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Europe > Belgium

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Cover Selected Issues Papers
Fiscal Consolidation in Belgium: How Much and by What Means?
Yu Ching Wong
Belgium is facing higher structural deficits and rising debt after the pandemic and energy crisis. Fiscal consolidation is needed to lower inflation, rebuild buffers, reduce debt, and preserve Belgium’s social contract. While designing an appropriate fiscal consolidation path involves trade-offs, an ideally front-loaded and significant adjustment to achieve a medium-term structural balance would reduce public debt towards the 60 percent debt threshold, significantly reducing vulnerabilities. Experiences in other countries and in the past in Belgium show that while ambitious, such an adjustment is achievable. Comparisons with peers show that rationalizing and increasing the efficiency of social benefits and the public wage bill would need to be at the core of the consolidation effort. All federal entities should share the burden of the adjustment, in a coordinated manner, with accountability at all levels of government, and within a credible and clear multi-year consolidation plan. Comprehensive spending reviews would help target budgetary saving. To mitigate the growth impact in the near term and boost potential growth, public investment should be preserved, and the adjustment should go together with structural reforms to increase labor force participation and productivity.
Keywords:
Fiscal policy; fiscal consolidation; government expenditures; budget; deficit and debt; federal and subnational public finances; fiscal federalism; fiscal consolidation in Belgium; social contract; major spending category; categories Between Belgium; fiscal consolidation path; Fiscal stance; Government debt management; Europe; Global
Cover Selected Issues Papers
The Fiscal Cost of Aging in Belgium: Pensions and Healthcare
Mr. Jean-Jacques Hallaert
Belgium faces a fiscal consolidation challenge at a time when the fiscal cost of aging—primarily related to pension and health outlays—is mounting. Pension spending will increase relatively fast unless a combination of measures related to pension generosity and retirement eligibility are put in place. Potential efficiency gains are large in the health sector and could absorb part of the fiscal and reorganization costs related to an aging population.
Keywords:
Belgium; Aging; Fiscal cost of aging; Pensions; Healthcare; reorganization cost; cost of aging; cost pressure; fiscal cost; healthcare cost; Pension spending; Europe; Global
Cover IMF Staff Country Reports
Belgium: Financial Sector Assessment Program-Detailed Assessment of Observance-Assessment of the CPSS–IOSCO Principles for Financial Market Infrastructures Euroclear Bank
International Monetary Fund. Monetary and Capital Markets Department
Euroclear Bank (EB) is a large and highly interconnected international central securities depository (ICSD) that provides critical services for global financial markets. EB, domiciled in Belgium, issues and provides custody and settlement services for international bonds (i.e., Eurobonds) in its capacity as an ICSD. It shares this role primarily with Clearstream Banking Luxembourg (CBL). EB also settles and holds in custody a wide range of domestic and internationally traded securities. In December 2019, EB was authorized under the Central Securities Depository Regulation (CSDR) of the European Union (EU) to perform so-called core CSD services, as well as non-banking- and banking-type ancillary services. EB is also licensed as a credit institution under the Belgian Banking Act. To facilitate smooth settlement, EB provides uncommitted credit facilities to its participants on an intraday and fully collateralized basis. In 2021, the value of securities held on EB’s books was EUR 17.1 trillion and it had settlement turnover of 147 million transactions with a value of EUR 653 trillion. This makes EB the most active CSD in the world (by settlement turnover), as well as the largest ICSD and third largest CSD in the world (by value of securities held).
Keywords:
resolution plan; EB's service; cyber posture; EB's ability; assessment of EB; EB's book; access implication; Securities; Credit risk; Operational risk; Collateral; Central securities depositories; Global; Europe
Cover IMF Staff Country Reports
Belgium: Selected Issues
International Monetary Fund. European Dept.
Selected Issues
Keywords:
state government expenditure; health efficiency frontier; cost of aging; major spending category; healthcare expenditure; Aging; Pension spending; Pensions; Fiscal consolidation; Europe; Global
Cover IMF Staff Country Reports
Belgium: Financial Sector Assessment Program-Technical Note on Systemic Risk Analysis and Stress Testing
International Monetary Fund. Monetary and Capital Markets Department
The financial sector has remained resilient to a series of shocks and is well capitalized and profitable, but risks remain. Bank profitability and capital have surpassed pre-pandemic levels. Liquidity buffers remain strong and banks’ direct exposures to Russia are limited. The insurance and investment funds sectors have also weathered the pandemic well. There is limited evidence of credit or asset price booms over the past decade. However, inflationary pressures, partly the result of spillovers from Russia’s war on Ukraine, and a rapid tightening of financial conditions have weakened activity and reined in credit demand. Among high uncertainty, GDP growth is projected to slow in 2023, before returning to potential over the medium-term.
