Wallonia is often compared to Flanders. For a long time now, Wallonia has had lower levels of GDP per capita and income per capita than Flanders and enjoyed weaker growth. These trends result from many factors, including geography, history, and the actions, particularly the political actions, of economic agents.

The NBB has produced a new analysis that broadens the scope of comparison and focuses on regions at similar stages of development. In particular, the economic performance, structural competitiveness, and level of well-being of Wallonia are measured against those of similar regions in countries that were members of the European Union before the major enlargement of 2004 (the so-called “EU15”). More specifically, Wallonia and its provinces are compared to so-called “NUTS2” ^[1]regions: These are used for the distribution of EU Cohesion Policy funds, with regions further classified by their level of economic development - as determined by their GDP per capita relative to the EU27 average over the 2015-2017 period.

• The provinces of Hainaut, Liège and Namur are classified as "transition regions", given that their GDP per capita was between 75% and 100% of the EU27 average. They are therefore compared with other transition regions, as is the province of Luxembourg, whose GDP per capita fell just short of the 75% threshold.
• Walloon Brabant is classified as a "more-developed region" for EU Cohesion Policy funding. In fact, it was the EU15 region with the highest GDP per capita growth between 1996-2019, and for the purposes of this analysis, it was therefore classified in a more restrictive category of "high-performing" regions.
• As an entity itself, Wallonia is considered to be a transition region.

In western Europe, economic rebounds are infrequent, take a long time and require considerable effort. Between 2001 and 2019, no transition region was upgraded to the more developed region category, while many were downgraded. Stagnation or relative decline is not confined to the Walloon provinces.

The new NBB comparative analysis shows that Wallonia has many strengths in terms of structural competitiveness relative to other transition regions. It has access to a large and rich potential market, has a large pool of people with higher education qualifications, and benefits from good accessibility thanks to its infrastructure. In addition, its (working age) population has grown steadily since 1996 and is relatively young. Its economic structure is service-oriented, and Wallonia scores rather well in terms of innovation. It also still has land available to accommodate businesses.

Nevertheless, there are still a number of challenges to be met which constitute priority areas for economic policy:

Wallonia's main structural weaknesses lie in social variables such as health, the risk of poverty or social exclusion and the labour market, all of which are interlinked. The employment rate, although rising, remains low, mainly due to the large proportion of inactive people. Activation policies are therefore essential to combatting the mismatch between labour supply and demand and to curb the already substantial labour shortages in many sectors. This is all the more important given that, as a result of ageing, the working-age population is set to decline from 2025 onwards.

Education and lifelong learning merit particular attention in view of the poor scores of French-speaking pupils in international comparisons regarding mathematics, science, and reading literacy; the wide differences between schools in the region; the relatively high numbers of early school leavers which tends to result in a more adults not being in work, education, or training; the high proportion of adults with at most lower secondary education; and the relatively poorer command of English and digital skills among Walloon adults.

Productivity gains were relatively limited over the 1996-2019 period, with the notable exception of Walloon Brabant. The other Walloon provinces are less dependent upon industry, with non-retail services accounting for a much higher - and growing - share of employment. To boost productivity, improving human capital will be essential to ensuring a sufficient supply of skilled labour. The dual transition - green and digital - also demands new skills. In addition, private and public investment is needed to improve the quality of existing transport infrastructure and develop new infrastructure. The spread of innovation beyond large, innovative and productive companies should also help to boost productivity.

These challenges must be met if Wallonia is to make the most of its assets – this at a time when credit rating agencies judge the finances of Belgium’s regions and communities less favourably than those of the French regions and German Länder. The budgetary trajectory recommended by the External Commission on Debt and Public Finance should therefore be fully implemented and adjusted as necessary. The fiscal sustainability of the French Community must also be assured.

^{[1] NUTS2 regions are those at the second level of the nomenclature of territorial units for statistics (NUTS). They correspond, for example, to the provinces of Belgium and the Netherlands, the regions of Italy, the autonomous communities of Spain, and the pre-2016 regions of France.}