Economy

Trends

Strongest growth in ten years

The Dutch economy grew by 2.9 percent in 2017. This is the strongest economic growth in ten years. This means that the Dutch economy once again grew faster than those of its most important trading partners. However, the Netherlands did have some catching up to do, as the effects of the 2012–2013 economic dip were more severe in the Netherlands than in neighbouring countries. Since 2008, our economy has lagged some way behind those of countries such as Germany and the United Kingdom.

Year of the construction industry

Many different sectors saw growth last year, but 2017 was really the year of the construction industry. Investment rose by 6.1 percent, adding almost a whole percentage point to the economic growth. The strong increase in construction is linked to the housing market heating up. A record 242,000 existing owner-occupied homes were sold in 2017, at prices which had risen by 7.6 percent: the biggest price increase since 2002.

As well as construction, trade and corporate services saw strong growth in production in 2017. In the category of corporate services, employment agencies and the travel sector grew particularly strongly. The output restrictions on the Groningen gas field caused the extraction of natural resources to shrink by double figures for the fourth year running.

Exports also contributed to economic growth. The Dutch economy has focused more and more on exports in recent years, with Dutch exports growing more strongly than total global trade for some years. Household consumption also increased, but its contribution to growth was less significant than that of exports and investments.

Tense labour market

The economic growth spurt was also noticeable in the labour market, with the creation of 207,000 new jobs. With the exception of financial services, employment increased in all business sectors, especially in corporate services and trade, transport and hotels and restaurants. Partly as a result of this, the number of unemployed people was reduced by 101,000, the biggest fall in unemployment for decades. The increase in the number of jobs meant that more positions were advertised. By the end of 2017, there were 1.8 unemployed people for every vacant position. The scarcity in the labour market has almost regained the level it was at just before the crisis, when there were 1.3 unemployed people for each position.

Income growth still lagging behind

Salary levels increased considerably more slowly than employment figures. Salaries agreed through collective bargaining rose only slightly faster than prices, meaning that employees saw little improvement in their spending power in real terms. Total available household incomes increased by 1.0 percent, which is considerably less than the growth of the (actual) gross domestic product (GDP).

GDP has been growing structurally faster than household incomes and consumption since as early as 2002. The main causes for this are that the share of the economy taken up by the labour factor (the labour income share) is steadily declining and that the tax burden on citizens has increased. In spite of the large number of homes that have been sold, households’ total mortgage debt only grew by 8 billion euros. As a share of GDP, mortgage debt actually fell slightly. However, the household debt ratio is still far higher than the EU average.

The number of bankruptcies was the lowest since the beginning of this century, and non-financial enterprises achieved record profits of 218 billion euros.

Government finances in order

At the end of 2017, government finances were in line with the European debt standard of 60 percent of GDP for the first time since 2008. The national debt amounted to 421 billion euros, or 57.1 percent of GDP. For some years now, the government balance has met the European standard, which dictates that the government deficit must not exceed three percent of GDP. As in 2016, the government achieved a surplus in 2017. Government incomes were 9 billion euros higher than its outgoings. The budget surplus was the highest on record.

Confidence is high

The economic upturn is also noticeable in the confidence demonstrated by consumers and entrepreneurs. Consumer confidence remained at a stable, high level throughout the year. Producer confidence was positive at the start of 2017 and increased over the course of the year. Entrepreneurs ended 2017 with ambitious expectations: they anticipate further growth in turnover and investment in 2018, and they expect to take on more employees in the near future. These confidence indicators are in sharp contrast with the last period of upturn, just before the financial crisis in the autumn of 2008, when the figures for the confidence of Dutch citizens and businesses had been declining for some time. That is not at all the case now.

Inflation is increasing

The prices of many goods and services saw a stronger increase in 2017 than in 2016, with the prices of industrial goods rising especially quickly. Consumer prices also rose faster than in previous years, although at 1.4 percent this increase was still moderate. 2017 was the fourth year in a row that the increase in consumer prices ended below the European Central Bank’s target of two percent. Consumer prices saw a limited increase elsewhere in the Eurozone, too. In the housing market, not only did the prices of existing homes rise quickly, but the price increase for new-build homes was also substantially higher than in previous years.