Economy of the Netherlands

Financial system

Sovereign Wealth Fund

Key rate

GDP

2022

Industry's share of GDP is less than 12.5%

GDP estimate - $1.0 trillion

GDP size forecast - $1.0 trillion

2021

GDP size - $1.01 trillion

Agriculture's share of GDP is less than 2%

2018: Netherlands' share of nominal GDP in the global economy

Non-financial debt

2022: Aggregate non-financial debt

National debt

2023: State debt - 49% of GDP

2017: The ratio of the national debt to the country's GDP - 56% of GDP

Inflation

2022

Inflation in November - 14.3%

Inflation in July - 10.3%

Stock market

2024: Issuers capitalization 148% of GDP

Economic history

1948-1952: Marshal's Plan - Post-War Boom

The famous saying says that God created the earth, and the Dutch - Holland. Its truth was reaffirmed after World War II, when the Netherlands had to recover from the German occupation. The country was one of the most affected by the war - in 1945 its economy reached only 28 percent of the level of the late 1930s, in six years of hostilities up to 60 percent of the transport system was destroyed.

A significant role in the development of the Dutch economy was played by the Marshall Plan. During the period from 1948 to 1952, the United States provided the country with over a billion dollars, which became the largest amount of assistance per capita among all continental European states. The funds raised from America were aimed at stabilizing the financial system, curbing inflation and mass housing construction. By 1953, the government financed the construction of up to 65 thousand houses a year, and by 1985 more than five million residential buildings were built in the country.

Post-war economic growth is partly due to decolonization. The Netherlands lost control of Indonesia in 1949, which some experts estimate should have severely hit the competitiveness of the Dutch economy. The new post-war realities, however, showed that the cost of maintaining the colonial administration and the associated costs only hinder the development of the economy in the metropolis. Decolonization forced the Netherlands to develop new sectors of industry, while before the war the country's economy was more focused on trade.

The period from 1950 to the early 1970s is even sometimes referred to as the "golden age" of the Dutch economy. GDP grew by an average of 4-5 percent annually, and GDP per capita increased (. pdf) from $5.285 thousand per person in 1950 to $13.4 thousand in 1973. Such significant economic growth allowed the government and Dutch entrepreneurs to gradually raise wages for employees, avoiding serious conflicts with workers and their unions.

Economic prosperity, on the one hand, had a beneficial effect on social stability, and on the other, it itself was a consequence of this stability. Historically, the Netherlands was a motley country in ethnic, religious and ideological relations - Catholics and Protestants lived on its territory, and at the end of the 19th century socialist ideas began to gain popularity in the country. The heterogeneity of Dutch society forced him to seek compromises and maintain dialogue between different groups. These skills came in handy after the war and contributed to the progressive development of the economy.

Since 1950, for example, the government and unions have agreed to limit wage increases. This allowed Dutch businesses to gain a competitive advantage in the foreign market and attract huge investments from abroad to the country. The restriction lasted 13 years, and only the coincidence of unfavorable economic conditions with disagreements in the government and trade unions put an end to such practices.

The increase in wages, however, could not prevent GDP growth, the structure of which has seriously changed in just a couple of decades. Since the 1960s, instead of metallurgy and agriculture (which has retained its high efficiency), shipbuilding and the chemical industry, as well as international trade, began to set the tone in industry.

By the early 1970s, the Dutch could confidently claim that they had built a welfare state. To other riches of the local economy, the "manna of heaven" was added, or rather, underground: large reserves of oil were discovered in the North Sea, which was supposed to make the kingdom one of the richest in the world. However, it was with the growth of field development in the Netherlands that difficulties began, which would later become significant for many states around the world.

1970s: Dutch disease

In the early 1960s, Holland began large-scale industrial development of the North Sea oil and gas reserves. The relative cheapness of production and the rise in fuel prices in the early 1970s led the oil and gas industry to dominate the country's economy, with more money being invested in it than in other areas. As a result, the industrial potential of the Netherlands suffered significant damage, which only worsened with the emergence of new industrial countries on the world market. The latter began to actively compete with the Netherlands in those sectors where the Dutch positions were especially strong - in shipbuilding and the chemical industry.

In the 1970s, the growth of productivity of the Dutch worker slowed down significantly. If in previous decades, according to some reports, it reached, on average, 5.12 points (an increase in production per hour of work) per year, then in 1973-1979 - only 3.40 points, and in the 1980s it fell to 1.73 points.

All this allowed The Economist to call the unfavorable trends that appeared in the Dutch economy "Dutch disease." Subsequently, this term was repeatedly applied to states whose economies fell under the influence of resource-producing sectors to the detriment of industry and services.

Negative economic phenomena in the 1970s did not prevent the Netherlands from investing in education and infrastructure, which, along with defense, became the leading expenditure items of the budget. The investment paid off in the next decade. Recovery

1980: Privatization of state assets

In the 1980s, the Netherlands was helped to overcome the adverse consequences of the "Dutch disease" by the "right turn" typical of Europe and the United States. It consisted of privatizing some of the state-owned enterprises and reducing public spending. As a result, since 1985, the country's economy has emerged from recession and grew at a rate of 2.53 percent annually in the next ten years.

