COMMISSION STAFF WORKING DOCUMENT Country Report The Netherlands 2020 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2020 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011
Date: 2020-02-26
Institutions: European Commission, Secretariat-General
Subjects: Netherlands, economic situation, green economy, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 26.2.2020  SWD(2020) 518 final  COMMISSION STAFF WORKING DOCUMENT Country Report The Netherlands 2020 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2020 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2020) 150 final}  
 
 
CONTENTS 

Executive summary 

1.  Economic situation and outlook 

2.  Progress with country-specific recommendations 

3.  Summary of the main findings from the MIP in-depth review 

4.  Reform priorities 

4.1.  Public finances and taxation 

4.2.  Financial sector 

4.3.  Labour market, education and social policies 

4.4.   Competitiveness, reforms and investment 

4.5.  Environmental sustainability 

Annex A: Overview table 

Annex B: Commission debt sustainability analysis and fiscal risks 

Annex C: Standard tables 

Annex D: Investment guidance on Just Transition Fund 2021-2027 for The 

Netherlands 

Annex E: Progress towards the Sustainable Development Goals (SDGs) 

References 

LIST OF TABLES 

Table 1.1: 
Table 2.1: 
Table 3.1: 
Table 3.2: 
Table 3.3a: 

Table 4.2.1: 
Table C.1: 
Table C.2: 

Key economic and financial indicators 

Assessment of 2019 CSR implementation (*) 

Outward spill-over heat map for Netherlands 

MIP assessment matrix(*) 

Simulated domestic impact and spillovers of a public investment boost of 1% of GDP 

for 10 years 

Financial soundness indicators 

Financial market indicators 

Headline social scoreboard indicators 

1 

4 

8 

15 

21 

26 

26 

30 

43 

52 

59 

65 

71 

72 

78 

79 

84 

14 
17 
22 
23 

25 
30 
72 
73 

 
 
 
Table C.3: 
Table C.4: 
Table C.5: 
Table C.6: 
Table E.1: 

Labour market and education indicators 

Social inclusion and health indicators 

Product market performance and policy indicators 

Green growth 

Indicators measuring the Netherlands’s progress towards the SDGs 

LIST OF GRAPHS 

GDP growth and components 

Labour market developments 

Net lending by institutional sector 

Construction investment (2000-2018) 

Employment growth by type (y-o-y change) 

Investment by sector, selected countries (2018) 

Regional GDP growth including and excluding natural gas extraction (2018) 

Actual and predicted wage growth based on fundamentals 

Tax mix in the Netherlands and the euro area (share in total tax revenues) 

Graph 1.1: 
Graph 1.2: 
Graph 1.3: 
Graph 1.4: 
Graph 1.5: 
Graph 1.6: 
Graph 1.7: 
Graph 1.8: 
Graph 2.1: 
Overall multi-annual implementation of 2011-2019 CSRs to date 
Graph 4.1.1:  General government expenditure, revenues and structural budget balance 
Graph 4.1.2:  Personal income tax rates, 2015-2020 
Graph 4.1.3:  Environment taxes (2018) 
Graph 4.1.4: 
Graph 4.2.1:  Private debt developments versus euro area average 
Graph 4.2.2:  Household debt versus GDP growth 
Graph 4.2.3:  House price developments (2008 Q1 = 100) (1) 
Graph 4.2.4:  House price valuation indicators 
Graph 4.2.5:  New housing supply versus expected needs 
Graph 4.2.6:  Compulsory payment wedge on labour income (2018) 
Graph 4.2.7:  Current account balance components 
Graph 4.2.8:  Non-financial corporate savings surplus: breakdown by company size (1) 
Graph 4.3.1:  Labour market indicators (1) 
Graph 4.3.2:  Vacancy rate by sectors (%, Q2 2019) 
Graph 4.3.3:  Unit labour cost decomposition 
Graph 4.3.4: 
Graph 4.3.5:  Relative ‘Child Penalty’ 
Graph 4.3.6:  Employment rates of the non-EU-born compared to natives (%) 
Graph 4.4.1:  Evolution of GDP per hour worked (1), NL versus peer countries 
Graph 4.4.2:  Quality score for transport infrastructure in the Netherlands 
Graph 4.5.1:  Greenhouse gas emissions by sector 
Graph 4.5.2:  Renewable energy usage by source 

Transition rate from temporary to permanent employee by educational level 

2 

74 
75 
76 
77 
79 

8 
9 
9 
10 
11 
11 
12 
13 
15 
26 
27 
27 
27 
33 
33 
34 
34 
36 
38 
40 
41 
43 
43 
44 
45 
47 
48 
52 
55 
59 
62 

 
 
 
 
LIST OF BOXES 

Box 1.1: Nitrogen Ruling Implications 

Box 2.2: EU funds and programmes to address structural challenges and to foster growth and 

competitiveness in the Netherlands 

Box 3.3: Public investment and potential spillovers 

Box 4.3.1: Monitoring performance in light of the European Pillar of Social Rights 

Box 4.4.1: Investment challenges and reforms in the Netherlands 

Box 4.5.1: Climate policy: towards carbon neutrality 

10 

20 
25 
49 
54 
61 

3 

 
 
 
 
EXECUTIVE SUMMARY 

the 

While  the  Dutch  economy  remains  resilient 
overall, 
growth 
subdued  medium-term 
prospects  underscore 
importance  of 
sustaining  the  reform  momentum (1).  There  are 
long-term challenges in the housing market, labour 
market  and  pension  system  that  still  need  to  be 
addressed in full. While the government has taken 
policy  measures  to  improve  the  housing  supply 
and  to  reduce  high  household  debt,  significant 
incentives  to  incur  debt  remain.  Expansionary 
fiscal  policy  and  nominal  (non-inflation  adjusted) 
wage  and  employment  growth  support  household 
to 
disposable 
external  rebalancing.  Tackling 
labour  market 
segmentation  remains  a  challenge  despite  recent 
measures.  The  government  and  social  partners 
have  reached  agreement  on  a  major  pension 
reform.  In  addition,  further  investments  in  R&D, 
human  capital  and  climate  and  energy  measures 
are  needed  to  boost  long-run  productivity  growth 
low-carbon 
transition 
and  address 
economy. Tackling these challenges would further 
support  the  resilience  of  the  Dutch  economy  and 
reduce risks from imbalances. 

