Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

features of Belgium’s wage-formation process. It then tries to identify some weaknesses and policy recommendations that strive to strike a balance between maintaining benefits of wage indexation while attenuating drawbacks for the economy. Inflation at record levels is putting the sustainability of Belgium’s wage indexation system to the test by weighing on corporate and government finances. Current price pressures in Belgium show parallels to periods of elevated inflation in recent history yet also involve some important differences. Energy price inflation in Belgium is among the highest in the euro area, in part driven by the relatively low taxation of energy products. Compared to the median euro area country, Phillips curve estimates point toward some differences in the inflation-setting process and inflation persistence in Belgium. Wage formation in Belgium is characterized by the desire to shield households from purchasing-power losses while protecting the competitiveness of a highly open economy. Despite successfully maintaining wage competitiveness in recent years, the current run-up in inflation is prone to put the wage-setting framework under additional strain.

Belgium

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

The COVID-19 pandemic and the subsequent need for policy support have called the traditional separation between fiscal and monetary policies into question. Based on simulations of an open economy DSGE model calibrated to emerging and advance economies and case study evidence, the analysis shows when constraints are binding a more integrated approach of looking at policies can lead to a better policy mix and ultimately better macroeconomic outcomes under certain circumstances. Nonetheless, such an approach entails risks, necessitating a clear assessment of each country’s circumstances as well as safeguards to protect the credibility of the existing institutional framework.

Belgium

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Fiscal decentralization in Belgium progressed substantially in 2015-19. However, as decentralization of expenditure responsibilities continued to outpace decentralization of revenue authority, vertical fiscal gaps and greater reliance on transfers from shared resources may have reduced spending discipline. Consecutive shocks (pandemic, energy prices) have worsened the fiscal positions of all levels of government, requiring urgent and concerted effort to improve fiscal and debt sustainability. Fostering better fiscal policy coordination across all levels of government would improve the efficiency of Belgium’s decentralized fiscal framework. We recommend that fiscal adjustment at the subnational levels should be a part of the general government fiscal consolidation plan, with strict spending limits applying; integrating systematic spending reviews in the budgetary process; and adopting a more strategic, multi-annual fiscal framework to support adjustment. Implementing the 2013 Cooperation Arrangement—intended to provide fiscal rules to govern and coordinate public finances at all levels—is important. Also, the cost of overborrowing at the regional level should be fully internalized; recalibration of transfers could be considered; and some flexibility should be retained in the pace and scope of further decentralization. Finally, there is scope to improve the integration of fiscal sustainability objectives in federal and subnational structural reforms.

Belgium

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Belgium’s current policies fall short of achieving its climate targets and promoting emissions reductions at limited economic costs. We recommend that domestic carbon pricing form the centerpiece of an emissions reduction package, as pricing promotes mitigation at the lowest economic cost, can be phased in as international energy prices fall, and generates revenue to compensate vulnerable households and reduce taxes on productive activities. Sectoral policies, such as subsidy-tax schemes to promote low emissions vehicles, should reinforce carbon pricing and regional efforts, while the social protection system can be made more efficient and environmentally friendly by switching from energy subsidies to income-based support. Belgium should also promote dialogue at the EU-level to harmonize ETS prices and include all sectors under a single trading scheme.

Belgium

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Belgium.