Belgium: Selected Issues
Author: International Monetary Fund
Publication Date:
05 Mar 2007
eISBN:
9781451803266
Language:
English
Keywords:
ISCR; CR; cost; Belgium; government; nominal wage; wage norm; macroeconomic scenario; structural adjustment; government policy; productivity-enhancing reform; community government; Fiscal sustainability; Fiscal consolidation; Productivity
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This Selected Issues paper focuses on the fiscal challenge for Belgium in coping with population aging, including the sustainability of prevailing fiscal federalism arrangements across all levels of governments. The analysis demonstrates that the current strategy of upfront consolidation is likely to fall short of achieving sustainability. Further reductions in aging-related spending and growth and productivity-enhancing reforms beyond those assumed under the authorities’ strategy appear to be necessary. The paper also assesses whether the wage bargaining framework, a key labor market institution, is conducive to preserving external competitiveness and raising employment rates.

Abstract

This Selected Issues paper focuses on the fiscal challenge for Belgium in coping with population aging, including the sustainability of prevailing fiscal federalism arrangements across all levels of governments. The analysis demonstrates that the current strategy of upfront consolidation is likely to fall short of achieving sustainability. Further reductions in aging-related spending and growth and productivity-enhancing reforms beyond those assumed under the authorities’ strategy appear to be necessary. The paper also assesses whether the wage bargaining framework, a key labor market institution, is conducive to preserving external competitiveness and raising employment rates.

I. Fiscal Sustainability and Coordination in a Federal State1

A. Introduction

1. Coping with the rising fiscal costs from population aging remains one of Belgium’s main challenges. In its latest report, the High Council of Finance’s (HCF) Study Committee on Aging (SCA) estimates net aging costs to rise by 5.8 percentage points of GDP between 2005 and 2050.2 Even if the Belgian population is aging at a comparable pace with those of other EU countries, the increase in aging-related costs is among the highest in the European Union, reflecting a rapid rise in pension and health care expenditures.

2. To deal with the rising costs, the government is pursuing a multi-pronged strategy of building up fiscal surpluses and implementing growth and productivity-enhancing reforms. It is targeting a 0.3 percent surplus in 2007 and wants to increase the surplus by 0.2 percent each year to 1.3 percent of GDP by 2012. Meanwhile, its latest Stability Program calls for a significant structural improvement in labor supply and productivity.3 Nonetheless, while improvements in productivity growth and labor supply are key, the pre-funding of the estimated aging costs through up-front fiscal consolidation remains at the center of the strategy, partly reflecting concerns about intergenerational fairness.4

3. However, implementation risks are significant, and a clear fiscal framework to ensure sustainability encompassing all levels of government still needs to be determined. While fiscal balance has been preserved in recent years and the government remains committed to accumulating surpluses starting in 2007, fiscal policy has relied on one-off measures to achieve its objectives without implementing a durable strategy and without appreciably improving the public sector’s net worth. In addition, the SCA’s latest estimates of aging-related costs suggest that fiscal sustainability is not necessarily secured under the current policy approach. Moreover, with spending pressures varying across levels of government, the sustainability of fiscal arrangements among the various levels of governments needs to be established. This becomes increasingly important in light of calls for greater fiscal devolution and tax autonomy.

4. Against this background, this chapter assesses Belgium’s fiscal challenge of coping with population aging and sustainability under the current fiscal arrangements across levels of governments. The analysis shows that the current strategy of upfront consolidation does not ensure sustainability and suggests that further reform of social spending and growth-and productivity-enhancing reforms beyond those assumed under the authorities’ strategy would be necessary. In addition, the fiscal adjustment should remain consistent with an equitable burden-sharing across levels of government to ensure that all entities contribute to fiscal consolidation. In this context, as the burden of population aging falls almost entirely within the responsibilities of the federal government, further devolution of social spending and consideration of the tax-sharing system should be mindful of the implications on the fiscal sustainability across levels of government.

5. This chapter is organized as follows: Section B points to the challenges of population aging focusing on the latest estimates of its fiscal costs. Section C assesses fiscal strategies to deal with rising costs from population aging, noting that the current government policies do not suffice and that further reforms might be called for. Section D reviews the new challenges to the current fiscal arrangement in Belgium. Section E concludes.