income  growth  and  contribute 

to  a 

the 

labour 

Domestic  demand  is  the  sole  driver  of  a 
moderating  economic  expansion.  In  2019,  GDP 
increased by 1.7% amidst weaker external demand. 
In 2020 and 2021, growth is projected to moderate 
to 1.3% in both years. In conjunction with a lower 
tax  burden  on 
income  and  declining 
inflation, household disposable income is expected 
to  see  the  largest  improvement  in  years.  By 
extension, private consumption should still support 
economic  activity  in  2020.  Fiscal  policy  will  also 
support  growth,  as  tax  relief  for  households  and 
increasing  public  expenditure  leading  to  a  lower 
fiscal  surplus  of  around  0.5%  of  GDP  in  2020. 
Government  debt  has  declined  to  below  50%  of 
GDP  in  2019  and  will  continue  to  decline  in  the 

(1)  This  report  assesses  the  Netherlands’  economy  in  light  of 
the  European  Commission’s  Annual  Sustainable  Growth 
Strategy  published  on  17  December  2019.  In 
this 
document, the Commission sets out a new strategy on how 
to address not only the short-term economic challenges but 
also  the  economy's  longer-term  challenges.  This  new 
economic agenda of competitive sustainability rests on four 
dimensions:  environmental  sustainability,  productivity 
gains,  fairness  and  macroeconomic  stability.  At  the  same 
time,  the  Commission  published  the  Alert  Mechanism 
Report  (AMR)  that  initiated  the  eighth  round  of  the 
macroeconomic imbalance procedure. The AMR found that 
the  Netherlands  warranted  an  in-depth  review,  which  is 
presented in this report. 

coming years, indicating that public finances are in 
good  shape.  At  the  same  time,  the  projected 
increase in public expenditure as a result of ageing 
long-term 
for 
risks 
points 
sustainability of public finances. 

to  medium 

the 

Despite  a  tight  and  well-performing  labour 
market  in  general,  wage  growth  is  still  modest 
compared  to  fundamentals.  The  unemployment 
rate reached its lowest level since 2008 and labour 
force  participation  increased.  Employment  gains 
are expected to remain positive, but will be weaker 
in  the  coming  years.  Permanent  contracts  account 
for  the  bulk  of  recent  employment  gains,  which 
seems  to  reflect  current  labour  market  tightness, 
rather 
labour  market 
segmentation. The persistence of a high degree of 
segmentation  could  offer  a  partial  explanation  for 
somewhat 
lagging  wage  developments,  and 
remains a source of vulnerability in the face of any 
adverse economic shocks.  

reduction 

than  a 

in 

emissions. 

Investment 
is  set  to  slow  amidst  weaker 
business  confidence  and  substantial  policy 
uncertainty linked to a ruling by the Council of 
State  on  nitrogen 
Investment 
continued  to  support  growth  in  2019,  with  the 
investment  rate  broadly  in  line  with  the  euro  area 
average  at  21%  of  GDP.  The  share  of  public 
investment  is  expected  to  increase  to  3.5%  of 
GDP, significantly below pre-crisis levels but well 
above  the  euro  area  average.  Business  investment 
is set to slow in conjunction with weaker business 
confidence, increased trade related uncertainty and 
weaker  external  demand.  Risks  to  the  investment 
outlook  are  relatively  high  given  the  uncertainty 
over  construction  and  infrastructure  investment  as 
a  result  of  the  nitrogen  ruling.  The  restrictions on 
issuing new permits around Natura 2000 protected 
areas  implied  by  the  ruling  are  likely  to  translate 
into  weaker  construction  investment  in  2020, 
despite ongoing housing shortages and measures to 
mitigate its adverse effects.  

The  Netherlands  has  made  some  progress  in 
country-specific 
the 
addressing 
recommendations.  

2019 

There  has  been  some  progress  in  the  following 
areas: 

  Taking  measures  to  reduce  the  debt  bias  for 
households  and  distortions  in  the  housing 

4 

 
 
                                                           
 
market,  including  by  helping  to  develop  the 
private rental sector.  

 

Implementing  policies  to  increase  household 
disposable  income,  including  by  strengthening 
the conditions that support wage growth.  

  Addressing features of the tax system that may 

facilitate aggressive tax planning.  

  Reforming  the  second  pillar  of  the  pension 

system.  

  Strengthening life-long learning and upgrading 

skills.  

  Supporting and upward trend in investment.  

  Focusing  investment-related  economic  policy 
on  renewable  energy,  energy  efficiency  and 
greenhouse gas emissions reduction.  

  Focusing  investment-related  economic  policy 

on addressing transport bottlenecks.  

There has been  limited progress in the following 
areas: 

  Reducing  the  incentives  for  the  self-employed 
without  employees  and  promoting  adequate 
social protection for the self-employed.  

  Tackling bogus self-employment.  

  Focusing  investment-related  economic  policy 
on R&D in particular in the private sector.  

The  Netherlands  performs  very  well  on  most 
indicators  of  the  Social  Scoreboard  supporting 
the  European  Pillar  of  Social  Rights.  It  has  a 
good  record  overall  in  terms  of  labour  market 
performance  and  social  situation.  Per  capita  real 
gross  disposable  income  of  households  continued 
to  rise,  with  income  inequality  below  the  EU 
average.  The  Netherlands 
top 
is  among 
performers, with a low level of poverty. 

the 

On progress towards its national targets under the 
Europe  2020  strategy, 
the  Netherlands  has 
achieved its targets on the employment rate, early 
school  leaving  and  higher  education.  While  the 
target  for  reducing  national  greenhouse  gas 

Executive summary 

emissions  in  the  non-Emissions  Trading  System 
(ETS) sectors is expected to be met, this is unlikely 
for  energy  savings.  The 
target  of  14%  for 
renewable energy consumption in 2020 is expected 
to  be  out  of  reach.  Although  the  Netherlands  is  a 
frontrunner  in  decarbonising  its  transport  sector, 
the  use  of  renewable  energy  in  transport  is  below 
the  EU  average.  While  the  Netherlands  has  taken 
measures to increase R&D spending, a substantial 
further effort is needed to reach 2.5% of GDP.  

on 

states 

As  a  high-income  country,  the  Netherlands 
ranks  as  one  of  the  top  performers  among  EU 
member 
Sustainable 
Development  Goals  (SDGs),  such  as  eliminating 
poverty  (SDG  1)  and  reducing  inequalities  (SDG 
10).  The  only  area  in  which  it  scores  lower  than 
most  –  albeit  with  a  positive  trend –  is  climate 
action (SDG 13). (2) 

several 

findings  of 

review 
The  main 
contained  in  this  report  and  the  related  policy 
challenges are as follows:  

in-depth 

the 

  Mortgage  interest  deductibility  continues  to 
fuel  household  debt.  Private  debt  is  well 
above  macroeconomic  imbalance  procedure 
thresholds.  Corporate  debt  is  largely  linked  to 
intra-group  borrowing  by  multinationals  and 
poses 
limited  macroeconomic  risks.  High 
household debt makes households vulnerable to 
shocks  with  macroeconomic  repercussions. 
Although  the  ratio  of  household  debt  to  GDP 
has  been  falling,  it  is  still  twice  the  euro  area 
average.  Household  debt  largely  consists  of 
mortgage  debt  and  is  fuelled  by  generous  tax 
relief  on  mortgage  interest  payments.  Despite 
the reduction in mortgage interest deductibility, 
debt-financed home ownership remains heavily 
subsidised. 

