2020 OECD ECONOMIC SURVEY OF BELGIUM Towards a more resilient and inclusive economy 3 February 2020, Brussels
http://www.oecd.org/economy/belgium-economic-snapshot/
Well-being is high Better life index, country rankings 20% top performers 2
4
60% middle performers
5
Work-life balance
Belgium
8 13
Civic Income and engagement wealth
20% bottom performers
Housing
Health status
14
Social connections
16
Subjective well-being
18
Personal security
19
20
23
Education and Jobs and Environmental skills earnings quality
Source: OECD, Better Life Index. 2
The economic recovery remains solid Real GDP Year-on-year % change 5 4
Belgium
Euro area
3 2 1 0 -1 -2 -3 -4 -5
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: OECD, Economic Outlook (database).
3
Public debt is steadily decreasing, but remains high % of GDP, Maastricht definition 110 100 90 80 70 60 50 40
Belgium
Euro area
30 20 10 0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: OECD, Economic Outlook (database).
4
Population ageing will put pressure on pension spending Gross public pension spending % of GDP, 2070 18 16 14
2016
12 10 8 6 4 0
LVA LTU EST IRL SWE NLD DNK GBR SVK POL GRC ESP CZE EU28 HUN PRT FRA EA19 DEU NOR ITA FIN AUT SVN BEL LUX
2
Source: European Commission (2018), The Ageing Report. 5
Labour taxes have declined, but remain high Labour taxes, as a % of total labour costs 2018 50 2015
40 30 20
0
CHL ISR NZL MEX CHE KOR AUS IRL GBR NLD CAN USA LUX ISL PRT OECD ESP NOR EST TUR JPN FRA DNK FIN GRC LTU BEL POL LVA SVN ITA SVK CZE AUT SWE BEL DEU HUN
10
Note: Labour tax wedge for a single worker without children, at 50% of the average wage. Source: OECD (2019), OECD Taxing Wages (database).
6
There are too many exemptions in VAT
100
VAT revenue ratio,% 2016
90 80 70 60 50 40 30 20 0
MEX ITA TUR ESP GRC POL GBR CAN BEL FRA PRT AUS IRL SVK LTU NLD FIN ISL LVA DEU OECD HUN NOR SVN AUT CZE DNK SWE ISR CHL CHE KOR JPN EST LUX NZL
10
Source: OECD (2019), Consumption Tax Trends 2019. 7
Risks are building up in the financial sector % of total bank loans with loan-to-value ratios> 80% 55 50 45 40 35 30
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: National Bank of Belgium. 8
Main macroeconomic and fiscal recommendations •
Stick to medium-term targets to ensure a gradual durable reduction of public debt and use any fiscal windfall to reduce the debt faster.
•
Make regular spending reviews at each level government an integral part of the fiscal framework.
•
Further lower social security contributions for low wages, financed by increases in less distortive taxes, such as VAT and environmental taxes.
•
If the current measures are ineffective, introduce additional borrower-based macroprudential measures.
of
9
Main pension policy recommendations •
Develop policies to reskill older workers and link the statutory retirement age to life expectancy at retirement.
•
Continue to align the pension treatment of public and private sector workers.
•
Harmonise calculations employees.
•
Lower required number of receiving minimum pensions.
contribution rates and pension between the self-employed and career
years
for
10
Boosting productivity growth
11
Productivity growth needs a boost Multifactor productivity growth Index, 2000=100 115 Belgium
Germany
France
Netherlands
110
105
100
95
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
Source: OECD, Productivity Database. 12
Promoting competition would boost firm entry Index scale from 0 to 6 (most restrictive regulations) 2018 6 Belgium
5
OECD best performers
4 3 2 1 0
Lawyers
Notaries
Accountants Architects
Civil Estate agents engineers
Retail
Retail sales of medicine
Source: OECD, Product Market Regulation Database. 13
Public R&D support is mostly concentrated on R&D tax credits As a percentage of GDP 2016 or latest available year 0.5
Direct government funding
Tax incentive support
0.4 0.3 0.2
0.0
LVA SVK CHL LTU EST GRC CHE LUX MEX FIN DEU DNK NZL ESP POL ITA TUR CZE PRT JPN OECD SWE ISL HUN CAN NLD SVN AUS ISR NOR USA GBR AUT KOR IRL FRA BEL
0.1
Source: OECD, R&D Tax Incentive Indicators (database). 14
Investment in transport infrastructure is low
2.5
Investment in transport infrastructure % of GDP, 2017 or latest available data
2.0 1.5 1.0
0.0
PRT BEL ITA CAN USA ESP SVN AUT NLD DEU SWE FIN POL DNK CZE FRA OECD EST LVA LTU JPN LUX GBR SVK CHE AUS HUN KOR GRC
0.5
Source: ITF, Transport Infrastructure Statistics (database). 15
The insolvency regime can be further improved
0.7 0.6 0.5
OECD insolvency regime indicator Index scale from 0 to 1 (less efficient) 2016 2018
0.4 0.3 0.2
0.0
GBR JPN DEU PRT ESP USA CHE FRA ISR IRL GRC CHL FIN SVN NZL OECD ITA CZE POL MEX LVA AUT NOR BEL SVK TUR SWE LTU AUS CAN BEL NLD HUN EST
0.1
Note: A higher value corresponds to an insolvency regime which is most likely to delay the initiation of and increase the length of insolvency proceedings. Source: Adalet McGowan, M., D. Andrews and V. Millot (2017).
