The National Recovery and Resilience Plan details the use of the €5.925 billion allocated under the Recovery and Resilience Facility. The major part (88%) of the Belgian plan is directly intended to increase the capital stock of the Belgian economy through public investment and aid to private investment. In the short term, at the peak of the plan's stimulus effect, economic activity would be 0.2% higher than in the non-plan scenario. Although the stimulus is temporary, it has long-term effects due to the increase in the public capital stock and the support for R&D activities that improve the profitability of the capital stock of firms and encourage its accumulation. By 2040, GDP is still projected to be 0.1% above non-plan growth path. This estimate does not take into account the reform component of the plan, nor the broader recovery, investment and reform plans announced by the Regions and the federal government, nor the effect of foreign plans on the Belgian economy.
The European Union is making €5.925 billion available to Belgium over the 2021-2026 period under the NextGenerationEU Recovery and Resilience Facility. In order to benefit from this, Belgium has drawn up a plan which includes a few hundred investment projects along with reform projects. The plan is organised into thematic axes entitled "climate, sustainability and innovation", "digital transformation", "mobility", "social inclusion and community" and "economy of the future and productivity". Only the investment component is taken into account in this quantitative analysis; reforms without a fiscal impulse have not been taken into account in the simulations.
Upon examination, it emerges that a major part of the €5.925 billion, i.e. 88%, is actually being used to increase the capital stock of the Belgian economy. Of this 88%, two thirds will be invested in tangible fixed assets, including - but not limited to - construction and civil engineering. One third will be invested in intangible fixed assets, almost half of which will be invested in R&D. Of this 88%, more than half will be the result of direct government investment with the remaining investments coming from the business sector and, to a lesser extent, households and NPIs, financed by the government with the European grant.
Investment increases economic activity in the short term by stimulating aggregate demand, and in the long term by increasing aggregate supply.
At the peak of the stimulus effect, economic activity (GDP) would be 0.2% higher than in the non-plan scenario. The additional volume of work would correspond to almost 4,000 jobs, taking into account a positive effect on productivity. The maximum stimulus effect would be achieved in the plan's second year according to its indicative implementation schedule. The recovery is somewhat diminished by the fact that some of the investment is import driven. The recovery has a positive impact on public finances; by 2026, government debt would be reduced by 0.5% of GDP compared to a non-plan scenario.
The plan's stimulus effects are reinforced by supply effects: the increase in public capital stock and the encouragement of R&D activities improve the profitability of the capital stock of firms, stimulating its accumulation. In 2030, GDP is projected to be 0.2% above the non-plan growth path as labour productivity and the external competitiveness of the economy improve. This positive effect gradually fades over the following ten years. In 2040, the effect on GDP is 0.1%, corresponding to the creation of 1,000 jobs and a reduction of almost 1% in the debt expressed as a percentage of GDP.
These effects on GDP, employment and public finances may seem modest, but it is important to remember that the reform component is not included in the quantitative assessment and that the European grant of €5.925 billion represents only 0.2% of GDP over the 2021-2026 period. Public and private co-financing from own resources could be added to this. In addition, broader recovery, investment and reform plans announced by the Regions and the federal government could multiply the impact of the European €5.925 billion. Finally, other countries will benefit from the European Recovery and Resilience Facility, sometimes to a much greater extent than Belgium, and large countries outside Europe are also embarking on recovery programmes. As a small open economy, Belgium could benefit significantly through its exports.