  Subsidies  to  owner-occupied  housing  and 
social  housing  lead  to  an  underdeveloped 
private  rental  market.  The  (rent-controlled) 

(2)  Within the scope of its legal basis, the European Semester 
can help drive national economic and employment policies 
towards the achievement of the United Nations Sustainable 
Development  Goals  (SDGs)  by  monitoring  progress  and 
ensuring  closer  coordination  of  national  efforts.  The 
present  report contains  reinforced  analysis  and  monitoring 
on the SDGs. A new annex (Annex E) presents a statistical 
assessment of trends in relation to SDGs in the Netherlands 
during  the  past  five  years,  based  on  Eurostat’s  EU  SDG 
indicator set. 

5 

 
 
                                                           
Executive summary 

to 

is  set 

fade  given 

Since  2017,  it  has  turned  net  lender,  although 
this 
the  current 
expansionary  fiscal  stance.  In  the  coming 
years,  the  current  account  surplus  is  expected 
to decline somewhat as import growth outpaces 
export growth, reflecting a weakening external 
environment  combined  with  relatively  robust 
domestic demand.  

spillover 

international 

  Boosting  domestic  investment  has  small  but 
positive 
effects. 
Simulations in this report show that a structural 
the 
increase 
Netherlands  would  reduce  the  Dutch  current 
account surplus and would also have a positive 
impact on economic growth in other euro area 
countries. 

in  public 

investment 

in 

Other key structural issues analysed in this report, 
which  point  to  particular  challenges  facing  the 
Dutch economy, are the following: 

  The  labour  market  performed  well  across 
the  board,  but  challenges  involving  labour 
market  segmentation  as  well  as  integration 
of  people  with  a  non-EU  background 
remain,  in  particular  women.  Employment 
reached  a  record  high  and  unemployment 
remains close to historic lows. An increasingly 
tight  labour  market  has  recently  provided 
incentives  for  employers  to  offer  more  open-
ended contracts. However, the share of flexible 
employment  and  the  number  of  self-employed 
without employees remains high, and there are 
large differences in the working conditions and 
social  protection  under  different  employment 
contracts  and  work  arrangements.  In  addition, 
there is still a large untapped labour pool linked 
to  the  high  number  of  women  in  part-time 
employment  and  people  with  a  non-EU-born 
migrant 
the 
employment situation of those at the margins of 
the labour market remains challenging. This is 
partly 
large 
the 
performance  gap  between  non-immigrants  and 
pupils born abroad and the fact that native-born 
pupils with a migrant background only partially 
catch up. 

Furthermore, 

background. 

remaining 

linked 

to 

  Economic 

evidence 

the 
Netherlands’ 
for 
aggressive  tax  planning.  Specifically,  rules 

that 
suggests 
tax  rules  are  used 

social housing sector is large compared to other 
Member States. The private rental market is the 
only  non-subsidised  housing 
sector  and 
remains  underdeveloped.  The  lack  of  a  well-
functioning  middle  segment  on  the  rental 
market  encourages  households  to  enter  the 
owner-occupancy market early, leading to high 
debt-to-income  ratios  and  potential  financial 
vulnerability issues. 

in 

  The second pillar pension system plays a key 
role  in  generating  a  high  savings  rate, 
combination  with  high 
especially 
mortgage  debt.  While  the  pension  system 
performs  well  on  pension  adequacy  and  fiscal 
sustainability,  it  has  drawbacks  in  terms  of 
transparency  and 
intergenerational  fairness, 
flexibility.  Moreover,  second  pillar  pension 
contributions  are  an 
important  driver  of 
compulsory  savings  for  households,  and  can 
affect household consumption in a pro-cyclical 
way.  Households  combine  substantial  housing 
and  pension  wealth  with  high  mortgage  debt. 
However,  the  former  are  highly  illiquid  and 
unevenly  distributed  across  generations.  This 
makes  households  vulnerable  to  economic 
shocks 
the  pro-cyclical 
dynamics  of  household  finances.  Effective 
implementation  of  the  planned  pension  reform 
could  address  key  challenges  in  the  second-
pillar system. 

reinforces 

and 

the  past 

  The  current  account  continues  to  show  a 
marked  surplus.  The  Netherlands  has  had  a 
current account surplus of over 7% of GDP on 
average  over 
two  decades.  All 
institutional  sectors  remain  in  surplus,  which 
led  to  the  current  account  surplus  rising  to 
11.2%  of  GDP 
in  2018.  Non-financial 
corporations  are  the  most  important  structural 
driver  of  the  savings  surplus.  This  is  in  part 
linked to the large presence of multinationals in 
the  Netherlands,  but  small  and  medium-sized 
enterprises  are  also  a  significant  contributor. 
The  latter  appears  driven  in  part  by  tax 
factors 
other 
incentives 
discouraging 
retained   
earnings.  The  household  sector’s  savings 
surplus is largely the result of high compulsory 
savings,  including  via  the  pension  system, 
combined  with  pressure  to  reduce  mortgage 
debt. The government sector was running large 
deficits  during  the  crisis  and  in  its  aftermath. 

structural 
the  distribution  of 

and 

6 

 
 
Executive summary 

investment 

in  sectors  with 

  Investments in R&D, human capital, climate 
and  energy  measures  can  help  support 
productivity  growth  and  address  other  key 
societal  challenges.  The  Netherlands  remains 
one of the most productive countries in the EU, 
but in common with most mature economies, it 
has  experienced  a  notable  slowdown 
in 
productivity  growth.  Targeted  policy  action, 
including 
the 
strongest prospects to raise potential growth for 
the  wider  economy,  can  contribute  to  tackling 
the challenges presented by this global trend. In 
particular,  investments  in  R&D  as  well  as 
human  capital  –  notably 
training  and 
upskilling and boosting digital skills – can help 
support 
long-run  productivity  growth  and 
capacity. 
maintain 
Investment  in  initiatives  to  address  climate 
change  and  promote  the  energy  transition  can 
make  a  key  contribution  to  wider  societal 
goals, including the need to ensure sustainable 
and 
economic  growth. 
Furthermore,  investment  in  new  housing  is 
needed 
the  current  housing 
shortage.  

