measures in 
support  of  investment-related  economic  policy  on 
the  low  carbon  and  energy  transition.  Latest  2018 
verified  greenhouse  gas  inventories  data  show  a 
slight  increase  in  emissions  in  comparison  to  the 
previous year. This contrasts with the high levels of 
ambition put forward for the medium term and the 
commitment  to  the  Paris  agreement.  The  energy 
efficiency and renewable energy targets in the final 
national  energy  and  climate  plan  notified 
in 
December 2019 are below those that were included 
in the draft version of the plan the year before and 
show a low level of ambition. The law introducing 
a  competitive  tendering  for  the  construction  and 

77 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  and research and innovation, in particular in 
digitalisation,  taking  into  account  regional 
disparities 

A. Overview Table 

is 

operation  of  production  facilities  creates  a  legal 
new  windfarms. 
for 
framework 
tendering 
Significant 
in 
capacity 
offshore  wind 
development  in  the  Belgian  Noth  Sea.  Brussels  is 
investing 
in  public 
in  photovoltaic  systems 
buildings in the frame of the Solarclick programme, 
which  will  run  till  end  2020.  Belgium  also  ranks 
low in the energy performance of buildings, and in 
spite  of  some  proactive  policies,  the  renovation  of 
buildings  is  moving  slowly.  Brussels  has  adopted 
its  long-term  renovation  strategy  in  April  2019. 
Belgium  committed  to  fully  phasing  out  nuclear 
energy by 2025, which will cause a major change in 
the  present  generation  capacity  mix:  at  the  same 
time  discussions  continue  on  whether  to  further 
extend the operation of a limited number of nuclear 
power  plants  beyond  2025,  which  does  not 
contribute to a more predictable energy investment 
environment.  

a 

into 

taking 

similar 

level  of 

Limited Progress. Limited progress has been made 
in  particular  on 
on  research  and 
innovation, 
regional 
account 
digitalisation, 
disparities.  Research  and  development  (R&d) 
expenditures in the private sector is relatively high, 
although  it  is  concentrated  in  a  few  multinational 
companies.  Despite  an  increase  in  public  R&D 
intensity  from  2007  to  2018,  it  remains  below  the 
increase  in  public  R&D  intensity  in  most  Member 
Sates  with 
economic 
development.  The R&D investment could be more 
widespread  towards  smaller  firms.  The  efficiency 
of  the  R&D  public  schemes  could  be  improved  as 
these  schemes  are  not  based  on  ‘additionality’ 
principle,  in  terms  of  net 
job  creation,  new 
investment  or  extra  earnings  from  innovation.  The 
R&D  governance  system 
is  complicated  with 
multiple  governments  at  federal,  regional  and 
community level responsible for (parts) of research 
and  innovation  (R&I)  policy.  Cooperation  and 
coordination  exist  mainly  at  operational 
level 
regarding  national  issues.  The  shortage  of  highly 
skilled  professionals,  in  particular  in  sciences, 
engineering  and  math,  and  the  lack  of  “knowledge 
entrepreneur”  hampers  Belgian  growth  prospects. 
Finally,  regions  are  conducting  R&D  programmes 
to  support  the  low-carbon  transition.  In  temrs  of 
digitalisation,  a  policy  framework  with  financing 
measures for promoting the uptake and deployment 
of  Artificial  Intelligence  have  been  put  in  place  in 

78 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A. Overview Table 

in  place 

in  Flanders  with 

Flanders  and  Wallonia  and  a  similar  initiative  was 
put 
to 
cybersecurity.  Coordinated  efforts  between  the 
federal level, the Regions and the Communities are 
needed  to  roll  out  5G  and  Belgium  risks  lagging 
behind in 5G deployment. 

