Explosion of energy prices, increase in labor costs: life is hard for companies. The Federation of Belgian Enterprises (FEB) warned on Friday of great economic difficulties if short and long-term reforms are not undertaken, particularly with regard to the wage indexation mechanism.
“We are clearly not in a ‘business as usual’ situation and the government must realize the seriousness of the situation“, proclaimed the president of the FEB, Pieter Timmermans. A FEB survey among the various economic sectors shows that the first half of 2023 may not be easy for companies. Many of them will have to renegotiate their energy contracts and large sectors will be subject to automatic wage indexation at the end of January. This mechanism for automatically adapting wages to the cost of living will increase the wages of a million workers by 11% at the start of the year. In this context, all the sectors surveyed foresee a drop in their profitability over the next six months, explained the chief economist of the FEB, Edward Roosens. Companies that had not yet passed on inflation to their selling prices will have to do so, further pushing inflation behind them and the price-wage spiral (rising prices lead to higher wages, which increases prices and so on, editor’s note).
A sharper than expected economic slowdown
As a result, the products of Belgian companies are less and less attractive, especially on the foreign market, a major problem for a “small open economy like ours“, underlined Pieter Timmermans. The FEB predicts a sharper economic slowdown than currently forecast by economic institutes. A recession between -0.5 and -1 in 2023 is likely, according to the employers’ federation. Despite this grim picture, it is “not yet too late“, noted Pieter Timmermans. The FEB asks the federal government not to impose additional costs on companies in 2023. The federation asks for a “competitiveness pacté” in order to reduce the Belgian wage handicap estimated at 5.7% by the Central Economic Council. This pact might include the continuation of the reduction of employers’ contributions by 7.07%, outlines the FEB.
Once once more, the federation pleaded for a revision of the wage indexation mechanism, through, for example, an index deferral coupled with a tax reduction for low wages.
Belgian