B. Challenge of Population Aging

6. Belgium’s population is projected to age fast, but the demographic change is no more dramatic than in other industrialized countries. According to the SCA’s baseline, the population is projected to rise by 5 percent by 2050 led by an increase in the fertility rate and life expectancy and an essentially constant net positive migration. At the same time, the elderly population is expected to jump by over 63 percent and would represent over a quarter of the total population by 2050. However, the aging profile in Belgium is broadly comparable if not slightly better than in most of Europe. Belgium’s old-age dependency ratio would reach 45.6 percent in 2050 compared with an average of 51.4 percent among EU25 countries (Figure 1).

Figure 1.
Figure 1.

Belgium: Demographic Changes Among EU Countries

Citation: IMF Staff Country Reports 2007, 088; 10.5089/9781451803266.002.A001

Sources: European Commission; and Study Committee on Aging.

7. This dramatic demographic change will have significant repercussions on public finances. According to the SCA, total social spending is projected to increase by 3.8 percent by 2030 and 5.8 percent by 2050 (Table 1). In Belgium, like in many other European countries, the provision of pensions and health care, arguably the two most affected spending items, are almost entirely funded by public resources. Not surprisingly, pension and health care costs account for the bulk of aging-related expenditures adding 3.9 percent and 3.7 percent to the fiscal burden by 2050, respectively. At the same time, a reduction in unemployment charges (resulting from a projected drop in unemployment) and lower child-related support due to the demographic changes would provide fiscal relief of about 1.7 percent of GDP.5

Table 1.

Belgium: Projections of the Fiscal Costs of Aging, 2005–50

(In percent of GDP)

article image
Source: Study Committee on Aging.

8. The SCA’s estimates of the costs of aging are based on sanguine macroeconomic assumptions, in particular with regard to employment and output growth. In its central scenario, the SCA projects an increase in the employment ratio of 7.5 percentage points to 69.5 percent by 2030. The improved performance in the employment ratio reflects higher female employment rates (up 10.4 percentage points), which are expected to follow from the gradual replacement of older women by younger women with a higher educational attainment and stronger attachment to the labor market. In addition, the employment rate of older workers (aged 55 to 64) is projected to increase sharply (up 12 percentage points), partly reflecting the recent reversal of the decades-long trend towards earlier retirement as well as the estimated positive effects of recent reforms.6 At the same time, this scenario presumes appreciable labor market reforms, as suggested by the sharp decline in long-run unemployment.

9. Rising employment rates, however, would only provide a temporary cushion as employment growth would begin to decline by around 2020. Between 2005 and 2011, the size of the working age population and overall level of employment will continue to rise. Beyond 2011, rising employment rates will offset the projected decline in the size of the working-age population brought about by the baby-boom generation entering retirement until about 2020 (Figure 2). By then, the trend towards higher female employment rates will have come to an end, and the employment rate of older workers would reach a steady state. Hence, the weight of demographic change will begin to prevail, contributing to a gradual drop in employment after 2020.

Figure 2.
Figure 2.

Belgium: Macroeconomic Assumptions for Scenarios, 2005–45

Citation: IMF Staff Country Reports 2007, 088; 10.5089/9781451803266.002.A001

Sources: 2007–10 Stability Program; Study Committee on Aging; and IMF staff calculations.

10. Demographic change is expected to weigh on output growth over the long run. The SCA’s central scenario points to a slowdown of output growth from 2.2 percent per year on average in the 2005–11 period to 1.6 percent by 2050 (Table 2). With employment growth trending downward soon after 2011, productivity growth will become the dominant source of growth. The SCA foresees an increase of annual labor productivity growth to 1.75 percent, consistent with TFP productivity growth of 1.1 percent per year (which corresponds to estimates of the EU’s TFP growth during the 1970–2004 period) and a 0.6 percent contribution of rising capital intensity over the long run.

Table 2.

Belgium: Macroeconomic Assumptions, 2005–50

article image
Sources: Study Committee on Aging, IMF staff.

Period average, percent change.

