Front Matter

Front Matter Page

© 2006 International Monetary Fund

February 2006

IMF Country Report No. 06/74

Belgium: 2005 Article IV Consultation—Staff Report; and Public Information Notice on the Executive Board Discussion

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2005 Article IV consultation with Belgium, the following documents have been released and are included in this package:

  • the staff report for the 2005 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on November 21, 2005, with the officials of Belgium on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on January 19, 2006. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.

  • a Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its February 27, 2006 discussion of the staff report that concluded the Article IV consultation.

The documents listed below have been or will be separately released.

  • Financial System Stability Assessment

  • Selected Issues Paper

The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.

To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to

Copies of this report are available to the public from

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Staff Report for the 2005 Article IV Consultation

Prepared by Staff Representatives for the 2005 Consultation with Belgium

Approved by Poul Thomsen and Michael Hadjimichael

January 19, 2006

Belgium’s economy has been performing reasonably well, and its economic policies are appropriately guided by the need to deal with population aging. The good economic performance is based on high productivity, supported by credible fiscal policies and a generally stable financial system, as documented in the Financial System Stability Assessment (FSSA) accompanying this report. Recognizing that higher growth is essential to attenuate the consequences of aging, structural reforms are being implemented, and social partners and the authorities have adopted a Generation Pact to boost job creation. Fiscal policy aims to support growth through tax cuts while gradually building up fiscal surpluses to fund the rising costs of aging in part through a reduction in the interest bill.

Policies will need to be strengthened to succeed:

  • The near-term economic outlook is favorable, but domestic wage developments pose a risk to competitiveness in the medium term, and demographics will dampen trend growth. There is consensus on the need for structural reforms to boost productivity and for further wage moderation, though social partners have not yet agreed on how to achieve the latter.

  • Balanced budgets during the past five years have contributed to appreciable fiscal consolidation. However, reconciling ongoing growth-enhancing tax cuts with budget surplus goals will require explicit spending restraint as well as structural reforms that rely less on budgetary resources. Reaching the consolidation objectives also requires further strengthening of fiscal institutions and clarification of the responsibilities of the various levels of government.

  • To boost employment rates in the labor market, it will be essential to complement the reforms initiated with the Generation Pact. Most importantly, the wage-bargaining framework should be focused more on achieving higher employment rates.

  • To preserve the stability and resilience of the financial system, it will be important to meet the challenges posed by the move to Basel II, the increasing complexity of financial groups, and European integration; upgrade insurance and pension fund supervision to the same high quality as banking supervision; and continue to ensure adequate oversight and prudential supervision of the globally important payment and securities settlement system.


  • Executive Summary

  • I. Economic Background and Outlook

  • II. Policy Issues

    • A. Achieving Sustainable Public Finances and Higher Growth

    • B. Financial Sector Issues and Financial System Stability Assessment

  • III. Staff Appraisal

  • Figures

  • 1. Economic Developments

  • 2. Inflation Analysis

  • 3. Monetary and Fiscal Policy Conditions

  • 4. Public Debt Sustainability Bound Tests

  • 5. Labor and Product Market Indicators

  • 6. Fiscal Developments

  • 7. Financial Sector Indicators

  • Tables

  • 1. Basic Data, 2000–06

  • 2. Public Sector Debt Sustainability Framework, 2000–10

  • 3. Operations of the General Government, 1998–2004

  • 4. Fiscal Scenarios, 2002–10

  • 5. Indicators of External and Financial Vulnerability, 2000–05

  • 6. Financial Soundness Indicators of the Banking Sector, 2000–05

  • 7. Financial Soundness Indicators of the Nonbanking Sectors, 2000–05

  • Text Boxes

  • 1. Buoyant Housing Market: How Large a Risk?

  • 2. Effectiveness of the Policy Dialogue

  • Text Tables

  • 1. Selected Indicators of Economic Activity, 2004–05

  • 2. Interprofessional Wage Agreements and Evolution of Labor Costs, 1999–2006

  • 3. Budget Indicators, 1999–2006

  • 4. Fiscal Cost of Cutting Social Security Contributions to Raise the Employment Rate by 5 Percent

  • Appendices

  • I. Fund Relations

  • II. Statistical Issues and Table of Common Indicators

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Public Information Notice (PIN) No. 06/22


March 1, 2006

International Monetary Fund

700 19th Street, NW

Washington, D. C. 20431 USA

Belgium: 2005 Article IV Consultation Staff Report; and Public Information Notice on the Executive Board Discussion
Author: International Monetary Fund