19. THE NETHERLANDS
Recovery on track despite some easing of momentum
The economy of the Netherlands likely grew by 2% in 2015, twice as fast as the year before. Forwardlooking indicators suggest that the recovery will continue, with growth forecast at 2.1% in 2016 and
2.3% in 2017. Tax measures are expected to fuel domestic demand but lower gas production levels
should weigh on both industrial output and public finances.
Strong domestic demand growth in 2015
In 2015, economic growth is estimated to have
reached 2.0%, thanks in large part to a strong
performance of domestic demand (excluding
inventories) of 2.4 pps. Domestic demand thrived
on the back of an improving housing market,
which led to a jump of investment in housing and
construction. With other investment categories also
showing robust growth, total investment is
expected to have provided a GDP growth
contribution of 1.8 pps. Private consumption is
slowly recovering from a relatively steep fall after
the crisis and is expected to have provided a
positive growth contribution of 0.6 pps. in 2015.
Net exports are likely to have provided only a
minimal positive contribution to GDP growth,
whereas disinvestment in inventories is expected to
have detracted from GDP growth.
Consumption growth expected to accelerate
Private consumption is set to accelerate in 2016 as
the domestic cycle matures. Rising wage growth
and steady employment growth are expected to
bolster household income. This is further
stimulated by large tax cuts and recent pension
reforms, leading to higher disposable household
income and lower compulsory savings. All in all,
consumption growth is expected to increase from
1.7% to 2.2% in 2016 and 2.3% in 2017. The
household saving rate is expected to stabilise in
2016 around 15% of gross disposable income,
before declining in 2017 to 14%.
The 2016 investment outlook is shaped by
international uncertainties
Investment growth is expected to moderate from
the brisk rates recorded in 2015 as the housing
market recovery is expected to slow, leading to
less dynamic investment in construction and
housing. Relatively healthy export growth and the
better domestic economic environment should
continue to fuel investment in equipment, albeit at
a slower pace than in 2015. Above all, the external
uncertainties surrounding the investment forecast
102
are large; lower growth in export markets, for
example, could lead some investment to be
postponed.
4
Graph II.19.1: The Netherlands - Real GDP growth
and contributions
pps.
% of pot. GDP
forecast
2
2
1
0
0
-1
-2
-2
-4
-3
-6
-4
08
09
10
11
12
Output gap (rhs)
Inventories
Gov. consumpt.
Real GDP (y-o-y%)
13
14
15
16
17
Net exports
HH consumpt.
GFCF
External surplus to remain high
Import growth is expected to outstrip export
growth throughout the forecast horizon, leading to
a negative contribution of net exports to GDP
growth on average. However, the current account
surplus is expected to remain elevated at around
10% of GDP in 2016, and to narrow only
moderately thereafter.
Slow labour market recovery
Labour market conditions have improved
markedly over the course of 2015 despite
economic growth waning in the second half of the
year. Over the course of 2015, total employment
grew by 0.9%. Rising vacancy numbers continue
to signal a recovery in labour demand.
Nevertheless, the number of vacancies is growing
relatively slowly and stands well below pre-crisis
levels, which suggests a lacklustre labour market
recovery. Employment is expected to increase only
slightly more than the growth of the labour force,
so the unemployment rate looks set to remain
above 6% throughout the forecast horizon. Recent
migration flows are unlikely to impact the labour
market significantly in the forecast, as current
Member States, The Netherlands
regulations limit labour participation during the
application process for residence and work
permits.
to safety concerns. This is expected to reduce
government revenues by 0.1% of GDP in 2015 and
by 0.3% in both 2016 and 2017. Second, the
government has implemented a large tax-stimulus
package (EUR 5 billion, 0.7% of GDP) in 2016,
which will have an immediate revenue-lowering
effect over the entire forecast horizon. Since the
2015 autumn forecast, the government has freed
resources for covering the costs of refugees. In
total, the relevant budgets have been increased by
EUR 350 million in 2015 and by almost EUR 500
million in 2016. As these expenditures fall under
strict expenditure ceilings, with mandatory
compensating measures having been taken
elsewhere, the direct impact on the budget deficit
is expected to be minimal.
