Until the mid-1990s Belgium and the Netherlands remained largely aligned in terms of output growth. However, since then they have shown a more divergent growth pattern as the Netherlands experienced a much more pronounced cycle than Belgium. There are three main explanations. 

• The Netherlands saw significant equity withdrawals from rising housing prices that only lessened as the real-estate
  market cooled down at the start of the new millennium, while the dynamic in the Belgian housing market has been much more modest and home equity withdrawal insignificant.

• The inflation pressures and labour market tensions that built up during the late 1990s in the Netherlands resulted in high nominal labour cost growth, a substantial loss in international competitiveness and the need for severe wage
  moderations in the ensuing years, which in turn reinforced the downward part of the cycle. In Belgium, the wage-setting institutions were more geared towards aligning wage developments to those of its neighbours, which prevented large swings in relative competitiveness.

• Economic policy was more accommodating in the Netherlands than in Belgium since inflationary pressures mean that real interest
  rates in the Netherlands were lower, implying a de facto more accommodating monetary stance.

Moreover, fiscal consolidation in Belgium in preparation of the adoption of the euro had a moderating effect on the cyclical upswing, whereas in the Netherlands fiscal policy was somewhat pro-cyclical.

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