regard 

in  April  2019,  but 

Limited Progress. Despite some additional policies 
and measures foreseen in the final National Energy 
Climate Plan, so far limited progress has been made  
to  tackle  the  growing  mobility  challenges,  by 
reinforcing  incentives  and  removing  barriers  to 
increase  the  supply  and  demand  of  collective  and 
low emission transport. In Flanders, the government 
has  lifted  the  exclusive  monopoly  of  De  Lijn  on 
intercity  coach  services.  Environmental  taxes  have 
increased, but there is still scope for better aligning 
taxation 
to  carbon  emissions,  possibly  also 
increasing  tax  revenues.  Road  users  pay  around 
43% (passenger) and 27% (freight) of their external 
and  variable  infrastructure  costs.  In  Flanders,  the 
decree on “Basic Accessibility” was adopted by the 
the 
Flemish  Parliament 
implementation  of  proposed  measures  has  been 
postponed  till  December  2021.  Alternative  tax 
expenditures (so-called ‘cash-for-car’ and ‘mobility 
in  2018  and  2019 
budget’)  were 
respectively.  However, 
the 
National  Social  Security  Office  suggest  that  very 
few  taxpayers  opted  for  the  cash  for  car  system, 
which  was  finally  annulled  by  the  Constitutional 
Court.  The 
favourable  company  car  scheme 
continues  to  provide  adverse  incentives  that  run 
counter 
emissions. 
Professional 
transporters  and  agriculture  still 
benefit  from  a  reduced  excise  rate  on  diesel. 
Deductibility  of  fuel  costs  (‘fuel  card’)  continues. 
High  registration  rights  for  immovable  properties 
discourage commuters to move closer to their place 
of employment.  Barriers to the supply of domestic 
rail  services  remain  as  98.2%  of  all  services  are 
provided  under  public  service  obligation  (pso) 
through  a  directly  awarded  contract  rather  than 
through competitive tendering. 

tackling  greenhouse  gas 

recent  data 

introduced 

from 

Belgium  has  made  No  progress  in  addressing 
country-specific recommendation 4. 

79 

  Tackle  the  growing  mobility  challenges,  by 
reinforcing incentives and removing barriers 
to  increase  the  supply  and  demand  of 
collective and low emission transport. 

the 

4:  Reduce 

CSR 
administrative 
entrepreneurship  and 
competition 
in 
telecommunication, 

regulatory 
to 

and 
incentivise 
to 
services, 
particularly 
retail  and  professional 

remove  barriers 

burden 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
services. 

  Reduce  the  regulatory  and  administrative 

burden to incentivise entrepreneurship 

  and  remove  barriers 
services,  particularly 
retail and professional services. 

to  competition 
in 
telecommunication, 

A. Overview Table 

to  respond 

Limited Progress. Limited progress has been made 
on  reducing  the  regulatory  and  administrative 
burden to incentivise entrepreneurship. Belgium has 
introduced  services  for  digital  identification(itsme) 
or to facilitate  business to government transactions 
(Mercurius).  Belgium  has  launched  initiatives  to 
promote e-prescriptions, medical data exchange and 
digital  interactions  with  public  administrations.  In 
Brussels,  the  recent  reform  of  the  Code  on  Land 
Use  (CoBAT)  has  tightened  the  deadlines  for  the 
to  building  permit 
administration 
requests,  while  in  Flanders  the  digitalisation  of 
building  permits 
is  on-going.  Wallonia  has 
introduced  a  SME  voucher  system.  However, 
taxation remains complex for financial investments 
and property registration continues to be costly and 
long. 
justice  still  requires 
additional  action.  The  coordination  of  climate, 
energy,  digital  and  transport  policies  is  still  a 
problem.  Key  enforcers 
in  regulation,  market 
surveillance  or  competition  are  still  understaffed. 
Impact assessments are not integrated in the policy-
making.  The  Belgian  State’s  slow  payments  to 
businesses  deteriorated  compared  to  the  previous 
year  and  is  a  liability  to  its  business  environment.  
A  draft  ordinance  guaranteeing  the  application  of 
the  ‘once  only’  principle  in  the  collection  by  all 
regional  and  local  administrations  through  the 
regional  service  integrator  (Fidus)  was  adopted  in 
third  and  last  reading  by  the  Government  in 
December  2019.  In  Wallonia,  the  timeframe  for 
obtaining was reduced by the reform of the land use 
code 

  Digitalisation  of 

Limited  progress  –  Limited  progress  has  been 
made  in  removing  barriers  to  competition  in 
services,  particularly telecommunication, retail and 
professional  services.  On  2  May  2019,  Belgium 
replaced  the  Code  of  economic  law  in  the  area  of 
improve 
competition 
compliance  with  competition 
the 
functioning  of  the  Belgian  Competition  Authority. 
The new rules do not foresee a strengthening of the 
staff or material means of the authority. . 

to 
law  and 

law,  with 

intent 

the 

80 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A. Overview Table 

Europe 2020 (national targets and progress) 

Employment rate (20-64): 

73.2 %. 

R&D: 

3 % of GDP. 

Greenhouse gas emissions: 

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

Renewable energy: 

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

Energy efficiency: 

43.7 Mtoe  primary  consumption  and  32.5 Mtoe 
final energy consumption  

Early school leaving: 

9.5 %. 