resource-efficient 

to  alleviate 

innovation 

strong 

in 

a 

to 

for  concern. 
of 
agreed 

such  as  the  absence  of  withholding  taxes  are 
the 
cause 
In  addition 
and 
implementation 
European 
the 
internationally 
initiatives, 
Netherlands  has 
some  unilateral 
taken 
measures,  notably  by  putting  into  place  a  new 
withholding 
royalty 
payments  to  low-tax  countries  as  of  2021, 
however its effectiveness remains to be seen. 

interest  and 

tax  on 

  A  more  effective  anti-money  laundering 
framework  is  needed  to  combat  the  misuse 
of  major  financial  institutions  and  legal 
structures  for  money  laundering  purposes. 
The misalignment between the low reporting of 
unusual  transactions  by  trust  and  company 
service  providers  and  tax  advisors  and  their 
high risk exposure calls for stricter supervision. 
Given the extensive presence of complex legal 
structures,  the  rapid  establishment  and  well-
functioning of the beneficial ownership register 
will  be  key  to  avoid  misuse  of  such  entities. 
Recent  big  money  laundering  cases  involving 
Dutch financial institutions also show the need 
to strengthen supervision and enforcement. 

investment 

than  expected  so 

  Ambitious goals for tackling climate change 
challenges  have  been  set.  The  budgetary  and 
macroeconomic  impact  of  policy  plans  under 
the climate agreement is expected to be limited. 
The transition towards renewable energy usage 
has  been  slower 
far. 
in  climate-focused 
Substantial 
R&D  and  innovation,  as  well  as  renewable 
energy  production  and  related  infrastructure, 
are  needed  to  support  long-term  sustainability 
goals.  The  Commission’s  proposal  for  a  Just 
Transition  Mechanism  under  the  next  multi-
annual  financial  framework  for  the  period 
2021-2027,  includes  a  Just  Transition  Fund,  a 
dedicated 
scheme  under 
transition 
InvestEU, and a new public sector loan facility 
with  the  EIB.  It  is  designed  to  ensure  that  the 
transition towards EU climate neutrality is fair 
by  helping  the  most  affected  regions  in  the 
Netherlands to address the social and economic 
consequences. Key priorities for support by the 
Just Transition Fund, set up as part of the Just 
Transition Mechanism, are identified in Annex 
D,  building  on  the  analysis  of  the  transition 
challenges outlined in this report. 

just 

7 

 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

GDP growth 

In  2019, 
its  sixth 
the  economy  entered 
consecutive  year  of  expansion,  but  growth 
slowed  as  external  demand  weakened,  which 
translated  into  subdued  exports.  At  the  same 
time,  strong  domestic  demand  helped  sustain  a 
healthy  GDP  growth  rate  of  1.7%.  The  largest 
growth contribution came from investment, which 
benefited  from  low  capital  cost,  high  profitability 
and overall supportive domestic demand, despite a 
more challenging environment (Graph 1.1). Private 
consumption  was 
continued 
employment growth in a tight labour market.  

boosted 

by 

Graph 1.1:  GDP growth and components 

Source: European Commission 2019 Autumn forecast 

Growth  is  expected  to  stabilise  at  a  lower  level 
in  2020  and  2021  as  domestic  demand  remains 
the  sole  driver  of  a  more  modest  expansion. 
Private and public consumption are expected to be 
the main growth drivers, with private consumption 
set  to  benefit  from  an  expected  improvement  in 
real  wages.  Public  consumption  will  also 
contribute 
it  should 
to  domestic  demand  as 
increase  by  about  2.6%  in  real  terms  in  2020  and 
2.1%  in  2021,  following  a  more  expansionary 
fiscal stance. Export growth will grow at a slower 
rate  than  historically,  and  import  growth  should 
continue  to  outpace  export  growth  this  year  and 
next  on  the  back  of  solid  domestic  demand. 
Business  confidence  has  declined  as  a  result  of 
increased trade related uncertainty over the course 
of  2019,  and  business  investment  is  expected  to 

8 

solid 

slow in 2020 in tandem with more modest growth. 
Although 
in  2019,  construction  and 
infrastructure  investment  has  become  affected  by 
policy uncertainty because of the nitrogen ruling of 
the Council of State (see Box 1.1). If unaddressed, 
this would lead to weaker construction investment. 
The  output  gap,  which  has  been  positive  since 
2017, should remain positive but start closing over 
the coming years.  

Inflation 

Consumer  price  inflation  is  set  to  decline  after 
experiencing a peak in 2019. As measured by the 
harmonized index of consumer prices (3), inflation 
increased  to  2.7%  in  2019  due  to  higher  indirect 
taxes (VAT and energy taxes). In 2020, inflation is 
expected to moderate to 1.4% as these indirect tax 
increases  no  longer  impact  inflation  figures  and 
weaker  external  demand  in  turn  translates  into  an 
alleviation  of  inflationary  pressures.  At  the  same 
time,  accelerating  wage  growth  should  exert 
upward pressure on prices, especially for services. 
A  substantial  lowering  of  energy related  taxes  for 
households  will  generate  downward  pressure  on 
energy price inflation. 

Consumption 

Private consumption is set to remain buoyant in 
2020 on the back of robust growth in disposable 
income.  The  labour  market  is  expected  to  remain 
tight as employment gains remain positive despite 
the  participation  rate  already  being  at  a  record 
high,  translating  into  a  further  acceleration  of 
nominal wage growth. In conjunction with a lower 
tax  burden  on  labour  income  and  dissipating 
inflation, household disposable income is expected 
to  see  a  substantial  improvement.  By  extension, 
private  consumption  should  continue  to  support 
economic activity in 2020.  

Investment 

Investment continued its upward trend in 2019 
and  is  now  broadly  in  line  with  the  euro  area 
average (Graph 1.2). In 2018, public investment as 
a  share  of  GDP  (3.3%  of  GDP)  was  substantially 

(3)  The  Harmonized  Index  of  Consumer  Prices  (HICP)  is  an 
indicator  of  inflation  and  price  stability  for  the  European 
Central  Bank. 
the  same 
methodology. 