16
There is room to foster judicial efficiency Quality of judicial processes Index scale from 0 to 18 (best practice) 16 14 12 10 8 6 4 0
NLD IRL JPN BEL FIN LUX CZE DEU CHE CAN POL SVN ESP OECD FRA GRC SWE HUN LVA AUT ITA EST PRT SVK USA DNK LTU GBR
2
Source: World Bank (2019), Doing Business 2019. 17
Recommendations for boosting productivity growth Competition: • Streamline the license and permits system, and reduce the number of restrictions in some professional services. • Ease barriers to entry in the telecommunications sector. Innovation: • Improve the mix of direct and indirect public R&D support. • Introduce credits.
immediate
refundability
of
R&D
tax
18
Recommendations for boosting productivity growth Transport infrastructure: • Introduce road congestion charges, with sufficient time differentiation within the peak period. • Consider abolishing the favourable tax treatment of company cars or alternatively extend other options. Insolvency and judiciary regimes: • Introduce special insolvency procedures for small and medium-sized enterprises. • Continue to digitise the judicial system to improve data collection and evaluation.
19
Improving labour market and education outcomes
20
The recovery has been job-rich Year-on-year % change 4
GDP
3
Employment
2 1 0 -1 -2 -3
2005
2007
2009
2011
Source: OECD, Economic Outlook (database).
2013
2015
2017
21
Employment remains low compared to peers Employment rate % of population (15-64 year-olds) 80 Belgium
Germany
France
Netherlands
75 70 65 60 55
2005
2007
2009
2011
2013
2015
Source: OECD, Short-Term Labour Market Statistics (database).
2017
2019 22
The unemployment rate has declined Unemployment rate % of labour force 14 Belgium
12
Germany
France
Netherlands
10 8 6 4 2 0
2005
2007
2009
2011
2013
2015
2017
2019
Source: OECD, Short-Term Labour Market Statistics (database). 23
Long-term unemployment is high Unemployed by more than one year As a % of total unemployment, 2018 80 70 60 50 40 30 20 0
KOR MEX ISR CAN ISL NZL USA NOR SWE AUS DNK TUR FIN LUX EST GBR POL AUT OECD CZE JPN LTU NLD CHE HUN FRA IRL DEU LVA ESP SVN PRT BEL SVK ITA GRC
10
Source: OECD, Labour Force Statistics. 24
Employment rates are particularly low among disadvantaged groups Employment gap, percentages 60 50 40 30 20 10 0
Youth (aged 15-29 years)
Mothers with young children
Non-natives
People with disabilities
Older workers (aged 55-64 years)
Note: The employment gap is defined as the difference between the employment rate of prime-age men (aged 25-54 years) and that of the group, as a percentage of the employment rate of prime-age men. Source: OECD (2018), The OECD Job Strategy.
25
The unemployment benefit system provides good income support, but may discourage job search Proportion of previous in-work household income maintained after a certain period of unemployment, 2018 85
Belgium
80
OECD
75 70 65 60 55 50
1
5
10
15
20
25 30 35 40 45 Duration of unemployment in months
Source: OECD calculations based on the OECD's TaxBEN model.
50
55
60
26
Education outcomes vary by family background Percentage of variance in science performance explained by socio-economic background 25 20 15 10
0
CAN EST JPN KOR LVA ITA NOR ISL ESP AUS FIN GBR GRC TUR IRL DNK MEX USA LTU POL SWE OECD NLD SVN ISR NZL CHL AUT PRT CHE CZE SVK DEU BEL FRA LUX HUN
5
Source: OECD (2019), PISA 2018 Results Volume II. 27
ICT skills shortages remain high Percentage of firms reporting hard-to-fill vacancies for ICT specialists, 2018 2012
NLD LUX BEL DNK FIN HUN CZE AUT DEU SWE SVN GBR IRL FRA EU28 EST GRC LTU SVK ITA LVA ESP NOR AUS PRT ISL POL TUR
10 9 8 7 6 5 4 3 2 1 0
Source: OECD (2019), Measuring the Digital Transformation. 28
Participation in life-long learning is relatively low Participation in lifelong learning 25-64 year-olds, 2018 35 30 25 20 15 10
0
SVK GRC POL HUN TUR LTU LVA ITA DEU BEL CZE PRT ESP EU28 SVN IRL GBR AUT LUX FRA NLD EST NOR ISL DNK FIN SWE CHE
5
Source: Eurostat. 29
Recommendations for improving labour market and education outcomes • Target individualised support to students at the risk of failing. • Introduce individual training allowances and disadvantaged workers, provide targeted support.
for
• Extend the use of statistical tools to identify job-seekers at risk of becoming long-term unemployed. • Increase work incentives for low-wage workers by introducing in-work benefits. • For the long-term unemployed, benefits rather than flat benefits.
use
means-tested
30
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