Diplomatist Magazine Diplomatist April-May 2019 | Page 9

COUNTRY FOCUS 3. The external imbalance also likely refl ects imbalances in the household sector, where low wage growth and sizeable labour income taxation are compressing disposable income and limiting domestic demand. Household debt remains high, even though households have positive net worth. Households are left too cash-constrained to eff ectively weather downturns and support rebalancing. Scaling down mortgage interest deductibility beyond current plans would help address the debt bias but this needs to go hand-in-hand with more aff ordable rental opportunities. Source: IMF staff proojections. Note: 2018 is an estimate. 5. Policies to support rebalancing and strengthen growth potential over the medium term could include boosting disposable income by bringing it closer in line with diff erent types of labour contracts, further lowering the weight of tax on labour, and fostering productivity and wage growth. Promoting the growth of small and medium-sized enterprises should focus on expanding direct support to research and development, investing in digitalization and lifelong learning, and establishing a business credit bureau.  Source: OECD Promoting the growth of small and medium-sized enterprises should focus on expanding direct support to research and development, investing in digitalization and lifelong learning, and establishing a business credit bureau. 4. The Netherlands’ fi scal position is strong, resulting in declining public debt and sizeable fi scal space. However, fi scal policy is limited in its potential for rebalancing demand by national rules and capacity constraints. Attempts to fully use the available fi scal space in 2018 were unsuccessful due to diffi culties with hiring against a background of low unemployment. While near-term budget plans imply greater spending, over the medium-term substantial fi scal space will re-open with public debt projected to decline below 40 percent of GDP by 2024. Source: Eurostat, CBS, and IMF staff calculations. Source: International Monetary Fund https://www.imf.org/en/News/Articles/2019/02/07/ NA021219-Netherlands-economic-outlook-in-fi ve-charts Extraordinary and Plenipotentiary Diplomatist • Vol 7 • Issue 4 • April-May 2019, Noida • 9