  All  EU  countries  follow 

-5-4-3-2-101234567-5-4-3-2-10123456712131415161718192021Output gap (rhs)InventoriesPublic consumpt.investment (GFCF)Net exportsPrivate consumpt.Real GDP (y-o-y%)pps. forecast 
 
   
                                                           
1. Economic situation and outlook 

supportive of growth in 2019 on the back of strong 
house  price  increases  of  around  6%  in  2019  (see 
Section  4.2.4).  However,  over  the  course  of  the 
summer  of  2019,  the  nitrogen  ruling  from  the 
Council  of  State  became  a  source  of  significant 
policy-induced  uncertainty  for  construction  and 
infrastructure,  as  it  resulted  in  permits  no  longer 
being granted for such projects and led to de facto 
higher 
new 
constructions  around  Natura  2000  protected  areas 
(Ministry  of  the  Interior,  2019).  The  nitrogen 
ruling  could  translate  into  weaker  construction 
investment in 2020 (see Box 1.1). 

environmental 

standards 

for 

Graph 1.3:  Construction investment (2000-2018) 

to 

the 

higher than the euro area average (2.7%) and peer 
European 
countries.  According 
Commission’s  2019  Autumn  Forecast, 
is 
it 
expected  to  increase  to  3.5%  in  2021.  Household 
investment as a share of GDP is comparable to the 
euro area average. Business investment, which has 
historically  been  lower  than  the  rest  of  the  euro 
area,  remains  relatively  low  compared  to  the  euro 
area average despite strong growth in recent years, 
in  particular  as  a  share  of  corporate  savings  (see 
Section 4.2.6). This could indicate scope for higher 
private  investment,  in  particular  in  R&D  (see 
Section 4.4.2). Further investment needs have been 
identified  in  R&D,  upskilling-  and  reskilling  of 
human  capital  and  climate  and  energy  to  boost 
productivity  growth  and  to  maintain  a  strong 
innovation capacity (see Section 4.4.1). 

Graph 1.2: 

Investment by sector, selected countries 
(2018) 

Source: European Commission (Eurostat) 

Labour market 

The  unemployment  rate  bottomed  out  at  its 
lowest  level  since  2001  as  the  labour  market 
remains  tight.  The  unemployment  rate,  which 
stood  at  3.8%  in  2018,  fell  to  3.4%  in  2019. 
(Graph 1.4).  Employment  increased  by  1.7%  in 
2019  and  is  also  expected  to  remain  marginally 
positive  this  year.  Labour  force  participation  (age 
15-75)  now  stands  at  a  relatively  high  71.4%. 
Youth  and  long-term  unemployment  rates  have 
also  fallen  compared  to  last  year.  However,  some 
untapped  potential  remains  as  regards  (part-time) 
employment of women, older workers, people with 
a  migrant  background  and  (partly)  people  with 
disabilities (see Section 4.3.1).  

Source: European Commission (Eurostat) 

confidence 

For  2020,  investment  is  set  to  slow  amidst 
weaker  business 
and  policy 
uncertainty linked to the nitrogen ruling.  Trade 
related  uncertainty  as  well  as  weaker  external 
demand have led to lower business confidence and 
weaker investment dynamics since the second half 
of  2019.  This  in  turn  translates  into  a  weaker  for 
business investment growth in 2020 (CPB, 2019c). 
Household  residential  investment  has  seen  on 
average  double-digit  increases  in  recent  years 
(Graph 1.3), and construction investment remained 

9 

3.3%2.4%2.6%3.3%2.7%6.3%6.3%5.5%6.0%5.7%11.1%12.0%15.3%12.8%13.4%0.05.010.015.020.025.0NLDEBEFREAas a % of GDPBusiness investmentHousehold investmentPublic investment0.02.04.06.08.010.012.014.0024681012142000200220042006200820102012201420162018As a % of GDPNon-residential construction NLDwellings NLConstruction NLConstruction EA 
   
   
1. Economic situation and outlook 

Box 1.1: Nitrogen Ruling Implications 

The  Dutch  Programmatic  Approach  to  Nitrogen  (‘Programmatische  Aanpak  Stikstof’,  PAS)  is  a  policy 
framework from 2015, which aimed to reduce the deposition of reactive compounds of nitrogen (1) in Natura 
2000  protected  areas  to  prevent  soil  acidification  and  loss  of  biodiversity.  PAS  was  used  as  the  basis  for 
granting construction and infrastructure permits in case of such emissions in anticipation of future reductions 
of  nitrogen  depositions.  However,  the  Council  of  State  (‘Raad  van  State’)  annulled  PAS  as  the  basis  for 
granting  such  permits  on  29/5/2019  because  of  its  incompatibility  with  Art  6  of  Habitats  Directive 
92/43/EEC,  as  it  failed  to  secure  such  future  reductions  ex  ante.  This  subsequently  led  to  a  stop  of  new 
permits  for  projects  around  these  protected  areas,  causing  significant  policy  uncertainty  for  housing  and 
infrastructure investment over the course of 2019. In part as a result of the nitrogen ruling, the number of 
granted  building  permits  has  dropped  substantially,  and  some  infrastructure  projects  are  expected  to 
experience substantial delays (Ministry of Infrastructure and Water Management, 2019). If unaddressed, the 
ruling  could  lead  to  an  estimated  cumulative  reduction  of  36 000  dwellings  being  realized  up  to  2024. 
Annual  housing  production  in  2024  could  drop  to  65 000,  as  compared  to  baseline  predictions  of  around 
75 000  new  dwellings  a  year  (Ministry  of  the  Interior,  2019;  Koops  and  Manshanden,  2019).  The 
government  has  therefore  announced  short-term  measures  that  reduce  emissions  with  the  objective  of 
improving the quality of the nature and re-enabling permit grants and the continuation of infrastructure and 
housing projects, although uncertainties remain (Ministry of Agriculture, Nature and Food Quality, 2019). 
As  of  yet,  these  measures  concern:  (i)  a  reduction  of  the  day-time  maximum  speed  on  highways  to  100 
km/h; (ii) a voluntary buyout scheme for pig farmers; and (iii) a  different composition of cattle feed. The 
government is considering structural measures for both permit grants as well as nature preservation.  

(1)  Namely nitrates, ammonia, and various nitrogen oxides. 

have increased by around 2.5% in 2019, compared 
to 1.7% in 2018. However, it remained roughly in 
line  with  the  inflation  rate,  thus  resulting  in 
stagnating  real  compensation,  and  real  wages 
therefore remained flat in 2019. For 2020 however, 
trade  unions  have  also  put  forward  substantial 
wage  demands,  and  nominal  wage  growth  per 
employee  is  expected  to  accelerate  further  to 
around  3%.    A  substantial  increase  in  household 
disposable  income  is  therefore  expected  for  2020 
as  nominal  wage  growth  coincides  with  lower 
expected inflation and a reduction of the labour tax 
wedge (Ministry of Finance, 2019a) (4), supporting 
private  consumption  (see  Section 4.3).  However, 
nominal  wage  growth  still  seems  to  lag  behind 
expected growth based on its historical relationship 
with  inflation,  productivity  and  unemployment 
developments  (Graph 1.5).  The  relatively  large 
share  of  temporary  employees  and  self-employed 
could  offer  a  partial  explanation 
this 
phenomenon (European Commission, 2019a).  

for 

(4)  Measures  for  2020  include  raising  the  working  tax  credit 
(arbeidskorting)  and  the  general  tax  credit  (algemene 
heffingskorting),  as  well  as  a  substantial  reduction  in  the 
energy bill for households amongst others. 

