Download PDF
Quick Facts
- Population:
- GDP (PPP):
- $550.5 billion
- 1.4% growth
- 1.5% 5-year compound annual growth
- $48,245 per capita
- Unemployment:
- Inflation (CPI):
- FDI Inflow:
Belgium’s economic freedom score is 68.9, making its economy the 48th freest in the 2020 Index. Its overall score has increased by 1.6 points, led by an increase in the government integrity score. Belgium is ranked 26th among 45 countries in the Europe region, and its overall score almost matches the regional average and is well above the world average.
Belgium’s economy has been trapped in the moderately free category for nearly a decade, having fallen from the mostly free rank it held earlier. GDP growth over the past five years has been similarly lackluster.
To return to the ranks of the mostly free, the government must rein in chronically high and unsustainable government spending. This would increase the prospects for successful implementation of its economic policy agenda, which is aimed at boosting job creation, strengthening competitiveness, and consolidating public finances.
Background
Belgium is a federal state with three culturally different regions: Flanders, Wallonia, and the capital city of Brussels, which hosts the headquarters of NATO and the European Union. Belgium held federal, regional, and European elections in May 2019. In the federal elections, the center-right New Flemish Alliance won the most seats in a fractured parliament. Coalition building is difficult because separatist Flemish parties gained in Flanders, and the Greens and far-left Workers’ Party of Belgium increased their support in Wallonia. Neighboring countries have a strong political and economic impact on Belgium. The services sector accounts for a large portion of GDP in the export-driven economy. Belgium boasts a dense network of rails and roadways and Europe’s second-busiest port, Antwerp.
Property rights are well protected by law, although property registration is cumbersome and enforcement of intellectual property rights can be protracted. Laws are well codified, and the independent judicial system functions professionally, albeit with a growing backlog of cases. Corruption is relatively rare in Belgium and is most serious in government procurement and public works contracting. Public officials can face heavy fines and imprisonment for corruption.
The top income tax rate is 50 percent, and the top corporate tax rate is 29 percent. Other taxes include value-added and estate taxes. The overall tax burden equals 44.6 percent of total domestic income. Government spending has amounted to 52.5 percent of the country’s output (GDP) over the past three years, and budget deficits have averaged 1.4 percent of GDP. Public debt is equivalent to 101.4 percent of GDP.
Access to credit has been strengthened by the new Pledge Law and the establishment of a unified and modern collateral registry. Resolution of insolvency has been made easier. Employment regulations have been loosened gradually since 2015 from their previous highly burdensome levels. Significant fragmentation of the labor market continues. In 2019, the parliament adopted a law aimed in part at further reducing subsidies granted to offshore wind electricity production.
The total value of exports and imports of goods and services equals 175.6 percent of GDP. The average trade-weighted applied tariff rate (common among EU members) is 1.8 percent, with 637 EU-mandated nontariff measures reportedly in force. The economy has long benefited from openness to foreign investment, and government policies are not a significant deterrent. The banking sector has undergone restructuring, and the overall financial system remains stable.