March 6, 2018

Dutch economy outperforms that of the eurozone

The Dutch economy is gathering steam. With growth figures of 3.2% (this year) and 2.7% (in 2019), the Dutch economy will outperform the eurozone by on average 0.6 percentage point, per year. Unemployment is rapidly decreasing to its lowest level since 2001. The economic boom, however, will hardly affect the budgeting balance — mostly as a result of higher government spending. Because of the uncertainties, the projections could not take into account any future decision-making on extractions from the Groningerveld natural gas field. This is concluded by CPB Netherlands Bureau for Economic Policy Analysis in its Central Economic Plan 2018 (CEP).
  2017 2018 2019
Gross domestic product (GDP): continued growth 3.1 3.2 2.7
Inflation (HICP) on the rise 1.3 1.6 2.3
Purchasing power (median, static) rises in 2019 0.3 0.6 1.6
Unemployment (% labour force) falls down 4.9 3.9 3.5
EMU balance does not improve, compared to 2017 1.1 0.7 0.9
EMU debt (ultimo year): steady decline 56.0 52.1 48.4


Unemployment is decreasing rapidly to 3.9% this year, and 3.5% in 2019.  The strong growth in employment can easily absorb new entrants into the labour market. Companies offer permanent labour contracts more often, and pay higher wages to either attract or hold on to staff. Rising labour costs and an increase in the low VAT tariff will cause inflation to increase to 2.3% in 2019. Nevertheless, median purchasing power will improve by 1.6% in 2019, because of the higher wages and lower income taxes. 

The Dutch economic boom is the result of the favourable international economy, lower interest rates, an expansive budgetary policy, and a persistently strong housing market. These last two factors distinguish the Netherlands from other countries. The projections take a mild Brexit scenario into account in which a trade agreement is reached. However, negative consequences for the economy may increase, substantially, under a chaotic Brexit or in case of a disappointing negotiation result.

The government balance is not projected to improve, despite the booming economy. Last year, the surplus was 1.1% of GDP; it will be 0.7% this year and 0.9% in 2019. The already flourishing economy will be stimulated even further by increased spending on education and defence, and the rising expenditure on health care.   

In addition to their focus on the latest economic figures, CPB also points to the limitations of purchasing power trends. Static purchasing power trends may provide insight into the general significance of economy and policy for Dutch citizens, but CPB warns that these trends are less suitable to be translated into personal spending opportunities. Policy may change the distribution range of income, but predicting it down to the smallest detail would ignore the uncertainty that is inextricably linked to projections. The full report, the Central Economic Plan 2018, is to be published on 22 March. It will include the same figures as those presented today.


Suzanne van Gils
Dick Morks