The most serious changes occurred in the structure of the economy - just as it was in Germany, small and medium-sized companies began to play the greatest role in the country's economy, while the share of large corporations and the state decreased.

European integration and the transnationalization of the global economy in the late 1990s and early 2000s had a beneficial effect on the Netherlands. In the late 1990s, the country managed to benefit significantly from the depreciation of the national currency, the guilder, against the dollar. Another positive factor for the economy was the rise in real estate prices and the stock market as a whole, which increased seven and three times, respectively. The growth of the economy led to the creation of new jobs and a decrease in unemployment, thereby creating a base for significant demand, which, in turn, also maintained a stable growth rate. From 1996 to 2000, the country's GDP increased annually by an average of 3.7 percent.

A solid base allowed the government in the 1990s to increase spending on health, social measures and education, thereby re-invigorating notions of the Netherlands as a "welfare" society.

However, the economic miracle of the late 1990s turned out to be short-term. The increase in wages negatively affected the competitiveness of the Dutch economy and caused a surge in inflation. The increase in prices, in turn, led to an outflow of capital and a decrease in foreign investment.

The Netherlands in the 2000s generally remained a stable eurozone country, which was classified as a prosperous North of Europe in contrast to the problematic PIIGS states: Greece, Ireland, Spain, Portugal and Italy. At the same time, the eurozone debt crisis still affected Holland.

2009: The Impact of the Crisis

The most striking episode was the allocation of state aid to the largest Dutch bank ING Group in 2009, which received 10 billion euros in order to avoid bankruptcy. Another troubled financial institution - ABN Amro Bank - from 2008 to 2013 received a total of up to 30 billion euros in aid. The mechanism, which was chosen by the Dutch government to finance the bank, further provoked complaints in the EU and even led to several lawsuits in Brussels.

In the same 2009, the Dutch economy contracted by 3.5 percent. After slight growth in 2010 and 2011, the economy in 2012 again contracted by 1.2 percent. The budget deficit in 2010 amounted to 5.3 percent of GDP, which exceeds the eurozone norms prescribing to limit the budget deficit to three percent. By 2013, the government was still unable to reduce the deficit to EU-required levels.

At the same time, despite its insignificant size and relatively small population (about 16 million people), the Netherlands ranks 17th in the world in terms of absolute GDP - in 2011, according to the UN, it exceeded 836 billion. dollars

2013: End of Welfare State

The relatively unfavorable macroeconomic statistics in Holland in 2013 coincided with a new round of aid to the financial sector. In February 2013, the rescue of banking and insurance group SNS Reaal from bankruptcy took $14 billion, raising concerns in the country and the EU about the sustainability of the Dutch banking industry as a whole.

The crisis facing the Netherlands should not be exaggerated. So far, it is more related to the coincidence of a number of adverse factors than to the structural vulnerability of the local economy. The country still holds one of the world's top economic indicators. In the ranking of the World Bank Doing Business this year, the country was in 31st place. The reliability of the Dutch public debt is not questioned in rating agencies either - it retains the highest AAA rating (September 2013).

The high level of economic development so far allows the Netherlands to maintain benefits for its citizens. Including such controversial as the lack of taxes on interest received on mortgage securities. Obviously, the lack of taxes affects in a favorable way not only on the condition of individual Dutch, but also the entire real estate market, which retains the attractiveness for investors^[1].

In September 2013, King Willem Alexander of the Netherlands announced the end of the welfare state. On his wreckage, the monarch proposed building a "participation society," which involves mainly reducing social spending of the state and increasing responsibility for the own well-being of the Dutch themselves. So ended (at least at the symbolic level) another "European economic fairy tale," which assumed a high standard of living for the entire population of the country.

The speech of King Willem Alexander should be perceived mainly in a symbolic way: it is no coincidence that it was he who uttered it, and not the author of the text - Prime Minister Mark Rutte. The symbol turned out to be contradictory and at the same time late. Contradictory - because, as Agence France-Presse caustically noted to declare the decline of the welfare state, the king arrived in parliament in a golden carriage.

King Willem Alexander. Photo: Robin Utrecht/AFP

Belated - because in fact Europe she broke up with the concept of general welfare back in the 1980s. Despite this, Willem Alexander's symbolic speech seems exceptionally important. It signals a new turn in the ideology of prosperous European countries: after Holland, other states will probably soon declare a reformatting of the economic model. Europe

2019: Impact of US President Trump's administration's trade restrictions

Tax system

The Dutch tax system is very complex. Fiscal authorities take into account the place of residence and work, age, family status of taxpayers, as well as various types of income. Income tax can reach 52 percent. In exchange, the country's legislation guarantees all employees a minimum leave of 28 days, as well as various social benefits, including child benefits, compensation for the unemployed and sick. For example, a few years ago (relative to 2013), the government transferred over 300 euros per child to families with children every month. In addition, in 2013, families with young children can claim compensation for kindergarten costs - per year such compensation reached 10-12 thousand euros per child. Women during pregnancy receive full salary compensation, but no more than 193 euros per day.

