Economic Policy Reforms 2023

Belgium

See more data for Belgium on the related dashboard.

Product and labour markets functioning

Performance gaps

• The wage-setting mechanism contributes to low wage inequality but risks hindering job reallocation, thereby lowering productivity growth.

• Automatic wage indexation preserves purchasing power but raises wages faster than in trading partners, weighing on competitiveness in the short run when inflation is high.

Recommendations

• Encourage the use of existing mechanisms within the framework of sector-level agreements to better align wages with productivity at the firm level.

• Make the wage indexation mechanisms more flexible, while ensuring coordination if future evaluations find they fail to take into account the business cycle.

Digital transition

Performance gaps

• Firms use digital technologies intensively, but the low share of fibre connections and delayed roll-out of 5G limit future adoption. High broadband prices and market concentration could reflect weak competition in the communication sector.

• There is scope to digitalise the public sector further.

Recommendations

• Remove the barriers that can delay broadband network and 5G deployment, including strict limits on electromagnetic fields and slow delivery of permits.

• Facilitate consumer mobility across service providers.

• Prioritise providing the public sector with digital skills to better use and develop digital tools. Promote coherence of digital strategies across different levels of government

Inclusiveness, social protection, and ageing

Performance gaps

• Belgian students’ overall performance is on par with peer countries, but individuals’ achievements strongly depend on their socio-economic backgrounds.

• Participation in lifelong learning is limited for the low educated, low-income groups and those with disabilities, accounting in part for low employment rates and labour mobility.

Recommendations

• Improve teachers’ incentives to work in disadvantaged schools. Better link school funding with educational outcomes for disadvantaged students.

• Streamline lifelong learning programmes and prioritise vulnerable groups for face-to-face career guidance.

Climate transition

Performance gaps

• Belgium makes no use of explicit carbon taxation beyond the EU Emissions Trading System. Fossil-fuel consumption is encouraged by moderate taxation and widespread subsidies.

• The coherence of regional and federal policies in the national energy and climate plan can be improved substantially.

Recommendations

• Introduce a carbon tax for sectors not subject to the EU Emission Trading Scheme and develop compensatory measures for vulnerable households.

• Present an integrated national overview of the federal and regional climate plans and define how efforts to reach the 2030 climate objectives should be shared.

Overall performance