2017 Index of Economic Freedom

Belgium

overall score67.8
world rank49
Rule of Law

Property Rights83.3

Government Integrity71.5

Judicial Effectiveness69.3

Government Size

Government Spending9.6

Tax Burden44.1

Fiscal Health66.3

Regulatory Efficiency

Business Freedom82.0

Labor Freedom61.1

Monetary Freedom84.9

Open Markets

Trade Freedom87.0

Investment Freedom85.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 11.2 million
  • GDP (PPP):
    • $494.1 billion
    • 1.4% growth
    • 0.9% 5-year compound annual growth
    • $43,585 per capita
  • Unemployment:
    • 8.7%
  • Inflation (CPI):
    • 0.6%
  • FDI Inflow:
    • $31.0 billion
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Generally friendly to free-market competition, Belgium’s economy has long benefited from openness to global trade and investment. Among the notable reforms instituted during the past two years to address fiscal weaknesses and enhance competitiveness are pension reforms raising the retirement age and gradually reducing the employers’ social security contribution.

However, lingering structural weaknesses persist. The tax system is burdensome, and the extensive welfare state is supported by a high level of government spending. Belgium’s public spending rate (around 55 percent of GDP) is among the world’s highest. Government debt is now larger than the size of the economy. Despite some progress, labor market rigidities impede productivity and job growth.

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Background

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. The center-right New Flemish Alliance won a plurality in the May 2014 federal elections, the first since electoral reform, and is part of a coalition government. Charles Michel of the liberal francophone Reformist Movement Party is Belgium’s youngest prime minister since 1845. Neighboring countries have a strong political and economic impact on Belgium. Terrorist attacks in March 2016 have cost the nation billions in additional security measures and lost business and tax revenue. Tourism has been particularly affected.

Rule of LawView Methodology

Property Rights 83.3 Create a Graph using this measurement

Government Integrity 71.5 Create a Graph using this measurement

Judicial Effectiveness 69.3 Create a Graph using this measurement

Property rights are well protected by law. Laws are well codified, and the independent judicial system functions slowly but professionally. Enforcement of intellectual property rights can be protracted. Corruption is relatively rare, and government efforts to address underlying fiscal and competitiveness weaknesses should further reduce opportunities for rent-seeking. The government prohibits and punishes bribery.

Government SizeView Methodology

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. The overall tax burden equals 44.7 percent of total domestic income. Government spending has amounted to 54.9 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.9 percent of GDP. Public debt is equivalent to 106.3 percent of GDP.

Regulatory EfficiencyView Methodology

The overall regulatory environment is efficient and transparent. With the cost of establishing a company reduced, starting a business takes less than five days and procedures. Employment regulations have gradually become less burdensome, but the nonsalary cost of hiring a worker remains high. The center-right federal government has focused on improving public finances (for example, by cutting subsidies on diesel fuel in 2016).

Open MarketsView Methodology

Trade is extremely important to Belgium’s economy; the value of exports and imports taken together equals 167 percent of GDP. The average applied tariff rate is 1.5 percent, and there are relatively few barriers to trade and investment. Since the financial crisis that resulted in the restructuring of Dexia and Fortis banks, the banking sector has become smaller. However, it has recovered its resilience, and the number of nonperforming loans remains low.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.50.5
2Estonia79.11.9
3Ireland76.7-0.6
4United Kingdom76.40.0
5Georgia763.4
6Luxembourg75.92.0
7The Netherlands75.81.2
8Lithuania75.80.6
9Denmark75.1-0.2
10Sweden74.92.9
11Latvia74.84.4
12Iceland74.41.1
13Finland741.4
14Norway743.2
15Germany73.8-0.6
16Czech Republic73.30.1
17Austria72.30.6
18Macedonia70.73.2
19Armenia70.33.3
20Romania69.74.1
21Poland68.3-1.0
22Kosovo67.96.5
23Bulgaria67.92.0
24Cyprus67.9-0.8
25Belgium67.8-0.6
26Malta67.71.0
27Hungary 65.8-0.2
28Slovakia65.7-0.9
29Turkey65.23.1
30Albania64.4-1.5
31Spain63.6-4.9
32France63.31.0
33Portugal62.6-2.5
34Italy62.51.3
35Montenegro62-2.9
36Bosnia and Herzegovina60.21.6
37Croatia59.40.3
38Slovenia59.2-1.4
39Serbia 58.9-3.2
40Belarus58.69.8
41Moldova580.6
42Russia57.16.5
43Greece551.8
44Ukraine48.11.3
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