Graph 1.4: 

Labour market developments 

Source: Statistics Netherlands 

Nominal  wage  growth  accelerated  further,  but 
remains  below  what  would  be  expected  based 
on  its  relationship  with  fundamentals.  With 
wage  developments  lagging  the  cycle,  ongoing 
favourable labour market conditions are translating 
into  an  acceleration  of  nominal  wage  growth,  as 
nominal  compensation  per  head  is  expected  to 

10 

0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%7800800082008400860088009000920094002016201720182019x thousand personslabour force (lhs)employment (lhs)unemployment (rhs) 
 
 
 
   
                                                           
1. Economic situation and outlook 

Graph 1.5:  Actual and predicted wage growth based on 

Graph 1.6: 

Employment growth by type (y-o-y change) 

fundamentals 

Source: European Commission 

to  address 

implemented 

Permanent  contracts  account  for  the  bulk  of 
recent employment growth, but this seems to be 
a  reflection  of  labour  market  tightness  as 
labour market segmentation remains prevalent. 
Since 2018, job growth has increasingly consisted 
of permanent contracts (Graph 1.6). This has led to 
a  modest  decline  in  the  combined  incidence  of 
self-employed  and  temporary  employees  in  total 
employment  from  39.0%  in  Q1  2018  to  37.9%  in 
Q3  2019.  Although  some  measures  have  recently 
been 
labour  market 
segmentation (5),  distinct  institutional  factors  that 
underlie  the  high  combined  incidence  of  flexible 
self-employed  without 
arrangements 
employees  largely  remain  in  place  (Council  of 
State,  2018).  The  decline  therefore  seems  a 
reflection  of  current  labour  market  tightness  as 
opposed to being policy-induced , and its share is 
expected  to  remain  high,  also  compared  to  other 
EU  countries  (see  Section 4.3.1).  The  persistence 
of  such  a  degree  of  labour  market  segmentation 
remains  a  source  of  vulnerability,  as  it  could 
amplify  shocks  for  certain  groups  in  case  of 
adverse economic developments (CPB, 2019b). 

and 

tax 

allowance 

(‘Zelfstandigenaftrek’) 

(5)  Most notably, these include a phased reduction of the self-
employed 
in 
incremental steps from €7 260 to €5 000 per self employed 
per annum over 10 years, as well as measures incorporated 
in  the  Balanced  Labour  Act  (‘Wet  Arbeidsmarkt  in 
Balans’).  On  the  later,  these  include  the  introduction  of 
minimum 
to  employees 
working  on  a  payroll  basis;  entitlement  to  the  transition 
allowance  as  of  day  1  of  a  contract;  the  introduction  of 
limits to the use of zero hour contracts; and differentiation 
of unemployment contributions by type of contract instead 
of per sector. In the context of the framework agreement on 
pension  reform,  the  government  also  aims  to  implement  a 
mandatory disability insurance for the self-employed. 

labour  conditions  applicable 

Source: Statistics Netherlands 

Public finances 

the  surplus 

After  sizeable  surpluses  in  2018  and  2019,  the 
2020  fiscal  stance  is  expansionary.  In  2018,  the 
general government headline surplus reached 1.5% 
of GDP following solid revenue growth, outpacing 
is 
expenditure  growth.  In  2019, 
expected to have remained around this level, with 
higher  expenditure  offset  by  revenue  growth.  In 
2020  and  2021,  the  headline  surplus  is  set  to 
decline to around 0.5% as tax relief for households 
kicks-in.  In  structural 
is 
projected to decline from 0.9% in 2018 to 0.2% in 
2020 and 2021, pointing to an expansionary fiscal 
stance  (see  Section 4.1).  The  government  also 
implemented  budgetary  measures  aimed  at 
reducing  greenhouse  gas  emissions  by  49%  in 
2030 compared to 1990 levels (see Section 4.5). 

the  surplus 

terms, 

External Position 

Having  peaked  at  a  record  11.2%  of  GDP  in 
2018, the current account surplus has started to 
decline  but  remains  high.  A  persistent  trade 
surplus  in  goods,  averaging  9.9%  of  GDP  over 
2014-2018  of  which  around  3%  pps.  re-exports, 
has  been  the  main  driver  of  the  current  account 
surplus from a balance of payments perspective. In 
2019,  the  current  account  surplus  is  expected  to 
have  declined  somewhat  as 
import  growth 
outpaced export growth. For the coming years, the 
current account surplus is expected to remain high 
but  decline  further  as  robust  domestic  demand 
coincides  with  a  weak  external  environment  as 
well  as  declining  natural  gas  extraction.  Net 
primary  income  flows  have  had  a  limited  impact 
on  the  current  account  on  average  over  a  multi-

11 

-2-101234567%NLPrediction based on inflation, productivity and unemploymentActual nominal compensation growth-250-200-150-100-500501001502002502013201420152016201720182019Yo-y change x 1 000 personsself-employedtemporarypermanentoverall 
   
                                                           
   
year  period,  but  remain  a  source  of  short-term 
volatility.  

in 

large  part  of 

the  savings  surplus 

is 
A 
attributable  to  the  corporate  sector,  with  net 
savings  of  8.1%  of  GDP  in  2018  (Graph 1.7). 
Both large companies and small and medium sized 
enterprises (SMEs) make a substantial contribution 
to the aggregate savings surplus. SMEs account for 
a  relatively  stable  2-3%  of  GDP  per  annum, 
whereas  large  companies  including  multinationals 
account for the rest of the savings surplus and are 
the  savings 
the  volatility 
responsible  for 
behaviour  of  non-financial  corporates  (DNB, 
2019a). Tax policy could play a role in explaining 
part  of  these  high  corporate  savings  (European 
Commission,  2019a).  At  the  same  time,  however, 
note  retained  earnings  of  multinationals  that  are 
domiciled  in  the  Netherlands  are  statistically 
attributed  to  the  Dutch  current  account  surplus, 
even though they are largely owned by foreigners 
(IMF,  2019b).  Conversely,  Dutch  pension  funds 
are  large  portfolio  investors  in  foreign  companies 
which  have  considerable  non-distributed  earnings 
that  are  not  included  in  Dutch  national  accounts, 
even  though  the  ultimate  beneficial  owners  are 
Dutch  employees  participating  in  the  capital-
covered  second-pillar  pension  scheme.  Correcting 
for  these  effects  would  shift  the  surplus  from 
corporations  to  households  by  an  estimated  2-4% 
al., 
of  GDP 
2014; 
Section 4.2.6).  However, 
the  overall  current 
account surplus would not change much following 
such a correction. 