Power

2023: State contributions to pay for energy by citizens and companies reached 4% of GDP

2022: Rise in electricity prices due to pressure on Russia

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2020: Energy consumption per capita

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Energy carriers

Energy supplies

Gasoline price

Automotive market

2021: 110,000 cars produced

Ports

• Port of Rotterdam

Foreign trade

2022

Germany is the largest export destination

Trade deficit with China

Gas export via pipelines

2021: Fifteenth largest importer to Russia

2019

Exporting Computer Devices

Decrease in trade with Russia

2018: Among the leaders in the export of pyrotechnics

2015: Top ten global apple exporters with 2.7% share

1855

Agriculture

2019: Average use of pesticides in agriculture

Potato production per capita

1. Belarus - 631.3 kg per 1 person

2. Ukraine - 487.4 kg

3. Netherlands - 384.8 kg

4. Denmark - 343.3 kg

5. Belgium - 299.2 kg

6. Latvia - 251.3 kg

7. Kyrgyzstan - 230 kg

8. Poland - 229.8 kg

9. Russia - 216.8 kg

10. Kazakhstan - 208.5 kg

Salaries

2023: Minimum wage - $1895

2019: The Netherlands is the leader country in the balance of work and life

Index of satisfaction with the work-life balance (balance of work and life), 2019]]

Estimated: the number of hours employees spend (not) at work, the percentage of people who stay at work, and other factors.

The rating includes 38 countries. In the top - the Netherlands, Italy, and Denmark. Russia is in 12th place.

The balance is felt not only by employees who go home on time, but also by those who: a) loves his work; b) grows and develops on it. The data was presented by an OECD study.

2017: Average monthly salary

Pensions

2023: Minimum retirement age is 66 years and 3 months

Labour market

2022: Proportion of workers aged 65 or over - above 10%

Unemployment

2023: Youth unemployment - 8.3%

2022: Unemployment rate - 3.4%

2020: Unemployment rate - 5.5%

Real estate

2023: Commercial property deal volume collapse

In the second quarter of 2023, the volume of commercial real estate transactions in Europe fell by 58% to the lowest level since 2010.

The office segment suffered the most - the fall was 68%, while in the hotel segment the fall was 36%. In all major markets, there was a significant decrease in the volume of transactions.

Consumption

Tea

2018: Per capita tea consumption per kg per year

Milk

2018: Milk consumption in litres per year per person

Meat

2023: Pork is the most consumed type of meat

2019: Pork is the most consumed type of meat

Beer

2019: Beer consumption in litres per year per person

Sexual Services Market

According to BBC News, the turnover of the sexual services market in the country annually reaches 625 million euros (data from 2013).

Light Drugs Market

Local media have calculated that the sale of light drugs brings dealers up to two billion euros, and the treasury allows you to receive up to 400 million euros. For comparison, the turnover of the landmark shipbuilding industry for the country in 2012 reached 6.1 billion euros.

Communication

Main article: Communication (Dutch market)

Data Center Market

2019: Termination of construction of new data centers

In mid-July 2019, Amsterdam was banned from building new data centers, as such facilities began to occupy too much space and influence the city's energy system.

The construction of new data centers in the Dutch capital has been stopped at least until the end of 2019. Prior to this, the regional authorities will assess the situation and develop requirements for data center operators, including those related to the location of such facilities.

Authorities are pushing new policies for a circular economy, trying to ease the country's dependence on gas and make more use of renewable energy. Projects are being developed that should turn the heat generated by data centers for free heating of houses in Amsterdam.

In the so-called Amsterdam region, which includes not only the capital of Holland itself, but also the 50-kilometer territory around the city, there are 70% of all data centers in the country, as well as about a third of data centers in Europe. They were opened by Interxion Holding EdgeConnex, E-Shelter UK, NLDC BV and other companies. Many of the facilities were launched just five years before July 2019.

Amsterdam attracted technology companies with low taxes and relatively cheap electricity, and they actively built data centers to follow data protection laws and have the infrastructure to handle growing volumes of financial transactions. Holland Fintech estimates that the Netherlands is one of Europe's largest fintech centres by July 2019, with more than 430 relevant companies operating in the local market.

According to forecasts of the energy sales company Liander, by 2030, data centers will account for up to 37% of energy consumption in the Amsterdam region, which has the most data centers in the world (by July 2019).^[2]

R&D

2020: R&D spending - $16.5 billion

Retail

Metallurgy

2022: Biggest aluminum producer goes bankrupt over conflict with Russia

On October 29, 2022, the largest aluminum producer Aldel in the Netherlands was declared bankrupt due to high gas prices after the outbreak of the conflict with Russia.

Tourism

Alcohol market

Minimum age to purchase alcoholic beverages

Notes