OECD Economic Surveys: Netherlands 2018

OECD

• Publisher: OECD
• Year: 2018
• eBook ISBN: 9789264309142
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

Key Policy Insights

• Macro-financial developments
• Medium-term challenges: towards more inclusive growth
• Structural focus: addressing population ageing

Macro-financial developments

The Netherlands is experiencing vibrant economic activity, with gross domestic product (GDP) at about 8% above its pre-crisis peak and the unemployment rate below 4% (Figure 1). Growth picked up to above 3% in 2017, which was well above the euro area and OECD averages. This sharp economic recovery has been broad-based, with spending by businesses and households contributing to growth while external demand, mainly from other European countries, has also had a positive impact. Despite moderating somewhat in upcoming years, growth is projected to remain strong at around 3% on average in 2018 and 2019. The fiscal balance is in surplus and public debt has fallen to below 60% of GDP.

Domestic policies have contributed to the rapid pace of economic expansion, as the Dutch consensus-driven policy framework facilitates the implementation of structural reforms. In the aftermath of the global financial crisis and the European debt crisis, the Netherlands undertook a number of structural reforms to heal public finances, strengthen the banking sector, foster competition and address some long-standing challenges in the labour and housing markets.

Despite an overall strong performance of the Dutch economy, some important challenges remain in a context where globalisation and digitalisation continue to deeply alter the functioning of the world economy. Reform efforts should continue to address potential vulnerabilities associated with the housing market and the financial sector, given the importance of both for the Dutch economy. Real wages have grown at a slower pace than the growth in output per hour, implying that workers have not enjoyed the full benefits of increased spending power commensurate with a comparatively high level of labour productivity in the OECD. Large increases in non-standard forms of work, notably self-employment, may have put a downward pressure on wages, reflecting weak representation in the consensus-driven collective bargaining system, lower safety nets and possibly a weaker productivity relative to dependent employment. Non-standard forms of work could also have a negative impact on job quality if they are involuntary and prevail among vulnerable groups. Population ageing creates pressures on the pension and healthcare systems, while the rising retirement age will require steps to ensure that older workers remain attached to the labour market.

Figure 1. Output has accelerated and the unemployment rate has fallen

Source: OECD (2018), OECD Economic Outlook: Statistics and Projections (database), June.

StatLink http://dx.doi.org/10.1787/888933775077

Against this backdrop, the main messages of this Survey are:

• Policy-makers should continue to monitor and address potential risks to financial stability notably implied by low interest rates and sharp rises in housing prices, which could be dealt with by relaxing housing supply constraints.
• The rise in flexible forms of work, presents opportunities but also challenges. In particular, a combination of tax and regulatory reforms would ensure a better job quality for the self-employed and workers on temporary contracts without discouraging these types of work.
• The ageing of the workforce and increases in the retirement age require a more transparent pension system and improved job mobility of older workers.

Strong economic outlook

Growth has been robust with average annualised quarterly growth at 3.1% since the beginning of 2016 (Figure 1, Panel A). All-time high levels of business and consumer confidence, strong labour market and rising purchasing power have supported household consumption (Figure 1, Panel B). A bright economic outlook and narrowing capacity utilisation have sustained strong business investment growth (Table 1). House price inflation, particularly high in large cities, has stimulated residential investment growth to record-high rates, but new construction developments have been weaker (Figure 2). This gap could be accounted for by housing transactions, with fees of real estate agents being statistically recorded as investment for the service they provide. Fiscal policy has been accommodating, and public consumption and investment have been mak...

Table of contents

• Title page
• Legal and rights
• Introduction
• Executive summary
• Key Policy Insights
• Annex A. Progress in structural reforms
• Thematic chapter
• About the OECD