State of the nation – the future looks bright

| 06-04-2018 | treasuryXL |

Last week, the Centraal  Bureau voor de Statistiek (CBS) released their year end data for 2017 regarding the Dutch economy. The recovery is strong – for the first time since 2008 the Netherlands complies with 2 of the important Euro criteria at the same time; the government debt is below 60% of GDP and the annual budget deficit must not exceed 3% of GDP. Furthermore, Dutch GDP grew at an annual rate by 3.2% in 2017 – this is higher than in 2016 when the growth was 2.2%. This is the strongest growth since 2007. We take a look at the data and the contributing factors.

Debt

At the end of Q4 2017, government debt was reported as EUR 416 bn. This is 56.7% of GDP, compared to 61.8% in 2016. There was a reduction of EUR 18 bn in the total debt – the largest annual fall recorded. As recently as 2014, this ratio stood at 68.0%

Budget surplus

At the end of Q4 2017, the government had a budget surplus of EUR 8 bn – a surplus of 1.1% of GDP. In 2009, this was a deficit of 5.4% of GDP. Expenditure increased by EUR 7 bn in 2017, but this was offset by an increase in revenue of EUR 12 bn. Tax revenues increased by EUR 15 bn. There was additional income of EUR 8 bn from the sale of state shareholdings in ASR and ABNAmro among others.

Inflation

There was a rise in consumer prices – CPI showed an annual rise of 1.4% in 2017. This compares with a rise of 0.3% in 2016.

Labour

Wages in 2017 increased by 1.7% and unemployment fell in 2017 – at the end of 2017 the rate was 4.1%. Shortages of available labour are being observed in the market – employers have stated that they are finding it increasingly hard to find appropriate employees. The latest reports suggest that there are 1 million vacancies, but that employers are having difficulty finding qualified people. Most of this growth appears to be coming from the small and medium sized enterprises (MKB) – large organisations are still in a round of cost-cutting and down-sizing.

The report of the Netherlands looks very rosy, but international events could impact on the health of the economy. There are threats of trade wars; Brexit will impact on trade within 1 year; the EU parliament is asking for more money in the next budget cycle; the composition of the new Italian government could cause unrest within the rest of the EU.

The future does look bright, but caution is advised on the road ahead.