Change in percentage points.

11. To illustrate the importance of macroeconomic assumptions, a less sanguine “baseline” scenario is considered, in particular with regard to employment and productivity growth. Annual labor productivity growth is assumed to average 1.5 percent during 2005–50, in line with the average productivity growth over the past two decades. In addition, the improvement in labor participation is less dramatic, reflecting only cohort effects on female employment and the impact of recent reforms on elderly retention rates, and otherwise unchanged labor market policies. As a result, the employment rate is projected to increase by 5 percentage points over the projection period.

12. Under the baseline macroeconomic assumptions, the fiscal burden of age-related spending is significantly higher than under the SCA’s macroeconomic scenario. The baseline projection implies that the burden of social spending would increase by about 2¾ percentage points of GDP over the SCA’s estimate of 5.8 percent of GDP by 2050. As the development of age-related spending is constructed using the SCA’s projections, it is assumed that pension outlays follow the projected path in nominal terms while health care costs track it proportionally. Evidently, the two macroeconomic scenarios would imply markedly different debt dynamics under similar fiscal strategies.

C. Policy Strategy to Achieve Sustainability

13. Based on the two macroeconomic scenarios described earlier, two stylized fiscal scenarios are presented with the objective of assessing the current strategy to achieve fiscal sustainability. The first scenario considers an upfront fiscal adjustment based on the staff’s recommended surplus of 1.5 percent by 2011 under the baseline macroeconomic assumptions (Table 3). The second one follows the fiscal consolidation path outlined in the 2007–10 Stability Program based on the authorities’ more optimistic macroeconomic scenario.

Table 3.

Belgium: Long-Term Fiscal Scenarios, 2005–50

(In percent of GDP; unless otherwise indicated)

article image
Sources: 2007–10 Stability Program; Study Committee on Aging; and IMF staff estimates.

  • Adjustment without reform. This scenario assumes an upfront fiscal adjustment of 1.5 percent of GDP by 2011, reaching 1.8 percent by 2012, and consistent with an average primary balance close to 4½ percent over the medium term. This would significantly reduce the debt ratio initially to a low of around 30 percent points of GDP by 2030, but thereafter, rising costs of aging begin to dominate, pushing the debt ratio on a upward path, above 60 percent of GDP (Figures 3 and 4). Indeed, the interest savings obtained in this strategy are insufficient to cover the costs of aging, and indebtedness would again rise without bound, though later and at a slower pace than in the baseline.

  • Stability Program scenario. In this scenario, the fiscal path is essentially consistent with maintaining the primary balance at about 4¼ percent of GDP through 2011 (about ¼ percentage point below the staff’s recommended path) and saving the decline in interest payments for debt reduction. This scenario comes closer to achieving fiscal sustainability and brings the public debt-to-GDP ratio down to about 20 percent of GDP around 2035. Because of the more sanguine macroeconomic assumptions, the debt dynamics is more contained despite a more moderate medium-term fiscal adjustment. However, aging costs continue to rise appreciably until 2050, by which date the public debt ratio will have resumed an upward trend.

Figure 3.
Figure 3.

Public Debt Scenarios, 2005–45

(In percent of GDP)

Citation: IMF Staff Country Reports 2007, 088; 10.5089/9781451803266.002.A001

Source: IMF staff estimates.
Figure 4.
Figure 4.

Belgium: Primary Balance Scenarios, 2005–45

(In percent of GDP)

Citation: IMF Staff Country Reports 2007, 088; 10.5089/9781451803266.002.A001

Source: IMF staff estimates.

14. Neither of the two fiscal scenarios satisfies the government’s inter-temporal budget constraint over the long run. To better illustrate the size of the budgetary imbalance under the two macroeconomic assumptions, we consider a measure of the size of the budgetary adjustment needed to ensure sustainability.7 This could translate into a medium-term primary balance target that will achieve a steady-state debt-to-GDP ratio. Under the current framework, the required primary balance would be equivalent to the primary balance that is sufficient to pay interest on outstanding debt and to cover the increase in age-related expenditure.

