Netherlands: Economic and Political Overview
In this page: Economic Outline | Political Outline | COVID-19 Country Response
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 had allowed the Dutch economy to grow at a dynamic pace, although trade uncertainty at the global level, the Brexit process and most of all the spread of the COVID-19 pandemic caused the Dutch economy to contract. Nevertheless, the country’s GDP rebounded in 2021 (+4.9%) and 2022 (+4.5%), on the back of solid export and investment growth (IMF). For 2023, a set of measures has been announced to mitigate the impact of high energy prices and support domestic demand. However, the decrease in households’ real disposable income, tightening financial conditions and the weak external environment caused by the Russia-Ukraine conflict are expected to weigh heavily on growth, which is forecast at 0.8% for the year. Rising investments and a positive contribution from external trade should help the country’s economy grow at a faster pace in 2024 (+1.7% - IMF).
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 and then the effects of high inflation prompted by the conflict in Ukraine. Government revenues picked up in 2022 driven by income taxes and Dutch gas fields, contributing to a reduction in the fiscal deficit, which stood at 1.2% of GDP. In light of an expansionary budget that includes a price cap on electricity and gas, a reduction in the excise duty on fuel, and a rise of the minimum wage by 10%, the government deficit is forecast to increase to 1.4% of GDP in 2023 (IMF – 4% according to the EU Commission) and 2.1% next year. Conversely, the debt-to-GDP ratio is projected to increase from 50.3% of GDP in 2022 to 52.4% in 2023 and 53.2% in 2024 (EU Commission). Fueled by high energy prices, inflation reached a record level of 12% in 2022. The aforementioned price cap should contribute to a reduction in headline inflation, forecast at 8% in 2023, before the rate returns closer to the ECB’s target by 2024 (2.7% IMF).
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 69,715 in 2022 (PPP – data IMF). The Dutch labour market remains tight, with the unemployment rate decreasing to 3.5% in 2022 (from 4.2% one year earlier). Nominal wages have been growing, although not as much as inflation. For 2023 and 2024, the IMF expects the unemployment rate to increase slightly to 3.9% and 4%, respectively.
| Main Indicators | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| GDP (billions USD) | 909.07 | 1,013.52 | 990.58 | 1,019.76 | 1,076.96 |
| GDP (Constant Prices, Annual % Change) | -3.9 | 4.9 | 4.5 | 0.8 | 1.7 |
| GDP per Capita (USD) | 52,222 | 57,997 | 56,298 | 57,629 | 60,621 |
| General Government Balance (in % of GDP) | -1.3 | -1.9 | -1.2 | -1.4 | -2.1 |
| General Government Gross Debt (in % of GDP) | 54.6 | 52.3 | 48.3 | 46.4 | 45.6 |
| Inflation Rate (%) | 1.1 | 2.8 | 12.0 | 8.0 | 2.7 |
| Unemployment Rate (% of the Labour Force) | 4.9 | 4.2 | 3.5 | 3.9 | 4.0 |
| Current Account (billions USD) | 64.90 | 91.62 | 73.96 | 78.44 | 83.26 |
| Current Account (in % of GDP) | 7.1 | 9.0 | 7.5 | 7.7 | 7.7 |
Source: IMF – World Economic Outlook Database, Latest available data
The agricultural sector represents 1.5% 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. The number of companies active in the sector stands at 53,233 (Agricultural Census). According to the latest data by CBS, in 2022, the Dutch agricultural sector income increased by 1.9% compared to 2021. At the same time, animal output dropped slightly (-0.7%) while crop output fell relatively sharply by -3.4%. The total agricultural output was 2.1% lower year-on-year.
Industrial activity generates around 18.1% 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 11% of the country's GDP. Although growing by 3.3% as of October 2022, the average daily output generated by the Dutch manufacturing industry was lower compared to the preceding one and a half years.
Services account for over 52.5% of national revenue and employ 79% 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 2022, with the five largest banks accounting for about 85% of the total assets of the sector (European Banking Federation).
| 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) | 1.5 | 18.1 | 69.4 |
| Value Added (Annual % Change) | 2.4 | 4.9 | 5.3 |
Source: World Bank, Latest available data.
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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.
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
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.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
See the country risk analysis provided by Coface.
The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in the Netherlands, please visit the website of the National Institute for Public Health and the Environment (RIVM) which provides the official data.
For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
For the information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the relevant pages on the portal of the Dutch Customs (Belastingdienst).
The “Guidelines for border management measures to protect health and ensure the availability of goods and essential services” issued by the European Commission can be consulted here.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to the Netherlands on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
The official governmental portal Business.gov.nl provides detailed information on the economic recovery scheme put in place in the Netherlands to address the impact of the COVID-19 pandemic. Further details can be found on the portal InvestinHolland.
The information on the EU’s economic response to COVID-19 and the actions to minimise the fallout on the EU member states’ economies of the COVID-19 outbreak is available on the website of the European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Dutch government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to the Netherlands in the IMF’s Policy Tracker platform.
The official portal Business.gov.nl provides comprehensive information on the government measures to help businesses to deal with the economic impacts of the COVID-19 epidemic on their activity, as well as a FAQ section for entrepreneurs. Another important source of information is represented by the official portal Invest in Holland.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.
The support package for Dutch exporters during the COVID-19 crisis can be consulted on the dedicated page on the official portal Business.gov.nl. The website of the Dutch Customs (Belastingdienst) is also a useful source of information.
The European Commission adopted a Temporary Framework for State aid measures to support the economy in the COVID-19 outbreak, which enables short-term export credit insurance to be provided by the State where needed.
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