Netherlands flag Netherlands: Economic and Political Overview

The economic context of the Netherlands

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

The Netherlands is the sixth-largest economic power in the Eurozone and the fifth-largest exporter of goods. The country is very open to trade and consequently to the global economic conjuncture. For the past few years, the recovery in Europe has allowed the Dutch economy to grow at a dynamic pace, although trade uncertainty at global level, the Brexit process and most of all the spread of the COVID-19 pandemic caused the Dutch economy to contract. Nevertheless, the Dutch economy has shown a rapid and strong recovery from the coronavirus recession of 2020, recording an estimated growth of 3.8% in 2021, on the back of a robust recovery in consumer demand and a favourable external environment, together with a rise in investment and government consumption. Economic growth is projected to remain robust this year (3.2%) underpinned by private consumption, before moderating to 2.1% in 2023. The scenario remains uncertain due to the surge in COVID-19 cases towards the end of the year. According to projections by the Dutch National Bank, the extension of containment measures could cut 2022 GDP growth by over two percentage points.

In recent years the government’s fiscal policy has been expansionary; nevertheless, the Dutch public finances remained sound, recording budget surpluses. The trend inverted as a consequence of the fiscal measures taken to contain the Covid-19-induced crisis, with a budget deficit of 5.2% recorded in 2021. As most measures expired and economic activity rebounded, the deficit should narrow to 1.5% this year and then again in 2023 as revenues increase (0.7% - IMF). Conversely, the debt-to-GDP ratio jumped to 58.1% in 2021 (from a pre-pandemic level of 47.4%), but is expected to follow a downward trend over the forecast period (56.2% this year followed by 54.8% in 2023). Inflation has risen sharply during the year and averaged 1.9% in 2021, driven by oil and gas price increases and a tight labour market. Temporary government measures (including cuts in energy taxes and tuition fees) should push projected inflation downwards in 2022 (1.7%).

The Netherlands presents a very high income per capita, which is distributed in a relatively equal manner. The GDP per capita is above the EU average and was estimated at USD 60,461 in 2021 (PPP – data IMF). Employment support measures were still in place for a large part of the year, resulting in a relatively low unemployment rate of 3.6% in 2021. Meanwhile, several sectors have been experiencing labour shortages, with the number of vacancies surpassing the number of unemployed. The IMF forecasts an increase in the unemployment rate in 2022 (4%); whereas the Dutch Central Bank expects wage growth to rise slowly to 2.4% in 2022 and 2.6% in 2023.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 910.30913.13e1,007.561,070.751,128.02
GDP (Constant Prices, Annual % Change) 2.0e-3.8e4.53.32.1
GDP per Capita (USD) 52,67352,45657,71561,15964,247
General Government Balance (in % of GDP) 1.8-3.2e-5.2-1.5-0.7
General Government Gross Debt (in % of GDP) 47.452.558.156.254.8
Inflation Rate (%) 2.71.1e2.85.22.3
Unemployment Rate (% of the Labour Force) 3.43.8e3.64.03.9
Current Account (billions USD) 85.3063.72e79.5892.8098.23
Current Account (in % of GDP) 9.47.07.98.78.7

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

Main Sectors of Industry

The agricultural sector represents 1.6% of the country's GDP and employs 2% of the active population (World Bank, latest data available). This sector produces high yields, which is due in part to the intensive farming of arable land. Nearly 60% of the production is exported, either directly or through the food industry. This makes the Netherlands the second-largest exporter of agricultural products in the world (after the U.S.). The main crops exported are cereals, potatoes and horticultural products. The Netherlands is also the largest flower exporter in the world. According to the latest data from Agricultural Census, the number of companies active in the sector stands at 53,233. In 2021, the income of the Dutch agricultural sector was 1% higher than one year earlier. Whereas output increased in both arable farming and horticulture, livestock farming showed an income decline (Statistics Netherlands).

Industrial activity generates around 17.8% of the Dutch GDP, mainly through food-processing, the petrochemical industry, metallurgy and the transport equipment industry. The Netherlands is also one of the largest producers and distributors of oil and natural gas. The secondary sector employs 16% of the workforce. The World Bank estimates that the manufacturing sector alone accounts for 10.7% of the country's GDP.

Services account for over 69.8% of national revenue and employ 82% of the workforce. The services sector is focused mainly on transportation, distribution, logistics, banking and insurance, water engineering and new technologies. The country is also Europe's leading service provider in ocean freight, which is not surprising as its economy largely depends upon exports. The Dutch banking sector plays an important role in the economic functioning of the country and has a relatively large size when compared to the GDP, its assets accounting for 330% of GDP in 2021.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 2.1 16.1 81.8
Value Added (in % of GDP) 1.6 17.8 69.8
Value Added (Annual % Change) 0.4 -2.5 -4.3

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
76,8/100
World Rank:
16
Regional Rank:
9

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
8.04/10
World Rank:
10/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

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Sources of General Economic Information

Ministries
Ministry of Social Affairs and Employment
Ministry of Economic Affairs and Climate Policy
Ministry of Infrastructure and Water Management
Ministry of Finances
Statistical Office
Central Bureau of Statistics
Central Bank
Dutch National Bank
Stock Exchange
Amsterdam Exchange (AEX)
Economic Portals
NL Agency
 

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Latest Update: September 2022