15. Under the baseline macroeconomic assumptions, the required primary balance would need to reach close to 7 percent of GDP over the medium term. This implies a structural adjustment of about 3 percent of GDP over five years, compared with the 1¾ percent structural adjustment recommended by the staff. The required adjustment would lead to a significant accumulation of net financial assets (about 40 percent of GDP) by the public sector to achieve the desired prefunding strategy. From a political economy point of view, it is rather evident that this strategy is untenable.

16. In comparison, the required primary balance under the authorities’ macroeconomic assumptions would have to attain 5¼ percent of GDP. The required structural adjustment amounts to about 1½ percent over five years, essentially twice as much as the adjustment considered under the Stability Program. As in the previous case, net financial assets would have to be accumulated, albeit representing only about 5 percent of GDP. A tighter fiscal adjustment, consistent with the staff’s recommended path, in the context of these more favorable macroeconomic assumptions would also fall short of the required adjustment by over ¼ percent of GDP. At any rate, reaching and sustaining the required structural primary balance would imply running larger surpluses, which might not be feasible.

17. The presence of a fiscal sustainability gap shows that in addition to upfront fiscal adjustment, structural reforms are key to ensuring stable debt dynamics over the long run. To illustrate this point, a purist scenario derives the gains in productivity growth needed to ensure convergence to a constant steady state debt-to-GDP ratio, assuming that an average primary balance of 4½ is maintained over the medium term, broadly consistent with the recommendation made by the Public Sector Borrowing Requirements Section of the High Council of Finance in its 2004 report. This would require additional reforms to yield an extra ¼ percent of productivity growth per year compared with the authorities’ macroeconomic scenario (or ½ percentage point higher when compared with the baseline). This active-reform scenario illustrates the importance of implementing structural reforms to boost TFP growth and allow for capital deepening.

18. That said, the parameters of the scenarios considered in this analysis are subject to considerable uncertainty. The values retained in the Stability Program (notably TFP growth) seem to be on the sanguine side. Similarly, the timing and impact of structural reforms under the active-reform scenario could prove optimistic. However, relatively small reforms to reduce the projected increase in the health and pension cost of aging (e.g., 0.5 percent of GDP by 2030 and 1 percent by 2050) would constitute a prudent insurance policy against uncertainty surrounding the key macroeconomic and reform parameters of the projections.

D. Challenges to the Current Fiscal Framework

19. Achieving fiscal sustainability would require broad political consensus and an efficient fiscal framework in the context of Belgium’s complex federal system. Over the past decade and half, Belgium managed to achieve remarkable fiscal consolidation while proceeding with fiscal devolution. The large transfer of expenditure responsibilities and revenues, including a restricted increase in tax autonomy, to regions and communities was accompanied by a sharp reduction in the general government deficit. Undoubtedly, this successful fiscal adjustment reflected a strong political will to control public finances and put the debt burden firmly on a downward path. At the same time, this result required clear budgetary targets for all levels of government and an efficient mechanism to enforce them. Belgium’s mix of a cooperative approach across all levels of government and the watchdog role of the HCF has proved successful in achieving and sustaining balance budgets since 2000. However, closing the current sustainability gap would require to accumulate substantial surpluses on a durable basis.

20. This section analyzes the fiscal challenge of coping with population aging to the current fiscal arrangement that guides policy coordination and implementation across all levels of government. The analysis raises a fundamental question: whether the current system provides the necessary means to ensure fiscal sustainability, in particular with regard to the implementation of the required adjustment targets. Similarly, mounting pressures for devolution of some elements of social spending represent an important challenge to the current system.

Policy coordination and the role of the High Council of Finance

21. Coordination of fiscal policy has been a central feature of the process of federalism in Belgium.8 With the decentralization of public spending and, to a lesser extent taxation power, and the significant role of each entity on public finances, regions and communities had to participate in the fiscal consolidation process. In addition, given the country’s fiscal commitments under the Maastricht Treaty and Growth and Stability Pact, the federal government had to secure the cooperation of the other entities. At the same time, communities and regions enjoy a large degree of budgetary autonomy and are in equal hierarchical stance with the federal government. As a result, a cooperative model of coordination was implemented under which the federal, regional, and community governments reach multi-year agreements on fiscal coordination. These cooperation agreements are based on political commitments to clearly specified budgetary targets.9

22. The HCF has played a key role in the coordination mechanism.10 Its role has been to provide transparency, recommend clear fiscal objectives to the different levels of government, and give incentives to policymakers to meet their targets. The HCF produces annual advisory reports, with an evaluation of the financial needs of each government entity and fiscal policy recommendations, including short and especially medium-term targets.11 These recommendations form the basis of the political agreements that take the form of internal stability programs. Since 1999, these targets have been integrated in Belgium’s stability program, as defined in the Growth and Stability Pact.

