Belgium Central Bank Statement

Author: IFLR Correspondent | Published: 24 Sep 2019
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A phase of expanding economic activity that has been underway for the last five years and a whole host of different economic policy measures, have helped strengthen the fundamentals of the Belgian economy. The widening of the employment base, on the back of a great deal of job creation, the extension of working life and the strengthening of the situation in the financial sector are examples of significant progress in this respect.

The risks and uncertainty weighing on the international economy nevertheless intensified considerably in 2019 and economic activity and international trade have decelerated. At the same time, while the impact of population ageing is becoming increasingly evident, a general sentiment of losing control and being left behind is emerging among some segments of the population, in response to technological change, globalisation and the challenge of climate change.

The Eurosystem's monetary policy, which is likely to remain accommodating for some time yet, could, to a certain extent, have a moderating influence in the face of an economic slowdown. However, it cannot remove every risk and it provides no answers to the structural challenges.

In this context, the next few years must be used proactively to build up the resilience of the economy and its growth potential. This will involve making sure of a stable and durable outlook on the macroeconomic, fiscal and financial fronts, so that individuals and companies alike can make informed decisions on long-term commitments. The context in which the economy turns must also foster dynamism and a capacity to adjust among all the different economic stakeholders – companies and individuals alike.

There is, of course, no miracle solution for fulfilling this ambition but the actions of all the various policymakers must point in this direction. In my view, the most important lines of action for Belgium should comprise three aspects.

First, is getting more people onto the labour market and keeping them there. This should be done by optimising the financial incentive to work and aligning wage developments with local and sector labour market conditions, but also by greater efforts in education, skills and lifelong learning. This can help boost the economy's production capacity at the same time as achieving wider social inclusion.

Second, is revitalising productivity gains, as their sharp slowdown is compromising income growth and the long-term sustainability of the social model. What is needed is to encourage wider diffusion of innovation potential, currently concentrated in the hands of a small number of top-performing firms and sectors.

Third is boosting the economy's agility to enable a smoother and more efficient allocation of human capital and physical and financial capital to the most promising activities.

Consolidation of public finances is key to speeding up debt reduction and improving the economy's resilience in bad economic times. Consolidation must follow the guiding principle of a quest for efficiency in all aspects of government action – whether it is public spending, and not least infrastructure investment, or taxation or regulations – so as to maximise its contribution to the growth potential and put in place conditions conducive to an efficient energy and environmental transition.

Essentially, even in a globalised world subject to rapid technological innovation, national authorities' ability to decide on and implement appropriate policies can make a difference for our fellow citizens, offering them the opportunity to reap the fruits of economic development. A shining example of this comes from the small open economies in the EU, such as the Nordic countries.