2017 OECD ECONOMIC SURVEY OF BELGIUM PROMOTING INCLUSIVE PRODUCTIVITY GROWTH http://www.oecd.org/eco/surveys/economic-survey-belgium.htm
Brussels, 20 June 2017
OECD Economics OECD
Main messages Belgium has undertaken important reforms Wage-setting system Tax shift Many challenges remain: Productivity growth has weakened The population is ageing and public debt is high Competitiveness is recovering following a period of high wage growth Inflation is higher than in neighbouring countries Inequalities in educational outcomes and the labour market threaten inclusiveness
2
The economy has recovered GDP per capita index Index 2000 = 100 125 BEL 120
DEU
FRA
NLD
115 110 105 100 95
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: OECD Productivity Database.
3
Social and economic well-being is high B. OECD Better Life Index1,2 BEL
OECD
Income and wealth Subjective well-being
10
8
Jobs and earnings
6
Personal security
4
Housing
2
Environmental quality Civic engagement and governance Social connections
0
Work-Life balance Health status Education and skills
1. Each well-being dimension is measured using one to three indications from the OECD Better Life Indicator set with equal weights. 2. Indicators are normalised by re-scaling to be from 0 (worst) to 10 (best). Source: OECD "Better Life Index 2016“.
4
Belgium has been a top reformer Responsiveness rate to OECD Going for Growth recommendations, 2015-16 70 60 50 40 30 20
0
LVA FRA AUT BEL BRA CHL ISR GRC MEX CHN CZE EST IRL ITA DEU DNK NLD JPN ESP NOR IND OCDE COL HUN SWE USA FIN GBR SVK KOR CHE NZL ZAF POL LUX PRT TUR AUS CAN ISL SVN IDN
10
The responsiveness rate measures the share of total policy recommendations formulated in the last issue of Going for Growth on which governments in each country have taken some action. It considers only legislated changes as opposed to announced changes. Source: OECD Going for Growth 2017.
5
Competitiveness is recovering Unit labour costs are moderating 2005=100
140 135
BEL
DEU
EU
FRA
NLD
130 125 120 115 110 105 100 95
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: OECD, Economic Outlook 101 database, OECD Economics Department database.
6
Inflation has picked up Inflation is higher than in neighbouring countries Y-o-y % changes 7
BEL
6
DEU
FRA
NLD
5 4 3 2 1 0 -1 -2
2007
2008
2009
2010
2011
2012
2013
Source: OECD, Economic Outlook 101 database, OECD Economics Department database.
2014
2015
2016 7
Public debt is falling, but remains high Public debt to GDP ratio1
% 140 130 120 110 100
2017
2015
2013
2011
2009
2007
2005
2003
2001
1999
1997
1995
1993
80
1991
90
1. Maastricht criterion. Source: OECD Economic Outlook 101 database
8
The population is ageing Old age dependency ratio projections Population 65 and over to population 15 to 64 years
% 65
BEL
60
DEU
FRA
NLD
55 50 45 40 35 30 25
2014
2019
2024
2029
2034
2039
2044
2049
2054
2059
Source: Eurostat. 9
Productivity growth has slowed Multifactor productivity
Index 2000=100 125 BEL
120
FRA
DEU
NLD
USA
115 110 105
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
95
2000
100
Source: OECD Productivity Statistics database. 10
Productivity varies widely between firms Real value added per employee, average, latest available data 180
Median
160
90th percentile
10th percentile
Mean
140 120 100 80 60 40 20 0
DNK
FRA
BEL
FIN
ITA
ESP
CRO
SVK
CZE
EST
POL
Source: CompNet, 2016. 11
Youth, seniors and low-skilled workers have low employment rates Employment rate amongst some groups % of population in each group, 2016 80
OECD
70
BEL
60 50 40 30 20 10 0
Total (15-64)
Foreign-born (15-64)
Women (15-64)
Older population (55-64)
Low-skilled (25-64)
Source: OECD, Labour force statistics database; OECD, Migration statistics database; OECD, Education at a glance database; and Eurostat, Labour Force Survey.
