Executive Search in The Netherlands – 2019 Outlook
Economy Stable but Growth to Slow
Dutch economic growth is set to continue in the next two years, though easing slightly each year. In 2019 GDP growth will slow, with our forecast being lowered from 2.5% to 2%. GDP growth will be slightly lower still in 2020.
Exports and domestic spending continue to contribute to growth each year.
The economic outlook is still fairly favourable, but potential pitfalls persist, notably the trade conflict with the US and Brexit.
Unemployment will not fall much more despite sustained – albeit weakening – jobs growth. Most jobs are going to newcomers in the labour market
Inflation will jump in 2019 due to increases in the low VAT rate and energy tax. At the start of 2020 the impact of the VAT increase will drop out of the calculation, which will allow inflation to fall sharply again.
In 2019 the Dutch economy will grow by 2.6% and the budget surplus will increase to 1% of gross domestic product (GDP). The government debt will fall by €6 billion, to 49.6% of GDP. Unemployment will drop to 3.5% in 2019 – the lowest level since 2001.
The Netherlands is doing well and it’s time the Dutch people felt this more in their pockets. That’s why the government is taking measures to strengthen purchasing power, especially for those on low or middle incomes.
Purchasing power will grow in 2019, due to both rising wages and lower taxes on labour. Despite higher inflation, purchasing power is expected to increase by 1.5% next year, leaving almost all population groups better off.
The government is seeking to make the province of Groningen safer. It intends to invest at least €1 billion in the Groningen Future Fund. The cost of cutting back gas extraction will be €300 million in 2019, rising to €1.5 billion on a structural basis in 2023.
In late 2017, Nederlandse Aardolie Maatschappij (NAM) and Energie Beheer Nederland (EBN), an independent enterprise wholly owned by the Dutch state, reserved a minimum of €1.4 billion to cover claims for damages and the building reinforcement programme. These costs will result in lower natural gas revenues for central government.
To ensure that the Netherlands is properly prepared for Brexit, over €90 million will be earmarked for, among other things, additional capacity at the customs authorities and the Food and Consumer Product Safety Authority (NVWA).
The creation of the new Ministry of Agriculture, Nature and Food Quality and the Ministry of Economic Affairs and Climate Policy will entail one-off expenditure of over €60 million in 2019 for extra staff, ICT and other material resources. The structural costs are estimated at €37 million.
Lower-than-expected healthcare and social security expenditure, lower interest charges and other windfalls will help cover these extra costs.
According to the most recent forecast, the planned tax measures would give businesses a higher tax cut than envisaged in the coalition agreement, partly because the abolition of dividend tax will cost more than expected. The government has therefore taken additional measures to bring the tax cuts into line with the coalition agreement.
In the years ahead, the high corporation tax rate will be reduced by slightly less than was agreed: from 25% to 22.25% instead of 21%. SMEs will be spared, because the low corporation tax rate will be reduced by the amount set out in the coalition agreement. For SMEs, the government is also cutting taxes on labour by €100 million on a structural basis.
The government also sees risks to economic growth. Brexit, the threat of trade conflicts, and geopolitical tensions in other parts of the world could trigger a sudden economic downturn and a deterioration of public finances.
Controlling healthcare spending is another ongoing challenge for the future. The government has taken various measures, such as the outline agreements that the Ministry of Health, Welfare and Sport has concluded with the healthcare sector.
The increase in healthcare costs will be around €2 billion lower than envisaged. Nevertheless, healthcare will continue to be the biggest and fastest-growing item of government expenditure in 2019.