The Dutch growth potential in the medium term
Trendmatige groei 2,5% per jaar tot 2006
An analysis of Dutch growth potential using the production function method shows that growth of potential GDP slows down from an annual average rate of 3,2% in 1996-2001 to an estimated 2¾% per year in 2002-2006. The growth in labour productivity is expected to accelerate because of an anticipated increase in capital intensity in 2002-2006 as opposed to a decrease in 1996-2001. But on current policies the equilibrium rate of unemployment will fall no further and the structural growth of labour supply decreases from 1,8% per year in 1996-2001 to 1,1% per year in 2002-2006. The net result is a slowdown in the rate of growth of potential GDP.
Given the positive output gap in 2001 and the assumption of a cyclically neutral 2006, trend growth is estimated at 2½% per year for 2002-2006 and 2003-2006. The Social Economic Council advised to use a prudent trend scenario as a baseline for the next cabinet term (2003-2006). Considering the uncertainty margin of ±0,4 percentage points for the growth in potential GDP in the present analysis, a prudent trend scenario could be set at an annual rate of 2¼%.
This publication is in Dutch.