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- GDP (PPP):
- $481.5 billion
- 1.0% growth
- 1.1% 5-year compound annual growth
- $42,973 per capita
- Inflation (CPI):
- FDI Inflow:
Belgium’s institutional strengths, including an independent judiciary and government transparency, are not matched by a commitment to limited government. Expansionary public spending has generated significant budgetary pressure. With government debt reaching over 100 percent of GDP, reducing the chronic deficit needs to be a high priority.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 68.4 (down 0.4 point)
- Economic Freedom Status: Moderately Free
- Global Ranking: 44th
- Regional Ranking: 21st in Europe
- Notable Successes: Regulatory Efficiency and Rule of Law
- Concerns: Management of Public Spending and Fiscal Freedom
- Overall Score Change Since 2012: –0.6
Belgium is a federal state with three culturally different regions: Flanders, Wallonia, and the capital city of Brussels. Brussels also serves as the headquarters of NATO and the European Union. Bart De Wever’s center-right New Flemish Alliance won a plurality in the May 2014 federal elections, the first since electoral reforms were put in place. Neighboring countries have a strong political and economic impact on Belgium; in May 2015, commemorative coins created to mark the 200th anniversary of the Battle of Waterloo were destroyed after France objected. The Belgian economy has been held back by high public debt; average unemployment is lower than the eurozone average but higher in the Wallonia region. Services account for 75 percent of economic activity. Leading exports are electrical equipment, vehicles, diamonds, and chemicals.
Corruption is relatively rare, and government efforts to cut spending and reduce the budget deficit would further reduce opportunities for rent-seeking. The government prohibits and punishes all forms of bribery. Property rights are well protected by law. Laws are well codified, and the independent judicial system is generally respected but can be slow to function. Enforcement actions to protect intellectual property rights can be protracted.
The top income tax rate is 50 percent, and the top corporate tax rate is 34 percent. Other taxes include a value-added tax and an estate tax. An environmental tax on packaging was abolished as of January 2015, but a tax on soft drinks will be implemented in 2016. The overall tax burden equals 43.8 percent of GDP. Government spending has leveled off at 53.4 percent of total domestic output, and public debt is over 100 percent of GDP.
The cost of establishing a company has been reduced, and starting a business takes only three days and four procedures. Although employment regulations have gradually become less burdensome, the non-salary cost of hiring a worker remains high. The state imposes price controls on a wide range of fuels and other items, but the center-right federal government’s fiscal consolidation agenda would eliminate some subsidies.
EU members have a 1 percent average tariff rate. Investment in some sectors of Belgium’s economy is limited, but overall barriers to foreign trade and investment are low. Red tape may discourage foreign investment. The Financial Crisis Law grants the government strong powers to step in during crises. In a challenging operational environment, banks are well capitalized and have adapted to greater regulatory requirements.