RaboResearch - Economic Research

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Dutch economy in full bloom

Economic Update

  • First signs of economic growth this year are positive
  • Elderly workers still find it difficult to find a job
  • Government finances show further improvement

Springtime for Dutch economy

Table 1: Key data for the Netherlands
Table 1: Key data for the NetherlandsSource: Statistics Netherlands, Rabobank

According to the second estimate by Statistics Netherlands (CBS), Dutch GDP increased by 0.6 percent in the final quarter of 2016. Our forecast for this year’s GDP growth is 2.3 percent (Table 1).

This means our forecast is similar to those by other economic bureaus (Table 2). For 2017, nearly all bureaus are expecting economic growth of over 2 percent. In 2018 growth falls back somewhat, due to lower consumption growth. Still, it remains high by Dutch standards. The different forecasters are expecting growth between 1.7 and 2 percent.

Table 2: Different forecasts compared
Table 2: Different forecasts comparedSource: Economisch Kwartaalbericht (Rabobank); Centraal Economisch Plan (CPB Netherlands Bureau for Economic Policy Analysis); Nederlandse economie in zicht (ABN Amro); Winter 2017 Economic Forecast (European Commission); Economische Vooruitzichten en Ontwikkelingen (DNB); Dutch Economy Chart Book (ING)

We expect household consumption to be the most important driver of economic growth this quarter and the rest of the year. The first figures have been auspicious. Data released this month showed that consumption grew by a solid 0.3 percent month-on-month in January.

Confidence indicators show that the economic upturn continues further into this year. Consumer confidence and producer confidence (Figure 1 and Figure 2) moved to 10-year and 9-year highs respectively this month. Looking at these figures more closely shows several interesting things. The sub-indicator consumer ‘willingness to buy’ increased for two consecutive months, which bodes well for consumption of durable goods. Producers, meanwhile, were most optimistic about their order position, and least confident about whether their stocks are sufficient to meet demand. It shows that demand is in full swing and producers are scrambling to keep up.

Downward risks to growth, mainly international in nature, still remain. For example, given Dutch exposure to the UK economy (exports to the UK make up 2.3 percent of GDP), Brexit could have a substantial impact.

Figure 1: Consumer confidence is high...
Figure 1: Consumer confidence is high...Source: Statistics Netherlands, Rabobank
Figure 2: ...as is producer confidence
Figure 2: ...as is producer confidenceSource: Statistics Netherlands

Bifurcation in the labour market?


Figure 3: Elderly workers take longer to find job
Figure 3: Elderly workers take longer to find jobNote: percentage of unemployed workers per age group that find a new job three months after lay-off
Source: Statistics Netherlands

The Dutch labor market is also in full recovery, with the latest figures now showing 5.3 percent unemployment in February (Figure 3). The unemployment rate is steadily approaching the NAIRU (non-accelerating inflation rate of unemployment; we estimate it to be around 4,5 percent for the Netherlands), but there is still a discrepancy between the old and the young. Unemployed older workers find a new job much less quickly than unemployed younger workers (Figure 4).

Long-term unemployment is detrimental to structural economic growth, insofar as it leads to hysteresis effects. The long-term unemployed, for example lose some of their job skills, which lowers their productivity when they do find a job.

Government finances on the right track

Springtime has also come for Dutch government finances. Data on government finances over 2016 were published this month. The budget balance for 2016 showed a surplus of 0.4 percent of GDP, while government debt was 62.3 percent of GDP at the end of the year. We expect the government budget balance to improve further, to a 0.5 percent surplus this year and a 0.6 percent surplus in 2018.

Figure 4: Budget balance shows a surplus
Figure 4: Budget balance shows a surplusSource: Statistics Netherlands

The rapid improvement of government finances (the deficit was over 5 percent in 2010) is due to both lower spending on unemployment benefits and a fast increase in corporate income tax receipts. Now that the Netherlands has experienced three years of economic growth firms have few losses that they can still deduct against their profits.


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