The employment rate (20-64) increased to a record 
high level of 69.7% in 2018 (+ 1.2 pp compared to 
2017),  but  remains  well  below  the  EU  average 
(73.1%) and the 2020 target (73.2%). There remain 
large  regional  disparities  in  the  employment  with 
highest  rate  in  Flanders  (74.6%),  followed  by 
Brussels (61.4%) and Wallonia (63.7%). 

Belgium R&D intensity increased remarkably from 
1.9%  in  2007  to  2.8%  in  2018,  mostly  thanks  a 
growth  in  business  R&D  intensity  (from  1.3%  to 
2.0%).  The  public  R&D  intensity  increased  too 
(from 0.54% in 2007 to 0.8% in 2018), but remains 
slightly  below  that  of  most  other  Member  States 
with a similar level of economic development. 

Belgium  is  not  on  track  to  reach  its  2020  climate 
change  target.  In  sectors  not  covered  by  the  EU 
ETS,  reductions  were  limited  to  10%.  They  are 
expected to reduce further by 2 or 3 pp., still short 
of the 2020 target of a decline of 15 % below 2005 
levels. 

consumption.  Currently 

According to 2017 data, Belgium reached a share of 
9.1%  of  energy  from  renewable  sources  in  gross 
final 
implemented 
renewable  energy  policies  and  already  planned 
renewable  energy  policy  initiatives  are  insufficient 
to  trigger  the  required  renewable  energy  volumes 
purely domestically. 

According to the 2017 data [NB: 2018 data will be 
available  at  the  end  of  year],  Belgium  consumed 
49,1 Mtoe of primary energy and 36,1 Mtoe of final 
energy.  Industry  is  keeping  the  top  position  as  the 
most consuming sector. 

In 2016, Belgium reached its Europe 2020 national 
target of 9.5% on early school leaving. Since then, 
the  early  school  leaving  rate  further  declined  to 
8.6%  at  national  level.  There  are,  however,  large 
regional disparities with the highest rate in Brussels 
(10.7%), followed by Wallonia (9.9%) and Flanders 
(7.3%). The gender gap of 4.1 pps (with the higher 
rate  of  10.6%  for  men)  has  increased  and  is  now 
above  the  EU  average  (3.3  pps).  The  gap  between 
non-EU (19.2%) and native-born (7.2%) is high and 
increasing. In 2018, the proportion of young people 
not  in  employment,  education  or  training  (NEET, 

81 

 
A. Overview Table 

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. 

15-24  years  old)  has  decreased  to  9.2%.  However, 
also in terms of the NEET rate there are important 
regional  differences.  It  is  the  highest  in  Brussels 
(13.3%) followed by Wallonia (10%) and Flanders 
(7.8%).  

In  2018,  the  proportion  of  30-  to  34-year  old 
tertiary  graduates  reached  47.6%,  surpassing  its 
EU2020  target  of  47%  and  well  above  the  EU 
average of 40.7%. Tertiary attainment is the highest 
in  Brussels  (56.3%)  followed  by  Flanders  (48.2%) 
and Wallonia (42.5%). The gender gap of 13.9 pps 
(with  the  higher  rate  of  54.5%  for  women)  has 
further  increased  (10.1  pps  in  2017).  The  gap 
between  non-EU  born  (35%)  and  native-born 
(49.2%) remains high, although decreasing. 

these 

The  number  of  people  at  risk  of  poverty  or  social 
exclusion  has  continuously  declined  since  2014. 
Despite 
the  cumulative 
improvements, 
difference from 2008 remains positive in 2018 at 56 
thousand  individuals.  As  a  result,  it  is  highly 
unlikely  that  Belgium  will  obtain  its  target  of 
reducing the number of people at risk of poverty or 
social exclusion by 380 thousands individuals.  

