Dutch economy to post strongest growth in a decade

Press release Date 12 June 2017

Economic growth in the Netherlands is expected to peak at 2.5% in 2017, a growth rate not seen since 2007. The next two years are also likely to show robust growth, at 2.1% and 1.9%, respectively. Economic growth is broadly based and supported by all expenditure categories. The Dutch budget surplus will benefit, edging up throughout the projection horizon, from 0.4% of GDP in 2016 to 1.1% of GDP in 2019. Unemployment is set to fall to 5.0% in 2017, declining further to 4.4% by 2019. This is evident from the new half-yearly forecast that De Nederlandsche Bank (DNB) published today.

Growth remains elevated in the years ahead, fuelling a sustained budget surplus 2017 is the fifth consecutive year in which growth in gross domestic product (GDP) is up from the year before. The strong economic performance seen in 2017 is driven by factors such as the pick-up in world trade and the recovery of corporate investment. GDP growth exceeds potential growth across the entire projection horizon, thereby closing the output gap, narrowing it from-3% on average in the 2013-2016 period to 0% in 2019. This means we expect the Dutch economy to perform at full potential by 2019. Over the projection horizon, the budget surplus of 0.4% of GDP in 2016 will edge up, to reach 1.1% of GDP by 2019. This will be mainly attributable to higher revenues from income tax, corporation tax, and VAT. Government debt will fall sharply, by over 10 percentage points, to 51.3% of GDP in 2019 from 62.3% of GDP in 2016, putting it well below the European debt threshold of 60% of GDP. The bright budget outlook will allow a new cabinet to create a buffer to draw on in more difficult times. Chart 1 Gross domestic product in the Netherlands Volume; 2008 = 100; year-on-year percentage change

Labour market recovery does not yet cause wage pressures Unemployment is set to drop to 4.4% of the labour force by 2019, representing nearly 400,000 people. The unemployment rate is set to fall at a slower pace during the projection years than in 2016, despite the sharp employment growth seen in 2017. This is because more people are willing to work, as those previously not active in the labour market are attracted by the more favourable prospects of finding a job. So far, the Dutch labour market is not characterised by overall tightness. Growing demand for labour can also be met from other categories of people than the registered unemployed alone, notably part-time workers seeking to work more hours. This is a key factor in the current absence of wage pressure. Chart 2 Supply and demand in the Dutch labour market Year-on-year percentage change; percentage of labour market