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- GDP (PPP):
- $413.3 billion
- 1.9% growth
- 1.0% 5-year compound annual growth
- $37,737 per capita
- Inflation (CPI):
- FDI Inflow:
Belgium’s economic freedom score is 69.2, making its economy the 40th freest in the 2013 Index. Its overall score has increased by 0.2 point from last year, primarily reflecting notable improvements in freedom from corruption and the management of public spending that counterbalance declines in labor freedom and monetary freedom. Belgium is ranked 18th among the 43 countries in the Europe region, and its overall score is above the regional and global averages.
Continued strong protection of the rule of law and the foundations of economic freedom is reflected in Belgium’s high scores in property rights and freedom from corruption. These institutional strengths, however, are not matched by commitment to the principle of limited government. Expansionary public spending has generated significant budgetary pressure. With government debt nearing 100 percent of GDP, reducing the chronic deficit needs to be a high priority.
The global financial crisis has caused a sharp economic slowdown in Belgium. In response to turmoil in the banking sector and the subsequent contraction in overall economic activity, the government has stepped in to support the financial system and implement a fiscal stimulus package. However, the economic recovery that began in mid-2009 has been uneven, and structural weaknesses that include a rigid labor market and high taxation continue to hinder international competitiveness.
Belgium is a federal state consisting of three culturally different regions: Flanders, Wallonia, and the capital city of Brussels, which is home to NATO and the European Union. In April 2010, an electoral dispute between the Francophone and Flemish parties led to the collapse of the coalition government. New elections in June 2010 produced a fragmented political situation that stalled the formation of a government. After 541 days without a government (by some accounts a world record), negotiations to form a new government were finally completed in December 2011, and Socialist Party member Elio Di Rupo was sworn in as prime minister. Services account for 75 percent of economic activity. Leading exports are electrical equipment, vehicles, diamonds, and chemicals.
Laws are well codified, and the judicial system is generally respected, but the courts can be slow in practice. Similarly, intellectual property rights and contracts are generally secure, although enforcement actions can be protracted. Corruption is minimal, and the government prohibits and punishes all forms of bribery.
The top income tax rate is 50 percent, and the top corporate tax rate is effectively 34 percent. Other taxes include a value-added tax (VAT) and an estate tax. The overall tax burden amounts to 43.8 percent of total domestic income. Government spending has leveled off at 53.4 percent of total domestic output, but budget deficits over 4 percent have caused public debt to reach levels equivalent to about 100 percent of GDP.
The cost of establishing a company has been reduced to below 20 percent of the level of average annual income, 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. Inflation has been modest, but price-control policies continue to affect a range of products and services.
Belgium has low tariffs along with other members of the European Union, and non-tariff barriers are relatively low. With a few exceptions, the investment regime is largely open. The Financial Crisis Law passed in June 2010 grants the government stronger powers to step in during crises. Following the 2011 nationalization of the Belgian unit, uncertainty remains high with regard to Dexia, a Brussels-based Franco–Belgian bank.