82 

ANNEX B: DSA STATISTICAL ANNEX 

83 

General government debt projections under baseline, alternative scenarios and sensitivity tests2018201920202021202220232024202520262027202820292030Gross debt ratio100.099.599.6100.099.298.697.997.697.497.497.497.597.4Changes in the ratio (-1+2+3)-1.7-0.50.10.4-0.8-0.7-0.6-0.4-0.10.00.00.1-0.1of which(1) Primary balance (1.1+1.2+1.3)1.40.2-0.4-0.9-0.9-1.0-1.1-1.2-1.4-1.5-1.6-1.6-1.7(1.1) Structural primary balance (1.1.1-1.1.2+1.1.3)0.3-0.1-0.5-0.5-0.7-0.9-1.1-1.2-1.4-1.5-1.6-1.6-1.7(1.1.1) Structural primary balance (bef. CoA)0.3-0.1-0.5-0.5-0.5-0.5-0.5-0.5-0.5-0.5-0.5-0.5-0.5(1.1.2) Cost of ageing0.20.50.80.81.11.21.31.51.5(1.1.3) Others (taxes and property incomes)0.00.10.20.20.20.30.30.30.3(1.2) Cyclical component0.50.2-0.1-0.4-0.2-0.10.00.00.00.00.00.00.0(1.3) One-off and other temporary measures0.50.10.20.00.00.00.00.00.00.00.00.00.0(2) Snowball effect (2.1+2.2+2.3)-0.9-0.7-1.0-1.2-1.7-1.7-1.8-1.5-1.5-1.5-1.5-1.6-1.8(2.1) Interest expenditure2.12.01.81.71.61.51.41.31.21.21.11.11.1(2.2) Growth effect-1.4-1.1-0.9-1.0-1.3-1.2-1.2-0.9-0.8-0.8-0.7-0.7-0.9(2.3) Inflation effect-1.5-1.5-1.9-2.0-2.0-1.9-1.9-1.9-1.9-1.9-1.9-1.9-1.9(3) Stock-flow adjustments0.50.40.60.70.00.00.00.00.00.00.00.00.0Note: For further information, see the European Commission Debt Sustainability Monitor (DSM) 2019. 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). BE - Debt projections baseline scenario[1]Thefirsttablepresentsthebaselineno-fiscalpolicychangescenarioprojections.Itshowstheprojectedgovernmentdebtdynamicsanditsdecompositionbetweentheprimarybalance,snowballeffectsandstock-flowadjustments.Snowballeffectsmeasurethenetimpactofthecounteractingeffectsofinterestrates,inflation,realGDPgrowth(andexchangeratesinsomecountries).Stock-flow adjustments include differences in cash and accrual accounting, net accumulation of assets, as well as valuation and other residual effects.[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.Detailedinformationonthedesignoftheseprojections can be found in the FSR 2018 and the DSM 2019.[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. 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 after that) to bring the debt-to-GDP ratio to 60 % by 2034. The critical values used are 0 and 2.5 pps of GDP. The DSA classification is based on the results of five 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. 70758085909510010511011512020172018201920202021202220232024202520262027202820292030Debt as % of GDP -BEBaselineEnhanced lower GDP growth scenarioAdverse combined scenarioEnhanced higher interest rate scenario70809010011012020172018201920202021202220232024(% of GDP)Stochastic debt projections 2020-2024 -BEp10_p20p20_p40p40_p60p60_p80p80_p90p50Baseline70758085909510010511011512020172018201920202021202220232024202520262027202820292030Debt as % of GDP -BEBaselineHistorical SPB scenarioSGP scenario70758085909510010511011512020172018201920202021202220232024202520262027202820292030Debt as % of GDP -BEBaselineHigher interest rate scenarioNegative shock on the SPBLower GDP growth scenarioBaselineHistorical SPBLower GDP growthHigher interest rateNegative shock on SPBStochastic projectionsRisk categoryHIGHMEDIUMHIGHHIGHHIGHHIGHDebt level (2030)97.489.9102.5102.499.1Debt peak year20212021203020302021Percentile rank67.0%51.0%Probability debt higher44.7%Dif. between percentiles27.2HIGHLong termMEDIUM(S2 = 4.8)S1S2Short termLOW(S0 = 0.2)DSAHIGHDebt sustainability analysis (detail)Medium termHIGHHIGH(S1 = 4.1) 
ANNEX C: STANDARD TABLES 

Table C.1: 

Financial market indicators 

(1) Latest data Q3 2019. Includes not only banks but all monetary financial institutions excluding central banks.  
(2) Latest data Q2 2019.  
(3) Quarterly values are annualized.  
* Measured in basis points.  

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

84 

201420152016201720182019Total assets of the banking sector (% of GDP)(1)273.4257.6256.1228.5217.9226.8Share of assets of the five largest banks (% of total assets)65.865.566.268.873.4-Foreign ownership of banking system (% of total assets)(2)50.349.249.549.149.750.9Financial soundness indicators:(2)              - non-performing loans (% of total loans)4.33.83.22.72.32.0              - capital adequacy ratio (%)17.618.718.819.018.818.5              - return on equity (%)(3)7.810.38.98.88.28.6Bank loans to the private sector (year-on-year % change)(1)9.97.06.85.58.15.9Lending for house purchase (year-on-year % change)(1)19.512.19.25.88.96.4Loan to deposit ratio(2)88.488.588.090.293.290.5Central Bank liquidity as % of liabilities(1)1.61.01.92.92.72.2Private debt (% of GDP)162.2176.1194.8185.0178.5-Gross external debt (% of GDP)(2) - public67.264.665.860.959.166.7    - private102.4107.3124.0108.097.994.4Long-term interest rate spread versus Bund (basis points)*55.034.438.640.539.845.8Credit default swap spreads for sovereign securities (5-year)*31.030.028.814.610.711.3 
 
