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IMF Country Report No. 25/70

BELGIUM

SELECTED ISSUES

March 2025

This paper on Belgium was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on March 3, 2025.

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© 2025 International Monetary Fund

Title Page

BELGIUM

SELECTED ISSUES

March 3, 2025

Approved By

European Department

Contents

• INCREASING PUBLIC INVESTMENT, FOSTERING DIGITALIZATION, AND SUPPORTING THE GREEN TRANSITION: A DIFFICULT CHALLENGE UNDER FISCAL CONSOLIDATION

• A. Introduction

• B. Current State of Public Investment

• C. Addressing Investment Needs for Digitalization and the Green Transition

• D. Policy Recommendations

• E. Conclusion

• BOXES

• 1. Public Investment: A Catalyst for Demand and Growth Potential

• 2. Consideration on Measurement of Public Investment

• 3. Climate Physical Risks and Economic Impact

• 4. Investment in Electricity Grids

• FIGURES

• 1. Gross Fixed Capital Formation and Capital Stock

• 2. Public Gross Fixed Capital Formation

• 3. Public GFCF by Function (COFOG)

• 4. Public GFCF by Government

• 5. Infrastructure Efficiency

• 6. Current State of Digital Infrastructure

• 7. Fossil Fuel Subsidies and Electricity Prices

• 8. Electric Vehicles and Electricity Prices

• References

• IMPROVING THE EFFICIENCY OF PUBLIC INVESTMENT IN INFRASTRUCTURE IN BELGIUM

• A. Introduction and Overview

• B. Strategic Planning of Public Investment

• C. Project Preparation and Governance

• D. Project Selection and Governance

• E. Coordination and Institutional Arrangements for Public Investment

• F. Recommendations

• BOXES

• 1. Cost Overrun in Public Projects

• 2. Major Project Governance Processes—Selected European Examples

• 3. Infrabel’s Regional Investment Key

• 4. Gatekeeping Functions of Finance Ministries in Public Investment in Advanced Economies

• FIGURES

• 1. Comparative Infrastructure Efficiency and Competitiveness

• 2. Flanders Complex Project Process

• 3. Aquafin’s Project Governance Process

• References

• PUBLIC EDUCATION IN BELGIUM: IMPROVING OUTCOME WHILE REDUCING COST

• A. Belgium Spends More on Education Than Peers

• B. Education Outcomes are Comparable to Peers and Deteriorating

• C. Potential Efficiency Gains are Large

• D. Efficiency-Increasing Reforms

• E. Conclusion

• FIGURES

• 1. Evolution of Public Expenditure on Education

• 2. Spending Per Full-Time Equivalent Student

• 3. Average Reading Achievement of Fourth Grad Students (2021)

• 4. Achievement in Mathematics and Science of Fourth Graders (2023)

• 5. Educational Achievement of Fifteen-Year-Old Students

• 6. Share of Low and High Performers Among the Fifteen-Year-Old Students

• 7. Efficiency of Education Spending (2022)

• 8. Actual Salaries

• 9. Students-to-Teacher Ratio (2022)

• 10. Change in the Number of Students and Teachers

• 11. Statutory Teaching Time

• 12. Share of Students Repeating a Grade at Least Once in Primary and Secondary Education

• 13. Class Size, Teaching Time, and Educational Outcome

• 14. Staffing Issues

• 15. Skills Mismatch

• 16. Share of Graduates in STEM

• 17. Employment Rate

• 18. Enterprises Providing Continuing Vocational Training Courses

• 19. Percentage of Variance in PISA Performance Explained by ESCS (2022)

• 20. Difference in PISA Score Associated with Immigrant Background

• TABLES

• 1. Potential Efficiency Gains (2022)

• 2. Composition of General Government Spending on Education

• 3. Wage Bill in Education

• 4. Teachers' Actual Salaries Relative to Earnings of Tertiary-Educated Workers

• 5. Skills Distribution

• References

• APPENDICES

• I. Total Expenditure on Educational Institutions

• II. Alternative Measures of Efficiency Gains

• III. Grade Repetition

• FIRM DYNAMICS AND FIRM-LEVEL TOTAL FACTOR PRODUCTIVITY IN BELGIUM

• A. Context: Declining Productivity Growth, and Subdued Firm Dynamics

• B. Firm Characteristics

• C. Firm Dynamics’ Contributions to Sectoral Productivity Growth

• D. Firm Access to Finance

• E. Labor and Capital Misallocation

• F. Product Markets and Insolvency Frameworks

• G. Intra-EU Trade Barriers and Firm Productivity

• H. Conclusions and Options for Reform

• FIGURES

• 1. R&D Spending, Innovation and TFP

• 2. Firm Dynamics

• 3. Firm Characteristics

• 4. VC Funding

• 5. Labor and Capital Misallocation by Firm Age and Size

• 6. Product Market and Insolvency Framework Reform

• References