Youth (15-24) 12
The labour market integration of immigrants can be improved Employment status by country of origin and gender Employed Men
Unemployed
Inactive Women
Total
67
6
28
58
5
37
Total
Belgium
67
5
28
61
4
35
Belgium
Other EU28
70
60
6
34
Other EU28
Non-EU28 20
28
15
57 0
23
6
40
60
80
38 100
0
20
10 40
Non-EU28
52 60
80
100
Source: OECD, Labour force statistics database; OECD, Migration statistics database; and Eurostat, Labour Force Survey. 13
First challenge: boosting productivity and economic growth
14
The tax mix could be adjusted to support growth The tax mix could still be more growth friendly Relative performance to OECD, latest available data 140
OECD=100
120
BEL
100 80 60 40 20 0
Environmentally related taxes
Recurrent taxes on property
Taxes on capital gains at the individual level
Social Security contributions
Note: Shares of fiscal revenues for a selection of tax categories. These are calculated as a % of total tax revenue and displayed as a percentage of the OECD average which equals 100. Sources: OECD, Environment Database - Instruments used for environmental policy and; OECD, Revenue Statistics database.
15
More public investment would boost growth Public investment has been declining since the 1980s As a percentage of GDP, 1970-2016 % 8
BEL
7
DEU
FRA
NLD
6 5 4 3 2
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
0
1970
1
Source: OECD Economics Department database. 16
Sustaining R&D expenditure will raise productivity
ISR KOR JPN SWE AUT DNK FIN DEU USA BEL OECD FRA SVN ISL AUS NLD CZE NOR GBR CAN IRL EST HUN ITA LUX PRT ESP SVK NZL TUR POL GRC LVA MEX CHL
% 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0
Gross domestic expenditure on R&D As a percentage of GDP, 2015 or latest available
Note: For Australia, Canada, Ireland and Turkey, data refer to 2014. Source: OECD, Main Science & Technology indicators.
17
Boosting business dynamism would raise productivity Entry and exit in the business sector Latest available data % 25
Death rate of businesses
Birth rate of businesses
20 15 10
Source: European Commission
BEL
IRL
AUT
ITA
DEU
SWE
FIN
NOR
CZE
ESP
EU28
FRA
HUN
LUX
NLD
EST
SVN
DNK
GBR
PRT
LVA
0
SVK
5
18
The business environment is favourable Framework conditions for entrepreneurship Relative to EU average, 2009-15 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 -2.0
Regulatory framework
Market conditions
Access to finance
Entrepreneurial capabilities
Entrepreneurship culture
Note: Lower scores indicate lower performance. Scores are expressed relative to EU (unweighted) average equal to zero for each indicator. Source: De Mulder and Godefroid, 2016.
19
Reducing administrative burdens would boost firm dynamism Barriers to entrepreneurship Administrative burdens on start-ups, latest available data Index 1.4 1.2 1.0 0.8 0.6 0.4 0.0
AUS NZL CHL CHE NLD DNK CAN NOR GBR RUS SWE IRL JPN ZAF USA DEU FIN EST KOR SVN LTU ISL AUT IDN SVK CZE ITA FRA ISR ESP GRC LUX LVA MEX PRT BEL POL HUN HRV BRA TUR IND CHN
0.2
Source: OECD, PMR indicators database. 20
Start-ups would benefit from more venture capital Venture capital As a percentage of GDP, 2015 0.38 0.33 0.12
ISR USA CAN ZAF KOR FIN CHE SWE IRL GBR AUT PRT FRA DNK DEU NZL JPN NLD AUS HUN EST NOR BEL ESP SVK LUX POL RUS SVN ITA CZE GRC
% 0.10 0.09 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0.00
Note: For Australia, Canada, Ireland and Turkey, data refer to 2014. Source: OECD, Entrepreneurship at a Glance 2016.
21
Second challenge: making growth more inclusive
22
Further reducing high labour taxes would support job creation % 60
Social security contributions remain high1 As a percentage of gross wage, 2015 Employees
50 40
Employers
* 2021, following the tax shift
30 20
0
NZL DNK AUS CHL ISL CHE MEX ISR IRL USA KOR CAN GBR NOR NLD LUX OECD JPN FIN TUR POL PRT EST ESP SVN SWE DEU GRC BEL* ITA BEL SVK CZE AUT HUN FRA
10
1. Average rates of social security contribution, calculated for a single person, with no children, at 100% of the gross wage. Source: OECD, Tax-Benefit Models; OECD, Taxing Wages database.