23. The HCF also contributes to the enforcement of internal agreements. On an annual basis, it publishes an ex-post evaluation of the implementation of the budgetary programs. This provides the opportunity to “name and shame” policy makers that have not respected their commitments while stressing the importance of maintaining a sound fiscal policy. In addition, following a special request by the federal minister of finance or on its own initiative, the HCF could also express an opinion on the merits of limiting the borrowing capacity of regions or communities. Although this situation has not happened until now, it remains a potentially useful instrument.

24. The current fiscal framework based on cooperation and the disciplining role of the HCF has worked well until now. Regions and communities have demonstrated a strong commitment to meeting, and even surpassing, medium-term targets laid out in the cooperation agreements. Between 1994 and 2003, the difference between the budgetary target and the actual outcome expressed as a percentage of total revenue was on average 2 percent for all entities (Figure 5). The HCF has been a key player imposing discipline and helping policy makers to resist pressure to increase expenditure.

Figure 5.
Figure 5.

Budgetary Performance of Regions and Communities, 1995–2003

(In billions of euros)

Citation: IMF Staff Country Reports 2007, 088; 10.5089/9781451803266.002.A001

Source: Belgian authorities.

Some fissures in the system

25. However, the fiscal challenge from population aging could expose some weaknesses in the system. In particular, garnering political support for accumulating significant surpluses could prove more difficult than explaining the need for achieving and maintaining balanced budgets. In addition, the fiscal adjustment burden-sharing across levels of government could complicate the cooperative approach. At the same time, the lapse of the guiding and monitoring role of the HCF in 2005 and 2006 questions the sustainability of the current arrangement.

26. The cooperation agreement reached in August 2005 illustrates some of the potential problems. Table 4 summarizes the targets reached in the agreement together with the goals outlined in the 2005 Stability Program. Put together, regions and communities are expected to maintain surpluses through 2009, but Flanders would account for most of the surpluses even though its debt burden is the lowest. More significantly, the federal government would carry the burden of all the fiscal adjustment over the medium term, consistent with the present strategy, given that the bulk of the debt belongs to the federal government. However, to meet the fiscal targets without increasing the already high tax burden, federal spending growth, excluding social security, would need to decline at an unprecedented level, magnifying the risks for slippage.

Table 4.

Belgium: Budgetary Targets Across Levels of Government, 2005–10

(In percent of GDP)

article image
Source: Belgian authorities.

27. Belgium’s contributive-capacity-based tax-sharing system could also dent the sustainability of the current arrangements. Under the current system, taxes are collected by the federal government, and some of them are transferred to local governments according to explicit repartition keys.12 However, while the socio-economic conditions of regions and communities have continued to evolve, the repartition keys remained largely unchanged, and revenue growth has varied greatly across regions and communities, leaving them with diverging budgetary pressures.13 In addition, while the 1999 and 2001 fiscal reforms set out principles for vertical and horizontal budgetary neutrality, the feasibility of maintaining vertical neutrality in subsequent years has been questioned.14

28. In addition, mounting pressures for devolution of some elements of social spending could further complicate the system. Social security contributions are collected at the federal government level, and the federal government is responsible for paying the benefits, including pensions, unemployment benefits, early retirement benefits, and health care. Because social security contributions and benefits are, to some extent, unequally distributed across regions (due to differences in regional economic activity and demographics), the social security fund transfers income across regions.15 This asymmetry has led to calls for increased devolution of social spending, in particular with regard to health care.