Keywords:
net interest income; risk projection; market interconnectedness Results; H. sensitivity analysis; market interconnectedness flowchart; sensitivity analysis result; regressions output; solvency capital requirement; Stress testing; Insurance companies; Solvency stress testing; Solvency; Mutual funds; Global
Cover IMF Staff Country Reports
Belgium: Financial Sector Assessment Program-Technical Note on Macroprudential Policy Framework and Tools
International Monetary Fund. Monetary and Capital Markets Department
Despite a series of shocks in the recent past, the Belgian financial sector has remained resilient and firm evidence for sustained credit or real estate price booms is limited. The profitability, capital adequacy and liquidity of banks have surpassed their pre-pandemic levels, remaining comfortably above regulatory thresholds. Notwithstanding the blows to the economy inflicted by the pandemic, spillovers from Russia’s war in Ukraine, and the energy crisis, bankruptcies have not materialized, and the quality of loan portfolios has stayed strong as automatic wage indexation and government support have helped households and firms. The credit gap turning positive in late 2017 did not herald the beginning of a prolonged period of further widening, with private sector borrowing expanding at a robust pace until the rapid tightening of financial conditions since 2022 triggered an ebbing of lending growth. Prices for residential and commercial dwellings have steadily increased since 2014, yet market dynamism over this period has been generally below developments seen in other euro area countries, keeping valuations in check.
Keywords:
mortgage market characteristic; coverage ratio; housing loan; bank funding; bank CRE exposure; NBB proposal; Macroprudential policy; Financial sector stability; Financial sector risk; Systemic risk; Macroprudential policy instruments; Global; Europe
Cover IMF Staff Country Reports
Belgium: Financial Sector Assessment Program-Technical Note on Regulation and Supervision of Less Significant Institutions
International Monetary Fund. Monetary and Capital Markets Department
The Belgium FSAP deep dived into the arrangements related to the financial safety net and crisis management. Belgium made progress since the 2018 FSAP2 in the preparation of resolution plans and minimum requirement for own funds and eligible liabilities (MREL) targets. The authorities should now focus on strengthening the crisis management framework, ensure the operational readiness of resolution plans and enhancing the Deposit Insurance System (DIS). The Belgium FSAP has reviewed the national arrangements and, as a result, all the recommendations are addressed to the national authorities. This technical note also refers to Significant Institutions (SIs) when relevant and includes a factual description of the allocation of responsibilities between the Belgian authorities, the European Central Bank (ECB) and the Single Resolution Board (SRB) with regards to the functioning of the financial safety net.
Keywords:
Belgium LSI sector; credit institution; market development; LSI sector; NBB governance Manual; Belgium's Less Significant Institutions; Financial Sector Assessment Program; External balance assessment (EBA); Bank supervision; Bank legislation; Global
Cover IMF Staff Country Reports
Belgium: Financial Sector Assessment Program-Technical Note on Insurance Regulation and Supervision
International Monetary Fund. Monetary and Capital Markets Department
The Financial Sector Assessment Program (FSAP) conducted a focused review of insurance regulation and supervision in Belgium. This technical note (TN) provides an update on the insurance sector and highlights risks and vulnerabilities. It analyzes key aspects of regulatory and supervisory oversight: supervisor; the solvency framework; supervision (micro and macro); changes in control and portfolio transfer, reinsurance; conduct of business and group supervision and supervisory co-operation and co-ordination.2 Belgium has adopted a twin peaks model of regulatory oversight and supervision. The National Bank of Belgium (NBB) is responsible for prudential supervision at both a micro and macro level whilst the Financial Services and Markets Authority (FSMA) is mandated with conduct of business supervision. The analysis focuses on supervision within the scope of the NBB’s and the FSMA’s mandates. The TN comments on progress in respect of the implementation of recommendations made by the previous FSAP and offers further recommendations to strengthen the regulatory and supervisory regime.
Keywords:
risk assessment framework; pre-emptive conduct supervision; conduct risk; group supervision; NBB's role; Insurance companies; Insurance; Mortgages; Financial Sector Assessment Program; Solvency; Global
Cover IMF Staff Country Reports
Belgium: Financial Sector Assessment Program-Technical Note on Financial Safety Net and Crisis Management
International Monetary Fund. Monetary and Capital Markets Department
The Belgium FSAP deep dived into the arrangements related to the financial safety net and crisis management. Belgium made progress since the 2018 FSAP2 in the preparation of resolution plans and minimum requirement for own funds and eligible liabilities (MREL) targets. The authorities should now focus on strengthening the crisis management framework, ensure the operational readiness of resolution plans and enhancing the Deposit Insurance System (DIS). The Belgium FSAP has reviewed the national arrangements and, as a result, all the recommendations are addressed to the national authorities. This technical note also refers to Significant Institutions (SIs) when relevant and includes a factual description of the allocation of responsibilities between the Belgian authorities, the European Central Bank (ECB) and the Single Resolution Board (SRB) with regards to the functioning of the financial safety net.
Keywords:
Resolution unit; NBB governor; NBB organic law; Belgium FSAP; resolution planning; Bank resolution framework; Lender of last resort; Financial safety nets; Bank resolution; Crisis resolution; Global
Cover IMF Staff Country Reports
Belgium: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Belgium
International Monetary Fund. European Dept.
Supported by strong and timely policy response, the Belgium economy and its financial sector showed resilience in withstanding a series of shocks in the past three years. Still, as in most euro area countries, growth is slowing, and core inflation remains high. Furthermore, the pandemic and energy crisis increased already-high public debt and structural fiscal deficits. Meanwhile, an aging population and the climate transition are putting pressure on public finances while low productivity and labor participation are dampening potential growth.
Keywords:
government formation; money market rate; Belgium economy; General government statement; General government balance; FSAP stress tests; Fiscal consolidation; Energy prices; Financial Sector Assessment Program; Fiscal stance; Inflation; Global