  
 
 
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 and/or living in households with zero or very low work intensity.       
(2) Unemployed persons are all those who were not employed but had actively sought work and were ready to begin 
working immediately or within two weeks.       
(3) Gross disposable household income is defined in unadjusted terms, according to the draft 2019 joint employment report.       
(4) Reduction in percentage of the risk-of-poverty rate, due to social transfers (calculated comparing at-risk-of-poverty rates 
before social transfers with those after transfers; pensions are not considered as social transfers in the calculation).       
(5) Average of first three quarters of 2019 for the employment rate, unemployment rate and gender employment gap.       

Source: Eurostat 

85 

Table C.2: Headline social scoreboard indicators201420152016201720182019 5Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)9.810.18.88.98.6:Gender employment gap (pps)8.78.39.39.88.48.1Income inequality, measured as quintile share ratio (S80/S20)3.83.83.83.83.8:At-risk-of-poverty or social exclusion rate(1) (AROPE)21.221.120.720.319.8:Young people neither in employment nor in education and training (% of population aged 15-24)12.012.29.99.39.2:Dynamic labour markets and fair working conditionsEmployment rate (20-64 years)67.367.267.768.569.770.5Unemployment rate(2) (15-74 years)8.58.57.87.16.05.5Long-term unemployment rate (as % of active population)4.34.44.03.52.92.4Gross disposable income of households in real terms per capita(3) (Index 2008=100) 97.998.299.1100.4101.1:Annual net earnings of a full-time single worker without children earning an average wage (levels in PPS, three-year average)243552477225082:::Annual net earnings of a full-time single worker without children earning an average wage (percentage change, real terms, three-year average)0.160.070.13:::Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction(4)43.644.241.139.534.7:Children aged less than 3 years in formal childcare48.850.143.852.954.0:Self-reported unmet need for medical care2.52.42.42.11.8: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) Long-term unemployed are people who have been unemployed for at least 12 months.       
(2) Difference between the average gross hourly earnings of male paid employees and of female paid employees as a 
percentage of average gross hourly earnings of male paid employees. It is defined as "unadjusted", as it does not correct for 
the distribution of individual characteristics (and thus gives an overall picture of gender inequalities in terms of pay). All 
employees working in firms with 10 or more employees, without restrictions for age and hours worked, are included.       
(3) PISA (OECD) results for low achievement in mathematics for 15 year-olds.       
(4) Impact of socio-economic and cultural status on PISA (OECD) scores.    Value for 2015 refers to mathematics; value for 
2018 refers to reading.   
(5) Average of first three quarters of 2019. Data for youth unemployment rate is seasonally adjusted.     

Source: Eurostat, OECD 

86 

Labour market indicators201420152016201720182019 5Activity rate (15-64)67.767.667.668.068.669.1Employment in current job by durationFrom 0 to 11 months10.910.811.211.411.0:From 12 to 23 months7.98.18.18.58.8:From 24 to 59 months16.615.915.114.915.7:60 months or over64.665.265.765.164.5:Employment growth* (% change from previous year)0.40.91.31.61.41.4Employment rate of women(% of female population aged 20-64)62.963.063.063.665.566.4Employment rate of men (% of male population aged 20-64)71.671.372.373.473.974.6Employment rate of older workers* (% of population aged 55-64)42.744.045.448.350.352.0Part-time employment* (% of total employment, aged 15-64)23.724.324.724.524.524.6Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)8.69.09.110.410.710.8Transition rate from temporary to permanent employment(3-year average)38.335.635.437.837.4:Youth unemployment rate (% active population aged 15-24)23.222.120.119.315.814.9Gender gap in part-time employment32.832.332.631.131.030.5Gender pay gap(2) (in undadjusted form)6.66.56.16.0::Education and training indicators201420152016201720182019Adult participation in learning(% of people aged 25-64 participating in education and  training)7.46.97.08.58.5:Underachievement in education(3):20.1::19.7:Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)43.842.745.645.947.6:Variation in performance explained by students' socio-economic status(4):19.3::17.2: 
 
 
  
 
 
 
C. Standard Tables 

Table C.4: 