(Rojas-Romagosa 

et 

Graph 1.7:  Net lending by institutional sector 

1. Economic situation and outlook 

While household (mortgage) debt has continued to 
increase  in  nominal  terms  in  recent  years,  the 
increase  was  limited  to  around  1%  per  year  on 
average  in  2015-2018  despite  strong  house  price 
increases. On the back of robust real GDP growth, 
this  has  resulted  in  passive  deleveraging,  with 
household  debt  declining  from  111%  of  GDP  in 
2015  to  a  still  substantial  102%  of  GDP  in  2018. 
The  high  stock  of  household  debt,  which  mainly 
consists  of  mortgage  debt,  is  largely  driven  by 
policy distortions in the housing market as well as 
prevailing  tax  incentives.  Although  a  series  of 
incremental  measures  have  been  taken  in  recent 
in  mortgage  debt  growth (6), 
years 
household  (mortgage)  debt  is  likely  to  remain 
elevated as substantial policy distortions remain in 
place (see Section 4.2.4).  

rein 

to 

Social dimension 

system, 

result  of 

Income  inequality  after  taxes  and  transfers  is 
relatively  low  and  has  remained  stable  over 
time. Moreover, the Social Scoreboard shows that 
the  Netherlands  has  one  of  the  lowest  share  of 
people  at  risk  of  poverty  or  social  exclusion  (see 
the  highly 
Section  4.3.1).  As  a 
redistributive 
the 
tax  and  benefit 
disposable income of the top 20% after tax is only 
around  4  times  that  of  the  lowest  20% (7),  well 
below  the  euro  area  average  of  5.1.  In  the 
framework  of  Sustainable  Development  Goal  10 
(reduced 
inequality  has 
remained  stable  in  terms  of  disposable  income, 
while  income  inequality  in  gross  income,  before 
taxes and benefits, has increased substantially over 
the  last  20  years.  This  points  to  increasing 
redistribution,  which  is  also  reflected  in  the  fact 
that around 75% of the gross income of the lowest 
income quintile consists of benefits and allowances 
(Ministry  of  Finance,  2019c).  Significant  income 
differences  persist  between  people  with  and 
without  a  migrant  background,  with  no  signs  of 
improvement since 2003 (see Section 4.3.1).  

inequalities), 

income 

Source: European Commission (Eurostat) 

Household  savings  remain  in  surplus  as  they 
continue  to  experience  deleveraging  pressures. 

(6)  These include the tightening of rules for loan-to-value and 
loan-to-income  ratios,  making  interest-only  mortgages 
ineligible for mortgage interest tax deductibility (MID), as 
well  as  an  accelerated  reduction  MID  in  three  equal  steps 
from 49% to 37% by 2023. 

(7)  The S80/S20 income quintile share ratio shows the income 
share of the richest 20% of the population compared to the 
income  share  of  the  poorest  20%  of  the  population  for 
equivalised  after-tax  disposable  income.  The  indicator  is 
based  on  the  EU-SILC  (statistics  on  income,  social 
inclusion and living conditions). Source: Eurostat. 

12 

-7.0-2.03.08.013.000010203040506070809101112131415161718-7.0-2.03.08.013.0as a % of GDPGeneral governmentHouseholdsFinancial corporationsNon-Financial corporationsTotal Economy 
   
                                                           
the 

lower  end  of 

Intergenerational  differences  and  low  liquid 
wealth  at 
the  wealth 
distribution  lead  to  high  net  wealth  inequality. 
The  top  10%  of  households  own  around  61%  of 
total  net  wealth,  while 
the  bottom  20%  of 
households  have  negative  net  wealth  (Statistics 
Netherlands,  2018 data). High wealth inequality, , 
in  combination  with  high  household  mortgage 
debt,  may  strengthen  procyclicality  in  houshold 
spending  with  macro-economic  implications,  as 
witnessed during the financial crisis and following 
recession  (Teulings  and  Zhang,  2019;  European 
Commission, 2019a; see also Section 4.2.5). 

Regional dimension 

Regional  differences  in  economic  growth  rates 
and  household  disposable  income  are  limited. 
GDP  per  capita  in  purchasing  power  standards  
stood at 128% of the EU-average in 2018. In 2018, 
GDP growth varied from 3.4% on an annual basis 
in  Flevoland,  to  -0.8%  in  Groningen.  At  first 
glance, this suggests substantial growth divergence 
between regions. This is largely attributable to the 
accelerated  reduction  of  natural  gas  extraction  in 
the area. With natural gas extraction in Groningen 
being  phased-out,  this  observed  divergence  is 
likely  to  remain  in  the  coming  years.  However, 
in  Groningen  excluding  natural  gas 
growth 
extraction  was  2.7%  in  2018,  implying  a  much 
smaller  difference 
in  economic  performance 
excluding  gas  extraction  at  the  regional  level 
compared  to  the  rest  of  the  economy  (Graph 1.8). 
This  smaller  variation  in  regional  growth  rates  is 
also  reflected  in  relatively  limited  differences  in 
regional  household  disposable  income  averages. 
These  vary  from  110%  of  the  national  average  in 
Utrecht to 87% in Groningen. Regional differences 
do appear larger in other aspects such as access to 
finance,  congestion,  and  shortages  in  specific 
labour  market  sections  amongst  others  (see 
Sections 4.2.2-4.2.4). 

1. Economic situation and outlook 

Graph 1.8: 

Regional GDP growth including and excluding 
natural gas extraction (2018) 

Source: Statistics Netherlands 

Performance  on  sustainable  development 
goals  

and 

and  global  partnership 

Overall,  the  Netherlands  performs  well  in 
achieving  the  Sustainable  Development  Goals. 
As  a  high-income  country,  it  is  one  of  the  top 
performers  among  EU  member  states  in  several 
areas,  including  eliminating  poverty  (SDG 1), 
reduced  inequalities  (SDG  10),  access  to  justice 
and  trust  in  institutions  (components  within  SDG 
16) 
financial 
governance (SDG 17). The only area in which the 
Netherlands ranks comparatively poorly is climate 
action (SDG 13), linked to a low renewable energy 
share and high greenhouse gas intensity of energy 
consumption. However, most underlying indicators 
for  this  SDG  have  shown  gradual  progress  over 
time.  More  generally,  in  terms  of  trends,  the 
Netherlands  has  recorded  stable  or  improving 
performance for most SDGs over the past 5 years. 
Progress  has  been  particularly  strong  with  regard 
to  responsible  consumption  and  production  (SDG 
12),  clean  water  and  sanitation  (SDG  6),  quality 
education  (SDG  4)  and  affordable  and  clean 
energy  (SDG  7).  Performance  has  also  risen 
further  from  an  already  high  level  (see  above)  on 
SDGs 9, 10 and 16. 