29. Finally, coordination of growth- and productivity-enhancing reforms across levels of government would be key to achieving fiscal sustainability. Closing the fiscal sustainability gap would require the implementation of structural reforms that would involve the various levels of government. For instance, policies to foster the diffusion of ICT technologies, rising competition in the tertiary sector, and continuous investment in human capital (life-long learning) and R&D would necessarily entail carving common strategies for the federal and regional governments.

E. Concluding Remarks

30. Coping with the rising fiscal costs from population aging remains a key challenge for Belgium. The government is pursuing a multi-pronged strategy to build up fiscal surpluses and implement growth-enhancing reforms. However, the government’s policy objectives fall short of fully addressing the sustainability gap, and implementation risks are significant. While upfront fiscal adjustment remains essential, structural reforms are key to ensuring stable debt dynamics over the long run. Relatively small reforms to reduce the projected increase in the health and pension cost of aging would constitute a prudent insurance policy against uncertainty surrounding the key macroeconomic and reform parameters of the projections.

31. In addition, achieving sustainability requires broad political consensus and an efficient fiscal framework in the context of Belgium’s complex federal system. The current fiscal framework based on cooperation and the disciplining role of the HCF has worked well until now. However, the fiscal challenge from population aging could expose some weaknesses in the system, in particular with regard to garnering political support for accumulating significant surpluses and maintaining an equitable fiscal adjustment burden-sharing across levels of government. It will be essential to ensure the sustainability of the role of the HCF and the active engagement of the cooperative process. Given the importance of growth-enhancing reforms for fiscal sustainability, the regional and federal governments should work closely together to develop common development strategies.

1

Prepared by Rodolfo Luzio (rluzio@imf.org).

2

The latest report of the Study Committee on Aging can be found at: http://docufin.fgov.be/websedsdd/intersalgfr/hrfcsf/adviezen/PDF/veillissement_2006_05.pdf.

4

See Langenus (2006).

5

The 2005 Generation Pact is estimated to have a net positive impact of 0.1 percent of GDP on the costs of aging through 2050. Measures to discourage early retirement and prolong work life would boost labor supply and growth (by 1 percent), leading to higher revenues (+0.5 percent). At the same time, increases in social spending including the adjustment of pension wage bases and social benefits to well-being could add up to 0.36 percent.

6

The 2005 Generation Pact is expected to lift employment growth by 1 percent from 2005 to 2030 for an increase in the employment ratio of 0.7 percentage point. Key measures that are expected to boost labor supply include the tightening of conditions for early retirement and the introduction of a pension bonus for workers aged 62 or older. In addition, the impact of recent policies to discourage workers from dropping out of the labor market have partially resulted in an upward revision retention rates.

7

Sustainability is achieved when the government’s inter-temporal budget constraint is met in the very long run (i.e., beyond 2050). This is equivalent to achieving a steady-state debt-to-GDP ratio.

8

See Gerard (2001) and De Smet (2004) for a detailed description of the process of decentralization in Belgium.

9

To date, five agreements were concluded with the first one in July 1994 for the 1994–96 period, then in July 1996 for the 1996–99 period, in November 1999 for 2000–02, in December 2000 for 2001–05, and finally the last agreement reached in August 2005 covering the 2006–09 period.

10

It is composed of high-level, politically-independent experts from academia and various government institutions, including public ministries, the National Bank of Belgium, and the Federal Planning Bureau. The members have renewable five-year mandates.

11

In fact, it is the “Public Sector Borrowing Requirements” section (PBR) of the HCF that is in charge of making the recommendations. These reports, however, were not available for 2005 and 2006.

12

About three quarters of the communities’ and regions’ revenues result from personal income tax and VAT transfers by the federal government in accordance to parameters laid down in the 1989 Finance Act, supplemented by the 1993 Saint Michel Agreement, the 1999 Saint-Eloi Agreement, and the 2001 Lambermont Agreement. See Claeys and others (2004) and Zhou (2003) for how the repartition keys are set across subcentral governments.

13

At the same time, with the 2001 Lambermont Agreement, part of VAT transfers linked to GDP have been progressively linked to relative personal income tax revenue.

14

See Van der Stichele and Verdonck (2001).