23
Adult education and training is key to improving employment prospects Participation in adult education and training1 As a percentage of the population aged 55-64, latest available data % 60 50 40 30 20 10 0
SWE DNK USA NLD FIN NOR CAN GBR IRL DEU EST JPN KOR BEL CZE ESP FRA SVK POL ITA
1. Participation over the year. Source: OECD, PIAAC 2013.
24
High seniority wages reduces job mobility Wages of males workers aged 60-64 relative to workers aged 30-35 Latest available data
% 250 200 150 100
FRA
SVN
AUT
LUX
BEL
GRC
ITA
FIN
POL
HUN
ESP
DEU
PRT
NOR
IRE
SVK
DNK
NLD
LVA
CZE
GBR
ISL
SWE
0
EST
50
Note: For Belgium, data refer to Flanders. Relative wages are obtained using HECKIT 2-stage estimation, regressing (log) gross hourly wages on age group, controlling for years of schooling, PIAAC scores and occupational status. Source: OECD, PIAAC 2013.
25
Growth in tertiary education attainment has slowed Share of individuals aged 25-34 with tertiary education attainment Average number of years of education
% 60
BEL
50
OECD
40 30 20
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0
2000
10
Source: OECD, Education at a Glance 2016 database. 26
Youth with an immigrant background are less likely to complete tertiary education Share of people aged 25-34 with tertiary education in each population group % 80
2nd generation immigrants
70
Non-immigrants
60 50 40 30 20 10 0
POL KOR NLD FIN SWE GBR CZE FRA ESP IRL NOR AUT BEL DEU USA EST DNK ITA SVK JPN CAN Source: OECD, PIAAC 2013 27
Firms are struggling to fill ICT vacancies ICT skills shortage Share of firms that offered jobs for ICT specialist that were difficult to fill, 2015 % 60 50 40 30 20
Source: Eurostat.
CZE
LUX
AUT
NLD
SVN
EST
IRL
DEU
SWE
HUN
SVK
BEL
LVA
FRA
DNK
GBR
EU28
FIN
GRC
POL
NOR
ISL
ITA
PRT
0
ESP
10
28
Inclusion
Productivity
Macro
Main Findings o
Public investment should be increased to boost potential growth.
o
The tax mix could be altered to support growth and make it more inclusive.
o
Commuting and traffic congestion contribute to air pollution.
o
Regulations are generally business friendly, but productivity growth has slowed.
o
There is scope to improve R&D activity, innovation and transfers of technology.
o
Business dynamism is weak. Start-ups face several barriers.
o
Educational outcomes of socio-economically disadvantaged individuals are comparatively poor.
o
The labour force participation of seniors and low-skilled workers, many of whom are first or second generation immigrants, is low.
o
The current model of financing tertiary education may not be sustainable
29
Recommendations for fiscal and financial policies to support the economy Shift taxes further away from labour by lowering employer social security contributions on low wages. Increase less distortionary taxes, such as green, capital gains and recurrent taxes on property. Finance growth-enhancing public investment by reducing inefficient public spending, considering user fees and private sources of finance.
30
Recommendations to boost productivity Streamline public support for R&D and innovation within each region. Step up innovation support cooperation across regions and communities. Reduce administrative burdens on SMEs. Reduce the level of the paid-in minimum capital requirement and increase the VAT threshold. Strengthen contract enforcement by strengthening court automation and case management More in Chapter 1 of the Economic Survey
31
Recommendations to make growth more inclusive Improve the employability of seniors by encouraging adult education and training, flexitime and new organisational practices, and work with social partners to reduce seniority wages. Enhance pre-primary language education for the children of immigrants. Expand controlled school-choice schemes to reduce the concentration of pupils with an immigrant background in particular schools. Improve teacher training and incentives to attract teachers to schools with a high concentration of disadvantaged students. To help sustain spending on tertiary education consider increasing tuition fees, while maintaining grants and waivers along with post-study income-contingent student loans. More in Chapter 2 of the Economic Survey
32
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