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Belgium 2017 OECD Economic Survey promoting inclusive productivity growth

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Belgium 2017 OECD Economic Survey promoting inclusive productivity growth

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Belgium 2017 OECD Economic Survey promoting inclusive productivity growth

  1. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 14 First challenge: boosting productivity and economic growth
  15. 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. 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. 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. 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. 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. 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. 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. 22 Second challenge: making growth more inclusive
  23. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 33. More Information… http://www.oecd.org/eco/surveys/economic-survey-belgium.htm OECD OECD Economics Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. 33

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