Assessing the impact of two Belgian specificities on competitiveness and purchasing power when an energy shock hits

When facing strong and persistent imported energy price shock, the Belgian economy is weakened by two structural features. First, the transmission of wholesale energy prices to the consumer is quicker and stronger than in the rest of the euro area, as measured by the energy subcomponent of the HICP. Second, Belgium is one of the three small economies of the euro area indexing automatically wages to price inflation. The latter characteristic is supposed to shield (at least partially) workers from the more pronounced loss in purchasing power induced by the first one. However, this is at the cost of a loss of competitiveness. We propose to disentangle the respective effects of each of these Belgian particularities by using a macroeconomic modelling of the Belgian economy within the euro area and proceeding to counterfactual analysis.