Toward a Growth-Friendly Fiscal Consolidation in Belgium

Abstract

Belgium faces two main fiscal challenges that call for a durable fiscal consolidation. First, at above 105 percent of GDP, public debt creates vulnerabilities. Second, the aging population and early access to pension benefits will lead in the medium term to significant fiscal costs. To address these challenges, the government plans to achieve a balanced budget (both headline and structural) by 2018. The purpose of this paper is to assess whether government plans meet the objectives of growth-friendly and sustainable adjustment. It is organized as follows. The first section describes Belgium’s record of fiscal consolidation. The second section highlights the features of a high quality fiscal consolidation in Belgium. The third section analyzes the implications of decentralization for fiscal consolidation.

Keywords: Belgium, fiscal policy, expenditure-based consolidation

JEL Classification: E62