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Quick Facts
- Population:
- GDP (PPP):
- $509.5 billion
- 1.4% growth
- 0.9% 5-year compound annual growth
- $45,047 per capita
- Unemployment:
- Inflation (CPI):
- FDI Inflow:
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Belgium’s economic freedom score is 67.5, making its economy the 52nd freest in the 2018 Index. Its overall score has decreased by 0.3 point, with declines in the scores for monetary freedom, labor freedom, and property rights offsetting improvements in the government spending and fiscal health indicators. Belgium is ranked 25th among 44 countries in the Europe region, and its overall score is below the regional average but well above the world average.
Generally friendly to free-market competition, Belgium’s economy has long benefited from openness to global trade and investment. Among notable reforms instituted since 2014 are measures to strengthen competitiveness and consolidate public finances. The government has also pledged to improve Belgium’s competitiveness through changes in tax policy, labor market rules, and welfare benefits. These changes have generally made Belgian wages more competitive regionally but risk worsening tensions with trade unions and triggering extended strikes.
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 2014 federal elections 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. The service sector accounts for a large portion of GDP. Terrorist attacks have cost the nation billions in additional security measures and in lost business and tax revenue. The continued threat of new attacks further injures the vital tourism industry.
Property rights are well protected by law. Laws are clearly codified, and the independent judicial system functions professionally, albeit slowly at times. Enforcement actions to protect intellectual property rights can be protracted. Corruption is relatively rare, and efforts to address underlying fiscal and competitiveness weaknesses should further reduce opportunities for rent-seeking. The government prohibits and punishes bribery.
The top income tax rate is 50 percent, and the top corporate tax rate is 33 percent. Other taxes include value-added and estate taxes. The overall tax burden equals 44.8 percent of total domestic income. Over the past three years, government spending has amounted to 54.1 percent of total output (GDP), and budget deficits have averaged 2.8 percent of GDP. Public debt is equivalent to 105.5 percent of GDP.
The overall regulatory environment is efficient and transparent. The business registration process can be completed within one week. Unemployment among skilled workers is low. Non–European Union nationals must apply for work permits before they can be employed. Minimum wages vary according to worker age and responsibility level, and firing an employee can be very expensive.
Trade is extremely important to Belgium’s economy; the combined value of exports and imports equals 167 percent of GDP. The average applied tariff rate is 1.6 percent. Nontariff barriers impede some trade. In general, government policies do not significantly interfere with foreign investment. The financial system remains relatively stable, but the banking sector has undergone restructuring and is now smaller than it was.