The report is based on the preliminary findings of IMF staff at the end of an official staff visit to Belgium. It includes a list of 14 recommendations on action to be taken to improve Belgium’s economic circumstances.
“Belgium’s economic engine has continued to run relatively well so far, with strong job creation and historically low unemployment. However, the public finances are deteriorating, and with a caretaker government in the driver seat, maneuverability is limited, while risks remain,” the report states.
“In the near term, policymakers must focus on limiting risks, including by strengthening spending controls and resisting pressures that would further worsen the deficit. A new government should use its fresh mandate to address population aging, put public debt on a downward path, boost employment and productivity growth, deliver on climate change commitments, and safeguard financial stability.”
Among the recommendations aimed at achieving those aims, the IMF includes an end to uncertainty, related to the lack of a functioning government above all, but also on a number of other levels.
These include improving health care, in particular preventive care, to cope with the ageing of the population; pension reforms, cutting subsidies or making them more efficient; and reducing administrative costs in public administrations.
As a means of increasing output, the report stresses the importance of improving participation in the labour force, especially for women and for vulnerable groups like the young, the low-skilled and non-EU born workers.
As well as reforms to taxation and parental leave for women, greater participation could be achieved by improving public transport across regions, removing property regulation and aligning wages with productivity.
“Belgium’s labor-productivity growth has slowed considerably over the last two decades. Reversing this trend is essential to support higher standards of living and safeguard fiscal sustainability,” the report concludes.
“Reducing red tape for startups and lowering regulatory barriers to competition in professional services, retail trade and distribution would help boost investment and growth. The authorities should also continue to support access to venture capital for innovative firms. Public investment in infrastructure, fiscal space permitting, can have positive spillovers across the economy.”