2017 OECD ECONOMIC SURVEY OF BELGIUM€¦ · 2 . Main messages Belgium has undertaken important reforms Wage-setting system Tax shift Many challenges remain: Productivity growth has

http://www.oecd.org/eco/surveys/economic-survey-belgium.htm

OECD

OECD Economics

2017 OECD ECONOMIC SURVEY OF BELGIUM

Brussels, 20 June 2017

PROMOTING INCLUSIVE PRODUCTIVITY

GROWTH

2

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

3

The economy has recovered

95

100

105

110

115

120

125

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Index 2000 = 100

GDP per capita index

BEL DEU FRA NLD

Source: OECD Productivity Database.

4

Social and economic well-being is high

0

2

4

6

8

10Income and wealth

Jobs and earnings

Housing

Work-Life balance

Health status

Education and skillsSocial connections

Civic engagement and governance

Environmental quality

Personal security

Subjective well-being

B. OECD Better Life Index1,2

BEL OECD

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“.

5

Belgium has been a top reformer

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.

0

10

20

30

40

50

60

70

LVA

FRA

AUT

BEL

BRA

CHL

ISR

GRC

MEX

CHN

CZE

EST

IRL

ITA

DEU

DNK

NLD

JPN

ESP

NOR

IND

OCDE CO

LHU

NSW

EUS

AFI

NGB

RSV

KKO

RCH

ENZ

LZA

FPO

LLU

XPR

TTU

RAU

SCA

N ISL

SVN

IDN

Responsiveness rate to OECD Going for Growth recommendations, 2015-16

6

Competitiveness is recovering

Source: OECD, Economic Outlook 101 database, OECD Economics Department database.

95

100

105

110

115

120

125

130

135

140

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

2005=100

Unit labour costs are moderating

BEL DEU EU FRA NLD

7

Inflation has picked up

Source: OECD, Economic Outlook 101 database, OECD Economics Department database.

-2-101234567

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Y-o-y % changes

Inflation is higher than in neighbouring countries

BEL DEU FRA NLD

8

Public debt is falling, but remains high

Source: OECD Economic Outlook 101 database

80

90

100

110

120

130

140

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

% Public debt to GDP ratio1

1. Maastricht criterion.

9

The population is ageing

25

30

35

40

45

50

55

60

65

2014 2019 2024 2029 2034 2039 2044 2049 2054 2059

% Old age dependency ratio projections

Population 65 and over to population 15 to 64 years BEL DEU FRA NLD

Source: Eurostat.

10

Productivity growth has slowed

95

100

105

110

115

120

125

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Index 2000=100 Multifactor productivity

BEL FRA DEU NLD USA

Source: OECD Productivity Statistics database.

11

Productivity varies widely between firms

0

20

40

60

80

100

120

140

160

180

DNK FRA BEL FIN ITA ESP CRO SVK CZE EST POL

Median 90th percentile 10th percentile Mean

Source: CompNet, 2016.

Real value added per employee, average, latest available data

12

Youth, seniors and low-skilled workers have low employment rates

Source: OECD, Labour force statistics database; OECD, Migration statistics database; OECD, Education at a glance database; and Eurostat, Labour Force Survey.

0

10

20

30

40

50

60

70

80

Total(15-64)

Foreign-born(15-64)

Women(15-64)

Older population(55-64)

Low-skilled(25-64)

Youth(15-24)

Employment rate amongst some groups % of population in each group, 2016

BEL OECD

13

The labour market integration of immigrants can be improved

Source: OECD, Labour force statistics database; OECD, Migration statistics database; and Eurostat, Labour Force Survey.

57

70

67

67

15

6

5

6

28

23

28

28

0 20 40 60 80 100

Non-EU28

Other EU28

Belgium

Total

Men Employed Unemployed Inactive

Employment status by country of origin and gender

38

60

61

58

10

6

4

5

52

34

35

37

0 20 40 60 80 100

Non-EU28

Other EU28

Belgium

Total

Women

14

First challenge: boosting productivity and economic growth

15

The tax mix could be adjusted to support growth

Sources: OECD, Environment Database - Instruments used for environmental policy and; OECD, Revenue Statistics database.

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.

0

20

40

60

80

100

120

140

Environmentally relatedtaxes

Recurrent taxes onproperty

Taxes on capital gains atthe individual level

Social Securitycontributions

The tax mix could still be more growth friendly Relative performance to OECD, latest available data

BEL OECD=100

16

More public investment would boost growth

0

1

2

3

4

5

6

7

8

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

%

Public investment has been declining since the 1980s As a percentage of GDP, 1970-2016

BEL DEU FRA NLD

Source: OECD Economics Department database.

