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07 May 2013

OECD Economic Survey on Belgium


This report says that weak domestic demand, rapid fiscal consolidation and slow export market growth will weigh on the economic recovery. Structural reforms beyond the 2012 measures would boost growth, helping to secure fiscal sustainability in the face of ageing-related spending.

Fiscal consolidation is advancing well, but public debt is still high. Fiscal consolidation has already been sizeable and the government is committed to secure a structural budget balance by 2015. This is appropriate to avoid further consolidation measures in case the economy deteriorates further, which could pose a risk to growth. Looking ahead, maintaining (at least) a structural budget balance over the medium-term would ensure rapid reduction in public debt, creating room to finance part of ageing-related spending increases. The recent reform of early retirement programmes will increase the internationally low effective retirement age a key to contain pension spending - but the system still gives insufficient work incentives to older workers. The recent reform of fiscal federalism arrangements is transferring more spending and tax responsibilities to the communities and regions. However, it does not clarify the medium-term burden sharing of fiscal consolidation efforts between government levels.

Boosting labour supply is a key driver of growth. Reforms of the unemployment benefit system and special provisions for new graduates are expected to improve the efficiency of the labour market. However, other factors still hold back the labour market, including high sectoral minimum wages, labour market traps created by the high tax wedge and the decoupling of wages from productivity.

Population ageing is boosting cost pressures in the health system. The system delivers accessible care and broadly satisfactory health outcomes. Nevertheless, its performance is reduced by practice and efficiency variation across providers, high consumption of drugs and perhaps supplier-induced demand. Health responsibilities are fragmented across government levels and sickness funds have too passive a role. The strict regulation of the supply of health services risks rendering the system too inflexible as ageing changes demand patterns. Long-term care has a high reliance on care in institutions.

Full survey



© OECD


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