At the beginning of March it will be one year since our lives and our economy were put under a bell. Economically, this is the biggest crisis since the Second World War. The economy shrank almost unprecedentedly last year and the recovery was and continues to be blocked by the flare-ups of the pandemic.
To limit the damage to citizens and businesses, our federal and regional governments have significantly increased their expenditure. And with favorable results. Thanks to government action, unemployment will hardly increase and disposable income will remain at the same level. Of course, this does not alter the fact that some sectors and certain companies or individuals have been very seriously affected.
The current massive support measures are fully justified, even in the longer term, despite the strong impact on the budgetary situation and global public debt. Because severe economic crises leave lasting scars and permanently reduce the growth path of the economy. Economically speaking, you lose a few years every time you go through a recession. It is therefore important to minimize the impact of the recession with temporary expenditure in order to lose as few years as possible.
This is certainly important for Belgium. The aging wave that is now rapidly approaching has long required a significant increase in growth and productivity. The pandemic and the resulting economic crisis make future financial challenges such as pension affordability even more pressing. Wealth building is slower due to the pandemic while the challenges remain unchanged. Restarting our economy and structurally and sustainably renewing it becomes all the more necessary and urgent. The pandemic is creating a burning platform for reforms and investments.
A first step towards a recovery is currently being taken thanks to Europe. Belgium will receive a budget of almost 6 billion to finance real investments and structural reforms. But if you consider that our country has invested far too little for decades, it is clear that at least ten times this amount is needed. The total amount of projects under the recovery plan confirms this.
However, the European plan can only be a starting point. A long, sustained investment effort must follow. And therein lies one of the big challenges. Making a choice for real investments, as defined in the European plan, requires a number of fundamental changes. It requires, among other things, that the government partly reconsiders its decades-long preference for consumer spending to the detriment of investments, but it also requires a stimulating framework for entrepreneurship and private investments. This also implies the effective implementation of structural reforms as requested by Europe or the OECD. A one-off injection of several billion euros without a “makeover” of our corporate framework is only half a shot in the water.
- Geert Gielens, Director Economic Affairs Febelfin