17

Sustaining R&D expenditure will raise productivity

0.00.51.01.52.02.53.03.54.04.5

ISR

KOR

JPN

SWE

AUT

DNK

FIN

DEU

USA

BEL

OECD FR

ASV

N ISL

AUS

NLD

CZE

NOR

GBR

CAN IRL

EST

HUN ITA

LUX

PRT

ESP

SVK

NZL

TUR

POL

GRC

LVA

MEX

CHL

%

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.

18

Boosting business dynamism would raise productivity

Source: European Commission

0

5

10

15

20

25

SVK

LVA

PRT

GBR

DNK

SVN

EST

NLD

LUX

HUN

FRA

EU28

ESP

CZE

NOR

FIN

SWE

DEU ITA

AUT

IRL

BEL

%

Entry and exit in the business sector Latest available data

Birth rate of businesses Death rate of businesses

19

The business environment is favourable

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.

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Regulatoryframework

Market conditions Access to finance Entrepreneurialcapabilities

Entrepreneurshipculture

Framework conditions for entrepreneurship Relative to EU average, 2009-15

20

Reducing administrative burdens would boost firm dynamism

Source: OECD, PMR indicators database.

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

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

Index

Barriers to entrepreneurship Administrative burdens on start-ups, latest available data

21

Start-ups would benefit from more venture capital

Note: For Australia, Canada, Ireland and Turkey, data refer to 2014.

Source: OECD, Entrepreneurship at a Glance 2016.

0.000.010.020.030.040.050.060.070.080.090.10

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

%

Venture capital As a percentage of GDP, 2015

0.38 0.33 0.12

22

Second challenge: making growth more inclusive

23

Further reducing high labour taxes would support job creation

0

10

20

30

40

50

60

NZL

DNK

AUS

CHL

ISL

CHE

MEX

ISR IRL

USA

KOR

CAN

GBR

NOR

NLD

LUX

OECD JP

NFI

NTU

RPO

LPR

TES

TES

PSV

NSW

EDE

UGR

CBE

L* ITA

BEL

SVK

CZE

AUT

HUN

FRA

%

Social security contributions remain high1

As a percentage of gross wage, 2015

Employees Employers

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.

* 2021, following the tax shift

24

Adult education and training is key to improving employment prospects

1. Participation over the year. Source: OECD, PIAAC 2013.

0

10

20

30

40

50

60

SWE DNK USA NLD FIN NOR CAN GBR IRL DEU EST JPN KOR BEL CZE ESP FRA SVK POL ITA

%

Participation in adult education and training1

As a percentage of the population aged 55-64, latest available data

25

High seniority wages reduces job mobility

0

50

100

150

200

250

EST

SWE ISL

GBR

CZE

LVA

NLD

DNK

SVK

IRE

NOR

PRT

DEU

ESP

HUN

POL

FIN ITA

GRC

BEL

LUX

AUT

SVN

FRA

%

Wages of males workers aged 60-64 relative to workers aged 30-35 Latest available data

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.

26

Growth in tertiary education attainment has slowed

Source: OECD, Education at a Glance 2016 database.

0

10

20

30

40

50

60

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

%

Share of individuals aged 25-34 with tertiary education attainment Average number of years of education

BEL OECD

27

Youth with an immigrant background are less likely to complete tertiary education

0

10

20

30

40

50

60

70

80

POL KOR NLD FIN SWE GBR CZE FRA ESP IRL NOR AUT BEL DEU USA EST DNK ITA SVK JPN CAN

%

Share of people aged 25-34 with tertiary education in each population group

2nd generation immigrants Non-immigrants

Source: OECD, PIAAC 2013

28

Firms are struggling to fill ICT vacancies

Source: Eurostat.

0

10

20

30

40

50

60

ESP

PRT

ITA ISL

NOR

POL

GRC

FIN

EU28

GBR

DNK

FRA

LVA

BEL

SVK

HUN

SWE

DEU IRL

EST

SVN

NLD

AUT

LUX

CZE

%

ICT skills shortage Share of firms that offered jobs for ICT specialist that were difficult to fill, 2015

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

Prod

ucti

vity

In

clus

ion

Mac

ro

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

31

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

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

More Information…

http://www.oecd.org/eco/surveys/economic-survey-belgium.htm

OECD OECD Economics

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