The Dutch growth potential in the medium term
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.