Inflation is expected to bottom out
HICP inflation is estimated to have reached 0.2%
in 2015, 0.1 pps. lower than in 2014. Although oil
prices are expected to remain very low for some
time, a gradual increase in the headline rate of
inflation is expected for 2016 and 2017. This
should come from a pick-up in public and private
sector wage growth and a swift closure of the
output gap, leading to positive domestic price
pressures. Moreover, strong and relatively stable
core inflation indicates limited second round
effects from low inflation, while base effects
linked to energy prices are expected to cause
volatility in headline inflation in 2016.
All in all, the general government deficit is
expected to turn out at 2.2% of GDP in 2015, and
to decline to 1.8% of GDP in 2016 and 1.5% of
GDP in 2017. The structural deficit is expected to
deteriorate by ½ pps. in 2016, after which it is
expected to stabilise in 2017. The sale of financial
assets and expected positive nominal GDP growth
has improved the outlook for the debt-to-GDP
ratio, which is expected to have reached 66.8% in
2015, and is set to decline to 66.2% in 2016 and
65.1% in 2017.
Slow improvement in headline deficit
Although the budgetary situation of the
Netherlands is improving on the back of relatively
strong growth in the tax base, several distinct
factors are expected to worsen the fiscal outlook.
First, the Dutch authorities have further reduced
the production ceiling for natural gas in the
Groningen field, as recurring earthquakes have led
Table II.19.1:
Main features of country forecast - NETHERLANDS
2014
bn EUR
GDP
Private Consumption
Public Consumption
Gross fixed capital formation
of which: equipment
Exports (goods and services)
Imports (goods and services)
GNI (GDP deflator)
Contribution to GDP growth:
Annual percentage change
Curr. prices
% GDP
96-11
2012
2013
2014
2015
2016
2017
662.8
100.0
2.3
-1.1
-0.5
1.0
2.0
2.1
2.3
296.1
44.7
1.8
-1.2
-1.4
0.0
1.6
2.2
2.2
171.2
25.8
2.8
-1.3
0.1
0.3
0.1
0.9
1.0
120.4
18.2
2.1
-6.3
-4.4
3.5
9.1
4.6
4.7
34.1
5.1
3.4
-5.0
-4.0
0.9
9.4
5.7
5.2
549.4
82.9
4.9
3.8
2.1
4.0
4.6
4.3
4.7
473.8
71.5
5.1
2.7
0.9
4.0
5.3
5.7
5.3
671.1
101.3
2.3
-0.8
-0.6
0.3
1.9
2.0
2.2
2.0
-2.1
-1.4
0.7
2.4
2.1
2.1
0.0
0.0
-0.2
-0.1
-0.4
0.4
0.1
0.2
1.1
1.1
0.5
0.0
-0.5
0.1
1.0
-0.6
-0.8
-0.3
0.9
1.0
1.0
4.9
5.8
7.3
7.4
6.9
6.6
6.4
3.1
2.5
1.8
2.2
0.3
2.1
2.3
1.9
2.9
1.5
0.8
-0.8
1.0
1.0
-0.1
1.5
0.1
0.0
-1.4
-0.2
-0.6
13.2
13.8
14.2
14.8
14.8
15.1
14.1
2.0
1.4
1.4
0.8
0.6
1.2
1.6
2.1
2.8
2.6
0.3
0.2
0.9
1.5
0.2
-0.2
0.7
0.9
1.5
0.2
-0.3
8.4
11.0
11.8
12.0
11.8
11.1
10.8
6.6
10.2
11.0
10.6
10.4
9.9
9.4
6.3
9.2
10.7
10.7
10.3
9.4
8.9
-1.4
-3.9
-2.4
-2.4
-2.2
-1.8
-1.5
-1.8
Domestic demand
Inventories
Net exports
Employment
Unemployment rate (a)
Compensation of employees / f.t.e.
Unit labour costs whole economy
Real unit labour cost
Saving rate of households (b)
GDP deflator
Harmonised index of consumer prices
Terms of trade goods
Trade balance (goods) (c)
Current-account balance (c)
Net lending (+) or borrowing (-) vis-a-vis ROW (c)
General government balance (c)
Cyclically-adjusted budget balance (d)
Structural budget balance (d)
General government gross debt (c)
-1.2
-2.3
-0.4
-0.7 -
-1.2
-1.5
-
-2.3
-1.0
-0.6 -
-1.2
-1.7
-1.8
54.5
66.4
67.9
68.2
66.8
66.2
65.1
(a) as % of total labour force. (b) gross saving divided by gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.
103