The International Monetary Fund (IMF) has concluded its Article IV mission to Belgium, issuing a statement on the country's economic situation and future prospects. The IMF staff's findings highlight that while Belgium's economy has shown resilience to various shocks, growth has decelerated and disinflation efforts have encountered obstacles.
"The Belgian economy has been resilient to a series of shocks, but growth has slowed, and disinflation has faced headwinds," the statement notes. It also points out that "the labor market has been strong but shows signs of cooling," with labor-cost competitiveness declining due to wage growth surpassing productivity gains.
The IMF projects stable growth for 2025, estimating an output increase of 1.1 percent, with inflation expected to gradually return to target levels. However, it warns of significant risks that could impact these projections, including geoeconomic tensions and energy price fluctuations.
Fiscal sustainability is a concern for Belgium, as pressures from an aging population could further elevate the fiscal deficit and public debt. The IMF stresses the need for substantial fiscal consolidation to address structural deficits exacerbated by recent crises. "Significant fiscal consolidation is needed to address large structural deficits and rising public debt," it states.
The report suggests reforms in several areas, including rationalizing current spending while preserving public investment. It emphasizes the importance of pension reforms to manage costs associated with an aging population and recommends tax reforms aimed at shifting the burden from labor to capital without losing revenue.
Labor market reforms are deemed essential by the IMF to enhance efficiency and competitiveness. The statement calls for changes in wage-setting mechanisms and educational reforms to better align skills with market needs.
In terms of financial stability, systemic risks remain moderate but evolving due to changing conditions. The IMF advises maintaining capital buffers and prudential limits on residential mortgages while implementing recommendations from the 2023 Financial Stability Assessment Program.
The report also highlights the need for continued efforts towards climate objectives through coordinated national strategies involving federal and regional governments.
Overall, the IMF acknowledges Belgium's resilience but underscores the necessity for policy adjustments across various sectors to ensure sustainable economic growth and stability in the coming years.