Economy
In 2017, the economy of the Netherlands was the fifth largest in the EU in terms of GDP. It accounted for 4.8% of total EU GDP. Since 1971, there has been moderate unemployment in the country, stable industrial relations, a trade surplus, low inflation and a large current account surplus. 2018 was the best year for exports in the Netherlands, when their value reached 495.985 billion Euros, or 64.13% of the GDP of the country.
One of the most important assets of the economy of the Netherlands is its highly trained and skilled workforce. Its workers are flexible and multilingual, with a large proportion of the population of the country being between 15-64 years of age: within the economically active age range.
The country's economy suffered during the global financial crisis in 2008 and 2009, due to its dependence on trade and exports. This resulted in the Dutch economy contracting by -3.8% in 2009, by -1.1% in 2012 and by 0.2% in 2013. In 2009 and in 2013, the GDP per capita was more than 4% below the level that it used to be in 2008. Only in 2016 did income growth return to its 2008 level. In 2017, GDP per capita growth was well over 2% higher compared to 2008.
To combat the economic crisis, the government focused on infrastructure investment programmes and bank bailouts. The result of this policy was an increase in the budget deficit reaching 5.2% of GDP in 2010, 4.4% of GDP in 2011, 3.9% of GDP in 2012, 2.9% of GDP in 2013, 2.2% of GDP in 2014 and 2% of GDP in 2015.The year 2017 marked a return to surplus, at 1.2% of GDP.
According to information from the Central Bureau of Statistics of the Netherlands, published in September 2018, the recovery of the economy was still fragile. Only after 2017, did government debt as a percentage of GDP sink to the level it was at the beginning of the financial crisis (54.7% of the GDP). Also in 2018 housing production was still much lower than it was in 2017. On the other hand, only during the first quarter of 2019, more specifically in March 2019, did unemployment reach the pro crisis level (310,000 unemployed in August 2008 and 308,000 in March 2019)
Another sector of the economy that was affected by the crisis was housing construction. Almost nine years after the beginning of the global financial crisis, the number of building permits issued for new homes reached nearly 70,000. In comparison, between 2000 and 2008, the number of permits issued annually was on average 80,000. Although these figures seem discouraging, it is worth remembering that in 2014, 2015 and 2016 the respective numbers of permits issued were 41,300, 55,600 and 53,600. The first indications that the economy of the Netherlands was recovering were seen in 2014, when GDP increased by 1.4%. This was followed by three more years with positive economic growth (2015 with 2.3% growth, 2016 with 2.2% growth, and 2017 with 3.2% growth).
In addition to the government infrastructure investment programme, recovery in the housing market and a large positive trade balance aided the recovery of the economy. Exports of goods from the Netherlands showed remarkable increases: from 309.4 billion Euros in 2009 to 371.5 billion Euros in 2010 and 433.4 billion Euros in 2014. This development ceased in 2015 when the value of exports reached 419 billion Euros. However, the next year (2016) and the following year (2017) the economy of the country increased its exports to 425 billion Euros and 468.9 billion Euros respectively.
It should be said that even during the economic crisis, the international trade balance of the country was positive. In 2009 the value of its exports was 309.4 billion Euros and its imports 274 billion Euros, while the trade surplus was 35.4 billion Euros. In the following year the trade surplus was 39.6 billion Euros, 2011 saw the trade surplus increase to 44.5 billion Euros, while in 2012 it was slightly reduced to 40.3 billion Euros and in 2013 it increased again to 46.7 billion Euros. In 2014 the trade surplus of the Netherlands increased further to 51 billion Euros. This trend came to a halt briefly in 2015 when the trade surplus was reduced to 46.8 billion Euros; however, in 2016 it increased again to 52.3 billion Euros. Finally in 2017, the trade balance reached 57.9 billion Euros, its best record since 2009.
The most important export products of the Netherlands are machinery and transport equipment, which in 2017 had a total value of 132.597 billion Euros (28.3% of total exports). Next come in line are chemicals and related products, which in 2017 had a total value of 81.296 billion Euros (17.4% of the total exports). The country hosts 16 of the world’s 25 leading chemical companies, including BASF, AkzoNobel, Dow Chemical, SABIC and Shell. Agriculture and food is the third most important sector of the economy, exporting products with a total value of 62.467 billion Euros in 2017 (13.3% of the total exports). Finally exports of mineral fuels, lubricants and related materials had a total value of 61.257 billion Euros in 2017 (13.1% of the total exports).
The Netherlands conducts the most of its trade with other EU countries, although the share held by EU countries in Dutch exports has been declining over the last few years. In 2017 approximately 71% of the exports from the Netherlands went to EU countries and 29% went to non-EU countries. In 2008, exports to EU countries represented 76.5% of the total value of exports and the remaining 23.5% were destined for non-EU countries. According to the Central Bureau of Statistics (2017), export value in trade with non-EU countries increased by 56% from 2008, while exports to EU countries increased by 17% and total Dutch exports increased by 26%.
Foreign Direct Investments are another source of revenue for the Netherlands. According to the Central Bureau of Statistics, “worldwide, the Netherlands is among the countries with the largest flows of inward and outward foreign direct investment (FDI) capital, including share capital and loan capital. In 2017, this involved a total of 4.587 billion Euros. Around 80% of these investments (3.655 billion Euros) did not remain in the Netherlands, but were transferred to a foreign destination through a special purpose vehicle”.
Regarding corporate taxes, the rate depends on the taxable amount. This is the taxable profit in a year less deductible losses. According to the Dutch Ministry of Finance, if the taxable amount is less than 200,000 Euros, the tax rate is 20%. If the taxable amount is 200,000 Euros or higher, the tax rate is 25%. Both corporate tax rates will be decrease by 1% in 2019, by 1.5% in 2020 and a further 1.5% in 2021. The Dutch government's target is that by 2021 the tax rate for a taxable amount of 200,000 Euros will be 16% and 21% for a taxable amount more than 200,000 Euros.
Additionally, the Dutch government has introduced a reduced tax rate for the taxable amount that is produced from innovative activities. As of the 1st of January 2018, the effective tax rate applicable to corporate income that is produced by innovative activities has been 7%. This reduced tax rate was introduced in order to encourage innovative research in the Netherlands..