The Netherlands: Recovered from the After-Shock

On this page we present the salient features of the Dutch Economy since the onset of the Great Recession in a global perspective, where the comparison is with the EU28 and the United States.

The first figures below show the path of Real GDP and its components since the recession. We have indexed all variables to the first quarter of 2008.

GDP and Main Aggregates

 

The Great Recession was felt hard by the Netherlands which experienced roughly a five percent decline in GDP at its worst. More worrying for the nation was its inability to recover until 2014Q2. Indeed, it seemed as though the Netherlands was “moving sideways” for a time.

The figure above shows the year-on-year growth rate for the Dutch economy. That is the growth for 2010Q1 should be read as the Real GDP growth rate between 2009Q1 and 2010Q1. We rely on these numbers rather than annualized quarterly growth rates as we believe they paint a more reliable picture of long-run trends. The Netherlands seems to have been hit by an “after-shock,” contracting again less than four years later. Since the start of 2016, however, the Dutch economy has outpaced both the U.S. and the rest of the EU, boasting year-on-year growth of just under 3.5% during 2017Q4.

 

Consumption in the Netherlands saw much of the same side-ways movement and suffered the same after-shock as GDP. Despite a small down-tick in the last quarter of 2017, it has grown steadily since 2014Q1.

Capital formation in the Netherlands has been lack-luster for quite some time. In fact, fixed capital formation did not fully recover until the start of 2017, though the pace of its recovery since 2014Q2 is of note.

While imports in the Netherlands declined by 8% during the recession, they changed little compared to its EU neighbors and the U.S. Moreover, they recovered quite quickly, taking only 6 quarters to reach its 2008Q1 levels.

 

 

The Labor Market

The after-shock from the Great Recession seems to have had a significant impact on the Dutch labor market.

Indeed, the rise in unemployment was much more pronounced during the after-shock than the Great Recession itself. Furthermore, the after-shock and Great Recession seem to have had similar effects on the fraction of the population securing employment.

The Dutch Beveridge curve seems to have completed its most recent cycle. As indicated by its inward shift, match efficiency has increased slightly.

 

The Role of Government

The Netherlands entered the Great Recession with a manageable stock of outstanding debt, a position that enabled them to increase deficit spending quickly in response to the downturn. The figure below shows the response as measured as a percentage of GDP.

Taken in conjunction with the figure below, it becomes clear that the increase in government debt is a response to a temporary change in fiscal policy. For comparison, the United States currently has a debt-to-GDP ratio of 104%.

Moreover, the Netherlands held its level of government consumption mostly constant between 2010 and 2016, a strategy that likely allowed it manage its growing debt better than the rest of the West. Taken together, these figures paint a picture of a fiscally responsible nation.

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