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- GDP (PPP):
- $422.8 billion
- 0.2% growth
- 0.3% 5-year compound annual growth
- $37,881 per capita
- Inflation (CPI):
- FDI Inflow:
Belgium’s economic freedom score is 68.8, making its economy the 40th freest in the 2015 Index. Its overall score has decreased by 1.1 points from last year, with declines in labor freedom, the management of public spending, and fiscal freedom outweighing improvements in monetary freedom, business freedom, and freedom from corruption. Belgium is ranked 18th among the 43 countries in the Europe region, and its overall score is above the regional and global averages.
Over the past five years, Belgium’s economic freedom score has slipped by 1.4 points, moving the country further away from the rank of “mostly free” that it last achieved in 2011. Long-term declines in four of the 10 economic freedoms, including the management of public spending, business freedom, labor freedom, and monetary freedom, have caused this deterioration. In particular, Belgium’s government spending score has declined by nearly 15 points.
Policy responses during and after the eurozone financial crisis have exacerbated long-term structural weaknesses. A rigid labor market and high taxation have undermined any broad-based recovery, and government spending has increased substantially, pushing public debt close to the size of the economy. Labor market reforms and fiscal prudence must be at the top of the policy agenda in order to secure broad-based economic freedom and growth.
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. In October 2011, an electoral reform package was adopted with the aim of avoiding a situation similar to the one that occurred when the country went 541 days without forming a government after the 2010 elections. The first federal elections under these reforms were in May 2014. Bart De Wever’s center-right New Flemish Alliance won a plurality but not a majority. Services account for 75 percent of economic activity. Leading exports are electrical equipment, vehicles, diamonds, and chemicals.
Notwithstanding ongoing political difficulties between the two linguistic communities, corruption remains minimal in Belgium. The government prohibits and punishes all forms of bribery. Property rights are well protected by law. Laws are well-codified, and the judicial system is generally respected, but the courts can be slow. Enforcement actions to protect intellectual property rights can be protracted.
Belgium’s top individual income tax rate is 50 percent, and its top corporate income tax rate is 33 percent. Other taxes include a value-added tax and an estate tax. The overall tax burden equals 45.3 percent of gross domestic product. Government spending is equivalent to 54.7 percent of the domestic economy, and public debt is approaching nearly 100 percent of GDP.
The overall regulatory environment is efficient and transparent. The cost of establishing a company has been reduced, and starting a business takes only three days and four procedures. Although employment regulations have become less burdensome, the non-salary cost of hiring a worker remains high. The state controls the prices of a wide range of fuels and other items and spends almost 1 percent of GDP on coal subsidies.
EU members have a 1.0 percent average tariff rate. Although some non-tariff barriers exist, the EU is relatively open to external trade. Foreign and domestic investors are generally treated equally in Belgium. The financial sector remains vibrant and generally free from government involvement. Some institutions received bailouts during the economic slowdown, and the recently passed Financial Crisis Law grants the state stronger powers during crises.