Social inclusion and health indicators 

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

Source: Eurostat, OECD 

87 

201320142015201620172018Expenditure on social protection benefits* (% of GDP)Sickness/healthcare8.38.37.67.47.3:Disability2.22.32.32.42.4:Old age and survivors11.811.712.612.412.6:Family/children2.12.22.12.12.1:Unemployment3.43.43.12.51.9:Housing0.20.20.20.20.2:Social exclusion n.e.c.0.70.60.60.70.7:Total28.828.728.627.727.2:of which: means-tested benefits1.51.41.41.41.4:General government expenditure by function (% of GDP)Social protection20.019.919.719.619.6:Health8.08.17.97.77.7:Education6.46.46.46.36.3:Out-of-pocket expenditure on healthcare18.017.517.517.917.6:Children at risk of poverty or social exclusion (% of people aged 0-17)*21.923.223.321.622.023.2At-risk-of-poverty  rate(1) (% of total population)15.115.514.915.515.916.4In-work at-risk-of-poverty rate (% of persons employed)4.44.84.64.75.05.2Severe material deprivation rate(2)  (% of total population)5.15.95.85.55.14.9Severe housing deprivation rate(3), by tenure statusOwner, with mortgage or loan0.20.40.10.81.20.5Tenant, rent at market price3.43.03.05.59.08.0Proportion of people living in low work intensity households(4) (% of people aged 0-59)14.014.614.914.613.512.1Poverty thresholds, expressed in national currency at constant prices*111641114011061113171136411585Healthy life yearsFemales10.911.011.011.411.7:Males10.811.011.210.310.4:Aggregate replacement ratio for pensions(5)0.50.50.50.50.50.5Connectivity dimension of the Digital Economy and Society Index (DESI)(6):69.374.675.877.9:GINI coefficient before taxes and transfers*48.749.549.850.350.1:GINI coefficient after taxes and transfers*25.925.926.226.326.0: 
 
  
 
 
 
C. Standard Tables 

Table C.5: 

Product market performance and policy indicators 

Notes: 
*While the indicator values from 2003 to 2013 are comparable, the methodology has considerably changed in 2018. As a 
result, past vintages cannot be compared with the 2018 PMR indicators. 
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 6 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 of population aged 15-64 having completed tertiary education.       
6 Percentage of 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       
Please be aware that the indicator values from 2003 to 2013 are comparable, however the methodology changed 
considerably in 2018 and therefore past vintages cannot be compared with the 2018 PMR indicators.       
8 Simple average of the indicators of regulation for lawyers, accountants, architects and engineers.       
9 Aggregate OECD indicators of regulation in energy, transport and communications.  
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). 

88 

Performance indicators201320142015201620172018Labour productivity per person1 growth (t/t-1) in %Labour productivity growth in industry2.415.935.03-1.111.03-2.67Labour productivity growth in construction-0.153.784.210.710.402.56Labour productivity growth in market services1.060.670.850.320.761.46Unit Labour Cost (ULC) index2 growth (t/t-1) in %ULC growth in industry0.64-3.18-4.511.751.624.01ULC growth in construction0.57-1.34-4.49-0.721.141.51ULC growth in market services0.47-0.23-0.19-0.231.110.40Business environment201320142015201620172018Time needed to enforce contracts3 (days)505505505505505505Time needed to start a business3 (days)4.54.54.54.54.54.5Outcome of applications by SMEs for bank loans40.540.360.460.310.370.17Research and innovation201320142015201620172018R&D intensity2.332.372.432.522.662.76General government expenditure on education as % of GDP6.406.406.406.306.30:Employed people with tertiary education and/or people employed in S&T as % of total employment505150515353Population having completed tertiary education5323333333636Young people with upper secondary education6838484858685Trade balance of high technology products as % of GDP0.330.470.570.530.320.21Product and service markets and competition2003200820132018*OECD product market regulation (PMR)7, overall1.641.521.391.69OECD PMR7, retail4.684.564.062.52OECD PMR7, professional services82.522.472.472.21OECD PMR7, network industries92.842.081.841.40 
 
 
 
 
  
 
 
