Belgium’s competitiveness has been undermined by the indexation of wages to inflation and its GDP growth has trailed that of the euro-area since 2015. However, a tax and economic reform package implemented since 2016 has contributed to a pickup in growth in 2017-18.
Business investment is expected to be the fastest-growing component of GDP growth.
The National Bank of Belgium estimates that the tax reform will add 1.2% to GDP and allow the creation of more than 50,000 jobs in 2016-20.
The reform package is mostly self-financed, so the general government deficit is expected to stay around 1.0-1.5% of GDP in 2018-19.
The 2019 elections could derail the reform process if forming a coalition proves difficult or if parties' policy priorities diverge.
