Belgium 2017 OECD Economic Survey promoting inclusive productivity growth

1. 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. 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. 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. 4
Social and economic well-being is high
0
2
4
6
8
10
Income 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. 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
COL
HUN
SWE
USA
FIN
GBR
SVK
KOR
CHE
NZL
ZAF
POL
LUX
PRT
TUR
AUS
CAN
ISL
SVN
IDN
Responsiveness rate to OECD Going for Growth recommendations, 2015-16

6. 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. 7
Inflation has picked up
Source: OECD, Economic Outlook 101 database, OECD Economics Department database.
-2
-1
0
1
2
3
4
5
6
7
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. 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. 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. 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. 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. 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
BELOECD

13. 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. 14
First challenge: boosting
productivity and economic growth

15. 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 related
taxes
Recurrent taxes on
property
Taxes on capital gains at
the individual level
Social Security
contributions
The tax mix could still be more growth friendly
Relative performance to OECD, latest available data
BELOECD=100

16. 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. 17
Sustaining R&D expenditure will raise
productivity
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
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
%
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. 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. 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
Regulatory
framework
Market conditions Access to finance Entrepreneurial
capabilities
Entrepreneurship
culture
Framework conditions for entrepreneurship
Relative to EU average, 2009-15

20. 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. 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.
0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.10
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. 22
Second challenge: making
growth more inclusive

23. 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
JPN
FIN
TUR
POL
PRT
EST
ESP
SVN
SWE
DEU
GRC
BEL*
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. 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. 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. 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. 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. 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

29. 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
ProductivityInclusionMacro

30. 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

31. 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

32. 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

33. More Information…
http://www.oecd.org/eco/surveys/economic-survey-belgium.htm
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