The Dutch economy contracted by 0.2% in the third quarter of this year. Statistics Netherlands also came to this conclusion after a second calculation, after this figure was already estimated in November. Statistics Netherlands also calculated that public debt decreased, consumer disposable income increased and non-financial corporations made higher profits. A nice Christmas message, thinks BNR in-house economist Han de Jong. “It’s better than expected.”
On an annual basis, the Dutch economy grew by 3.1%. This figure is also in line with the previous estimate. According to Statistics Netherlands, the fact that the economy grew year-on-year is due to the coronavirus measures, which were still influential in the third quarter of last year. The growth is mainly due to the trade balance, i.e. exports minus imports, household consumption and investment. “A growing economy also means higher tax revenues,” says CBS chief economist Peter Hein van Mulligen. “And higher prices in the supermarket also lead to higher VAT revenues.”
The second calculation is made 85 days after the end of the quarter. The first calculation is published approximately 45 days after the end of a quarter. According to Statistics Netherlands, the first estimate is often followed by economic data on, for example, construction, business services, the hotel and restaurant industry and government. Often this leads to only minor adjustments.
The increase in household consumption was revised upwards to 0.5 per cent. The decline in investment was slightly smaller, while the decline in government consumption was slightly larger. On balance, the growth figure has not changed.
Furthermore, according to the new estimate, employment growth was slightly lower. Not 59,000, but 53,000 jobs have been added. YoY, the number of employed and self-employed jobs increased by 375,000, not 386,000.
The government has deep pockets
Government debt declined in the third quarter relative to gross domestic product, reflecting the size of the economy. According to Statistics Netherlands, the debt stands at 49 percent, up from 50.8 percent at the end of June. This puts the Netherlands out of the danger zone, says Van Mulligen. “In the eurozone it has been agreed that the debt must remain below 60 per cent, we are well below it”.
In the first three quarters of this year, the government had seven billion euros left. In the same period last year, there was still a budget deficit of 20 billion euros. This was partly due to subsidies issued by the government to help companies during the corona period. Those disappeared this year, but the government has spent more on civil servant salaries, a plan to fill gas depots and compensation schemes such as those for savers. However, this was also offset by higher tax revenues.
Surprising numbers
BNR’s in-house economist Han de Jong thinks the figures are startling. ‘We’ve actually been looking at forecasts all year that will result in a shortage this year. The autumn note from the Ministry of Finance assumed a deficit of nine billion, but now there is a plus of seven billion. It went better than expected.’
In this regard, the government still has “pretty deep pockets,” thinks Van Mulligen. “The debt is decreasing, the budget balance is positive and the deficit is further below the European standard of three per cent of GDP”. And it is true, says De Jong. “If you compare that to other countries, we’re in a very good position.”
Despite the current account surplus, public debt has increased. At the end of September, the government had €451 billion in loans outstanding, €2 billion more than at the beginning of this year. But the size of the economy has grown faster. This was partly due to inflation, according to statisticians.
Rising disposable income
Dutch households had slightly more to spend in the third quarter of this year than in the same period a year earlier, according to Statistics Netherlands. The higher wages under collective bargaining agreements and the higher number of hours worked contributed in particular to this, according to the statistics office. At the same time, mortgage debt also increased.
Real disposable income increased by 0.8%. This is the increase in disposable income, adjusted for price increases. Income of both employees and self-employed was higher than in the third quarter of 2021. Total employee compensation grew by 8.3%. The number of hours worked increased by 3.2 percent, while collective bargaining wages increased by 3.4 percent. This is surprising given the high inflation, but this figure is an average over the last four quarters and the inflation is something from the last quarter. But the labor market is doing well, people are working longer hours and more jobs have been created,’ says Van Mulligen.
According to Han de Jong, the problem is that the 0.8% growth applies to all households together and says nothing about a household’s purchasing power. “And that’s the lowest growth we’ve seen in a long time, but I actually expected it to be worse given skyrocketing inflation.” But if it’s slightly better than expected, that’s still good news.’
The increase in total benefits received was 5.1%. Low-income households were compensated for rising energy prices and paid higher AOW benefits. Households paid 2.8% more in taxes and social security contributions.
The total mortgage debt of all Dutch people increased by 7.3 billion euros to 811.5 billion euros, according to Statistics Netherlands. In addition, the debt-to-GDP ratio, total mortgage debt as a percentage of the size of the economy, has declined. It is now 88.2%. This is the lowest level since the third quarter of 2003. The lower debt-to-GDP ratio is due to stronger gross domestic product (GDP) growth relative to total mortgage debt.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