15

See De Maesschalck and Verbist (2005).

References

  • Claeys, J., T. Stragier, K. Van Cauter, and L. Van Meensel, 2004, “The Finances of the Communities and Regions,” Economic Review, National Bank of Belgium, Vol. 4, pp. 53 –72.

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  • De Maesschalck, V., and G. Verbist, 2005, “Interregional Social Transfers in Belgium: Would Further Devolution Lead to More Inequality,” Paper for the ESPA netconference, Making Social Policy in the Post-Industrial Age, Fribourg, Switzerland, September 2005.

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  • De Smet, G., 2004, “Fiscal Federalism and the Coordination of Fiscal Policy in Belgium,” Working Paper, Contributions to the IMF Seminar on Sub-national Financial Management, Brazil, March 2004.

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  • Gerard, M., 2001, “Fiscal Federalism in Belgium,” Working Paper, Conference in Fiscal Imbalance, Quebec City, September 2001.

  • High Council of Finance, 2004, Annual Report 2004, Public Sector Borrowing Requirements Section of the High Council of Finance, July 2004 (http://docufin.fgov.be/websedsdd/intersalgfr/hrfcsf/adviezen/PDF/rapport2004.pdf).

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  • High Council of Finance, 2006, Annual Report 2006, Study Committee on Aging of High Council of Finance, May 2006 (http://docufin.fgov.be/websedsdd/intersalgfr/hrfcsf/adviezen/PDF/veillissement_200 6_05.pdf).

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  • Langenus, G., 2006, “Fiscal Sustainability Indicators and Policy Design in the Face of Ageing,” Working Paper Research 102, National Bank of Belgium, October.

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  • Van der Stichele, G., and M. Verdonck, 2001, “The Lambermont Agreement: Why and How,” Working Paper.

  • Zhou, J., 2003, “Fiscal Devolution in Belgium,” IMF Country Report, No. 03/50.

16

Prepared by Jianping Zhou (jzhou1@imf.org).

17

Export market shares have fallen in volume but not in value, suggesting suspiciously strong pricing power, which may reflect statistical shortcomings related to exports and imports deflators.

18

The number of joint committees now exceeds 100, because economic sectors are narrowly defined.

19

Throughout this paper, the term “wages” refers to labor costs, unless otherwise noted.

20

Resulting from seniority, age, normal promotions, or individual changes of category, and traditionally estimated at 0.5 percent per year.

21

See Stockman (2004), Zhou (2004), and Burggraeve and Du Caju (2003).

References

  • Burggraeve K., and P. Du Caju, 2003, “The Labour Market and Fiscal Impact of Labour Tax Reductions,” National Bank of Belgium, Working Paper No. 36, March (Brussels: National Bank of Belgium).

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  • Plasman, R., F. Rycx, and I. Tojerow, 2006, “Industry Wage Differentials, Unobserved Ability and Rent-Sharing: Evidence From Matched Worker-Firm Data, 1995–2002,” National Bank of Belgium, Working Paper No. 90 (Brussels: National Bank of Belgium).

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  • Stockman, P., 2004, “Personal Income Tax Reform in Belgium: The Short-, Medium- and Long-run Impact on Wages, Employment and Value Added Re-examined by LABMOD,” Belgian Federal Planning Bureau, Working Paper No. 11-04.

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  • Zhou, J., 2004, “Employment Effects of Reductions in Labor Taxes in a Wage-Bargaining Model,” IMF Staff Selected Issues Paper.

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Cover IMF Staff Country Reports
Belgium: Selected Issues
Author: International Monetary Fund
Volume/Issue:
Volume 2007: Issue 088
Publisher:
International Monetary Fund
ISBN:
9781451803266
ISSN:
1934-7685
Pages:
32
DOI:
https://doi.org/10.5089/9781451803266.002

Belgium: Demographic Changes Among EU Countries

Belgium: Macroeconomic Assumptions for Scenarios, 2005–45

Public Debt Scenarios, 2005–45

(In percent of GDP)

Belgium: Primary Balance Scenarios, 2005–45

(In percent of GDP)

Budgetary Performance of Regions and Communities, 1995–2003

(In billions of euros)