C. Standard Tables 

Table C.6:  Green growth 

Note: All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2010 prices)         
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)         
          Carbon intensity: greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)         
          Resource intensity: domestic material consumption (in kg) divided by GDP (in EUR)         
          Waste intensity: waste (in kg) divided by GDP (in EUR)         
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP.          
Weighting of energy in HICP: the proportion of 'energy' items in the consumption basket used for the construction of the HICP.         
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual % 
change).         
Real unit energy cost: real energy costs as % of total value added for the economy.         
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2010 
EUR).         
Real unit energy costs for manufacturing industry excluding refining: real costs as % of value added for manufacturing sectors.         
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP.         
Electricity and gas prices for medium-sized industrial users: consumption band 500–20 00MWh and 10 000 -100 000 GJ; figures 
excl. VAT.         
Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste.         
Public R&D for energy or for the environment: government spending on R&D for these categories as % of GDP.         
Proportion of GHG emissions covered by EU emissions trading system (ETS) (excluding aviation): based on GHG emissions.         
(excl. land use, land use change and forestry) as reported by Member States to the European Environment Agency.         
Transport energy intensity: final energy consumption of transport activity including international aviation (kgoe) divided by 
gross value added in transportation and storage sector (in 2010 EUR).         
Transport carbon intensity: GHG emissions in transportation and storage sector divided by gross value added in transportation 
and storage sector (in 2010 EUR).         
Energy import dependency: net energy imports divided by gross inland energy consumption incl. consumption of 
international bunker fuels.         
Aggregated supplier concentration index: Herfindahl index covering oil, gas and coal. Smaller values indicate larger 
diversification and hence lower risk.         
Diversification of the energy mix: Herfindahl index covering natural gas, total petrol products, nuclear heat, renewable 
energies and solid fuels. Smaller values indicate larger diversification.         
* European Commission and European Environment Agency - 2018 provisional data.         

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). 

89 

Green growth performance201320142015201620172018MacroeconomicEnergy intensity kgoe / €0.150.140.140.140.140.13Carbon intensity kg / €0.320.300.300.290.29-Resource intensity (reciprocal of resource productivity)kg / €0.410.390.380.370.390.39Waste intensity kg / €-0.15-0.16--Energy balance of trade % GDP-4.5-3.8-2.7-2.2-2.4-3.5Weighting of energy in HICP%11.2910.9211.029.229.029.94Difference between energy price change and inflation p.p.-5.8-8.0-5.50.47.35.7Real unit of energy cost% of value added16.516.217.017.9--Ratio of environmental taxes to labour taxesratio0.100.100.110.120.12-Environmental taxes% GDP2.52.52.62.72.72.7Sectoral Industry energy intensity kgoe / € 0.100.100.090.090.090.13Real unit energy cost for manufacturing industry excl. refining% of value added24.024.025.326.8--Share of energy-intensive industries in the economy% GDP8.328.569.148.858.587.95Electricity prices for medium-sized industrial users€ / kWh0.110.110.110.110.110.11Gas prices for medium-sized industrial users€ / kWh0.040.030.030.030.020.02Public 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%52.853.853.553.553.954.5Share of GHG emissions covered by ETS*%37.938.538.137.138.238.2Transport energy intensitykgoe / €0.510.510.510.520.520.52Transport carbon intensitykg / €0.540.510.550.580.520.52Security of energy supplyEnergy import dependency%77.179.883.975.474.8-Aggregated supplier concentration indexHHI16.114.513.714.917.5-Diversification of energy mixHHI27.027.928.227.327.327.7 
  
 
 
ANNEX D: INVESTMENT GUIDANCE ON JUST TRANSITION FUND 

2021-2027 FOR BELGIUM 

Building  on  the  Commission  proposal,  this  Annex  (117)  presents  the  preliminary  Commission  services’ 
views on priority investment areas and framework conditions for effective delivery for the 2021-2027 Just 
Transition  Fund  investments  in  Belgium.  These  priority  investment  areas  are  derived  from  the  broader 
analysis  of  territories  facing  serious  socio-economic  challenges  deriving  from  the  transition  process 
towards a climate-neutral economy of the Union by 2050 in Belgium, assessed in the report. This Annex 
provides the basis for a dialogue between Belgium and the Commission services as well as the relevant 
guidance  for  the  Member  States  in  preparing  their  territorial  just  transition  plans,  which  will  form  the 
basis for programming the Just Transition Fund. The Just Transition Fund investments complement those 
under  Cohesion  Policy  funding  for  which  guidance  in  the  form  of  Annex  D  was  given  in  the  2019 
Country Report for Belgium (118). 

In  Belgium,  the  “arrondissements  de  Tournai,  Mons,  Charleroi”  in  the  province  of  Hainaut  have  the 
highest  industrial  greenhouse  gas  emission  intensity,  caused  mainly  by  the  production  of  cement, 
chemicals and electricity. In addition, Hainaut is a province formerly dependent on steel, textile and coal; 
it is still undergoing industrial transition, with specific challenges in terms of economic development and 
a relatively high unemployment. Finally, the high intensity carbon sectors in the province employs over 
13,000  employees.  Based  on  this  preliminary  assessment,  it  appears  warranted  that  the  Just  Transition 
Fund concentrates its intervention on that region. 

