Dutch economy not out of danger.
There have been slight positive developments in the Dutch economy in recent months. This does not alter the fact that on many fronts the signal is still on red, and the Netherlands still has a long way to go.
As expected, the aging population will continue to grow, just as population growth was expected to decline. Both the number of births and immigration are on a downward trend. The declining population growth is partly caused by the crisis. The number of marriages has clearly decreased. It is difficult to say whether this will ultimately lead to a shortage on the labor market. The reduced population growth will also be reflected in the volume of the economy. In addition, the increasing digitization, automation and robotization is taking more and more hands out of the process.
In 2013, the Dutch economy shrank only 0.8% of GDP. That is less than in 2012 when the economy shrank by 1.2%. The overall trend reversed at the end of 2013 due to a marked increase in exports, in which the other areas continued to contract. On balance, both households and the government spent less last year. Investments, such as real estate, are also still shrinking. In the last quarter of 2013, the investment rate in commercial vehicles in particular increased.
Employment is downright bad. The number of available employee jobs declined and the number of vacancies continues to decrease. Employment also fell sharply, especially in the government and in health care. The number of jobs is therefore the lowest number since 2008.
Unemployment has now risen to 8.3%. However, the employment rate has increased as a result of combating early retirement [retirement] and the cohort effect in women on higher education levels. The earlier decline, which became visible in mid-2013, has now been converted back into an ascending line. In view of the ongoing cutbacks, especially for the government, unemployment will continue to rise.
Since 2007, household disposable income has decreased by 5.2%. In 2013 disposable income for households also decreased. On the other hand, wage developments also lagged behind inflation. The average collective labor agreement increase was 1.2%, where inflation amounted to 2.5%. [VAT scheme] As a result, total household consumption decreased by 2.1%. The total financial assets of households [savings, bonds, shares, pension value] did increase. The positive development on the stock exchanges in particular contributed to this. The investment portfolios of pension funds and insurers increased by EUR 32 billion and the share package with households by 24 billion [residential] Savings did decrease considerably because they were mainly used to repay mortgages and to absorb a decrease in disposable income.
Both social assistance and unemployment benefit are increasing strongly. The number of unemployment benefits increased by almost 100,000 and the number of social assistance benefits increased by almost 30,000. The cyclical effects of the crisis are causing this sharp rise. The Cabinet’s measures to curb this will have no effect for the time being. Due to the long duration of the crisis, this also has an impact on assistance. The long-term unemployed end up on social assistance at some point.
Dutch exports are lagging behind.
Despite an increase in export figures, self-produced exports have barely grown. The Netherlands therefore does not benefit from the improving world trade. In particular, re-exports have a positive effect on the trade balance. However, the contribution of this is much lower than with own exports. Own exports yield 54 euro cents and re-exports only 8 euro cents. Only service exports increased by 14% with a contribution of 76 euro cents.
Business is still weak.
The greatest contraction was in construction. There the size decreased by 3.7%. The added value of the chemical industry fell the most of all branches of industry, by 4.4 percent. In 2012, this industry was a positive outlier within the industry. The food, beverage and tobacco industry recovered well from the previous year’s downturn of 3.1 percent.
The Netherlands compared to abroad.
Compared to other countries, the Netherlands is clearly doing worse and raises questions about the policy pursued. The European economy shrank by only 0.4% while the Netherlands shrank by 0.8%. The German and English economies in particular are doing much better than the Netherlands. A wry observation considering that until the end of Purple, the Netherlands always went right with Germany. The industrialized countries outside Europe also performed better than the Netherlands in 2013. In the United States and Japan, the economy grew by 1.9 and 1.6 percent, respectively.
Unemployment also rose more strongly in the Netherlands than in comparable countries in Europe. Only in the Southern European countries the picture remains worse. The Netherlands also scores significantly worse when it comes to inflation
Despite some bright spots, the Dutch economy is not yet out of trouble. What is particularly striking is that the hopes of Dutch politics are not realized. The often stated principle that the Netherlands automatically moves with the international economy appears to no longer apply. Other, comparable countries, such as Germany and England, are benefiting much better from the international recovery.
It is mainly the pressure on the domestic market that keeps the Netherlands in the red. The austerity and tax increases are structurally depressing spending, which means that domestic trade remains below par. Internationally, Dutch competitiveness has declined sharply in the past 15 years, as shown by the International Manufacturing Index. At the end of the nineties, in 4th place, the Netherlands has now disappeared from the top 10, where countries such as Germany and Switzerland are still frontrunners.
The long-term and repeatedly over-deployed austerity policy, not only during the current crisis but also in the period 2002-2004 [B-II], has put the Netherlands at a structural disadvantage. During this period, countries such as Germany and England have reformed their economies better than the Netherlands [housing market]. Current policy, which has little to no vision for the future, will do little to change that. It is hoped for a strong recovery of the international economy and especially the European one to finally pull the Netherlands out of the doldrums. Current Hague policy is too timid to change this.
Source: The Netherlands in 2013. An economic overview. © Statistics Netherlands, The Hague / Heerlen, 2014