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