The carbon intensity of the industry in the province of Hainaut highlights the scale of the decarbonisation 
challenge,  suggesting  that  the  sectors  concerned  would  be  likely  to  undergo  by  2030  significant 
restructuring  in  their  industrial  processes.  The  smart  specialisation  strategies  (119)  provide  an  important 
framework to set priorities for innovation in support of economic transformation. Key actions of the Just 
Transition Fund could promote economic diversification and reskilling and increase the attractiveness of 
the province for investments in line with the smart specialisation strategy, which identifies the sectors and 
activities  with  most  potential,  i.e.  industrial  processes  and  materials;  health  and  food;  sustainable 
development; mobility; and ICTs. 

In  order  to  tackle  the  transition  challenges,  investment  needs  have  been  identified  for  alleviating  the 
socio-economic costs of the transition, through actions targeting in particular: 

• 

• 

• 

• 

• 

• 

investments  in  research  and  innovation  activities  and  fostering  the  transfer  of  advanced 
technologies; 
investments in the deployment of technology and infrastructures for affordable clean energy, in 
greenhouse gas emission reduction, energy efficiency and renewable energy; 
productive  investments  in  SMEs,  including  start-ups,  leading  to  economic  diversification  and 
reconversion; 
investments in enhancing the circular economy, including through waste prevention, reduction, 
resource efficiency, reuse, repair and recycling; 
investments  in  regeneration  and  decontamination  of  sites,  land  restoration  and  repurposing 
projects; 
upskilling and reskilling of workers. 

Some  industrial  sites  in  these  areas,  performing  activities  listed  in  Annex  I  to  Directive  2003/87/EC, 
employ  a  substantial  number  of  workers  and  their  activity  is  at  risk  due  to  their  high  greenhouse  gas 
emissions.  Support  to  investments  to  reduce  the  emissions  could  be  considered,  provided  that  they 
achieve a substantial reduction of emissions (going substantially below the relevant benchmarks used for 
free  allocation  under  Directive  2003/87/EC)  and  on  the  condition  that  the  investments  are  compatible 
with the European Green Deal. 

117  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  Just  Transition  Fund  2021-2027  (COM(2020)22  and  the  EC  proposal  for  a  Regulation  of  the  European 
Parliament and of the Council laying down common provisions on the European Regional Development Fund, the European 
Social Fund Plus, the Cohesion Fund, and the European Maritime and Fisheries Fund and financial rules for those and for the 
Asylum and Migration Fund, the Internal Security Fund and the Border Management and Visa Instrument (COM(2020)23). 

118 SWD(2019) 1000 final 
119 As defined in Article 2(3) of Regulation (EU) No 1303/2013 (CPR) 

90 

 
 
                                                           
ANNEX E: PROGRESS TOWARDS THE SUSTAINABLE 

DEVELOPMENT GOALS (SDGS) 

Assessment of Belgium’s short-term progress towards the SDGs (120) 

Table E.1 shows the data for Belgium and the EU-28 for the indicators included in the EU SDG indicator 
set used by Eurostat for monitoring progress towards the SDGs in an EU context (121). As the short-term 
trend at EU-level is assessed over a 5-year period, both the value at the beginning of the period and the 
latest available value is presented. The indicators are regularly updated on the  SDI dedicated section of 
the Eurostat website. 

Table E.1: 

Indicators measuring Belgium’s progress towards the SDGs 

(120) Data  extracted  on  9  February  2020 

from 

the  Eurostat  database 

(official  EU  SDG 

indicator 

set; 

see 

https://ec.europa.eu/eurostat/web/sdi/main-tables).  

(121) The EU SDG indicator set is aligned as far as appropriate with the UN list of global indicators, noting that the UN indicators are 
selected for global level reporting and are therefore not always relevant in an EU context. The EU SDG indicators have strong 
links with EU policy initiatives. 

(Continued on the next page) 

91 

 
 
                                                           
 
  
 
E. Sustainable Development Goals 

Table (continued) 

(Continued on the next page) 

92 

 
 
 
   
 
E. Sustainable Development Goals 

Table (continued) 

(Continued on the next page) 

93 

 
 
 
   
 
E. Sustainable Development Goals 

Table (continued) 

(Continued on the next page) 

94 

 
 
 
   
 
E. Sustainable Development Goals 

Table (continued) 

Source: Eurostat 

95 

 
 
 
 
   
 
 
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