13 

-1.0-0.50.00.51.01.52.02.53.03.54.0% GDP growth (2018)GDP growthdiscounting gas extraction effectNL (2018) GDP growth 
   
1. Economic situation and outlook 

Table 1.1: 

Key economic and financial indicators 

(1) NIIP excluding direct investment and portfolio equity shares.         
(2) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches.         
(3) The tax-to-GDP indicator includes imputed social contributions and hence differs from the tax-to-GDP indicator used in the 
section on taxation.         
(4) Defined as the income tax on gross wage earnings plus the employee's social security contributions less universal cash 
benefits, expressed as a percentage of gross wage earnings 
Source: Eurostat and ECB as of 4-2-2020, where available; European Commission for forecast figures (Winter forecast 2020 for 
real GDP and HICP, Autumn forecast 2019 otherwise) 
Source:  

14 

2004-072008-122013-1620172018201920202021Real GDP (y-o-y)2.80.01.42.92.61.71.31.3Potential growth (y-o-y)1.80.90.91.61.81.81.71.4Private consumption (y-o-y)0.8-0.40.62.12.3...Public consumption (y-o-y)3.01.40.50.91.6...Gross fixed capital formation (y-o-y)6.2-4.13.54.23.2...Exports of goods and services (y-o-y)6.62.04.06.53.7...Imports of goods and services (y-o-y) 6.81.14.36.23.3...Contribution to GDP growth:Domestic demand (y-o-y)2.4-0.71.02.02.1...Inventories (y-o-y)0.00.00.20.0-0.2...Net exports (y-o-y)0.40.80.10.90.7...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.30.20.50.91.00.90.70.4Capital accumulation (y-o-y)0.70.50.30.50.50.60.60.6Total factor productivity (y-o-y)0.70.30.10.20.20.30.30.4Output gap-0.6-1.3-2.10.21.01.00.60.4Unemployment rate5.24.86.94.93.83.43.64.0GDP deflator (y-o-y)2.01.00.71.32.22.51.51.2Harmonised index of consumer prices (HICP, y-o-y)1.51.90.81.31.62.71.41.5Nominal compensation per employee (y-o-y)2.32.51.11.01.72.53.22.5Labour productivity (real, person employed, y-o-y)1.7-0.11.00.70.1...Unit labour costs (ULC, whole economy, y-o-y)0.62.40.30.31.82.62.51.5Real unit labour costs (y-o-y)-1.31.4-0.4-1.0-0.40.11.00.3Real effective exchange rate (ULC, y-o-y)-0.30.3-0.60.31.0-0.70.0-0.4Real effective exchange rate (HICP, y-o-y)-0.5-0.80.10.61.40.5-0.8-0.3Net savings rate of households (net saving as percentage of net disposable income)2.66.49.68.88.4...Private credit flow, consolidated (% of GDP)12.17.84.53.74.5...Private sector debt, consolidated (% of GDP)228.6244.0261.7249.1241.6...of which household debt, consolidated (% of GDP)106.5115.9111.7106.0102.4...of which non-financial corporate debt, consolidated (% of GDP)122.1128.1150.0143.1139.3...Gross non-performing debt (% of total debt instruments and total loans and advances) (2).2.42.61.91.7...Corporations, net lending (+) or net borrowing (-) (% of GDP)9.29.06.27.38.16.76.86.5Corporations, gross operating surplus (% of GDP)27.327.727.527.026.826.426.126.1Households, net lending (+) or net borrowing (-) (% of GDP)-2.41.33.82.21.51.51.61.6Deflated house price index (y-o-y)2.4-3.70.76.17.3...Residential investment (% of GDP)6.04.83.44.54.8...Current account balance (% of GDP), balance of payments7.77.28.110.810.99.58.68.2Trade balance (% of GDP), balance of payments8.58.49.710.810.7...Terms of trade of goods and services (y-o-y)-0.1-0.50.5-0.2-0.3-0.10.00.0Capital account balance (% of GDP)-0.4-0.3-0.20.0-0.1...Net international investment position (% of GDP)-5.510.347.259.470.7...NENDI - NIIP excluding non-defaultable instruments (% of GDP) (1)-64.3-73.2-50.0-17.5-14.0...IIP liabilities excluding non-defaultable instruments (% of GDP) (1)326.3387.0415.5371.9356.0...Export performance vs. advanced countries (% change over 5 years)6.90.3-5.3-1.3-0.4...Export market share, goods and services (y-o-y)-1.5-2.70.11.31.70.8-1.3-1.8Net FDI flows (% of GDP)4.65.85.15.91.2...General government balance (% of GDP)-0.6-3.7-1.81.31.51.50.50.4Structural budget balance (% of GDP)..-0.70.70.90.70.20.2General government gross debt (% of GDP)47.159.765.556.952.448.947.145.6Tax-to-GDP ratio (%) (3)36.036.137.739.239.239.739.639.6Tax rate for a single person earning the average wage (%) (4)32.532.031.930.330.7...Tax rate for a single person earning 50% of the average wage (%) (4)23.421.618.815.616.1...Key economic and financial indicators - Netherlandsforecast 
 
 
  
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

of 

all 

89% 

Since  the  start  of  the  European  Semester  in 
2011, 
country-specific 
recommendations addressed to the Netherlands 
have  recorded  at  least  ‘some  progress’.  11%  of 
these  CSRs  recorded  ‘limited’  or  ‘no  progress’ 
(Graph 2.1). Substantial progress has been made in 
recent  years  on  public  finances,  including  reform 
of  the  long-term  care  system  and  protection  of 
expenditure  in  growth-friendly  areas.  Substantial 
progress  and  full  implementation  have  also  been 
achieved  in  several  areas  related  to  the  labour 
market  and  pensions, such  as  raising  the  statutory 
retirement age and getting older workers back into 
work. 

of 

first 

round 

implemented 
The  Dutch  authorities  have 
significant  structural  reforms  to  ensure  the 
long-run  sustainability  of  public  finances  since 
the 
country-specific 
recommendations.  In  line  with  country-specific 
recommendations  adopted  in  2011  and  2012,  the 
Netherlands  had  corrected  its  excessive  deficit  by 
2013, while protecting public expenditures directly 
relevant  for  growth,  such  as  spending  on  R&D, 
Following 
education 
recommendations 
fiscal 
sustainability  of  public  finances,  the  government 
implemented  reforms 
long-term  care  and 
in 
pensions.  In  particular,  it  raised  the  statutory 
retirement age and linked it to life expectancy.  

training. 
improve 

and 

the 

to 

but 

market 

housing 

distortions 

The government has taken steps to address high 
household  debt  and  distortions  in  the  housing 
market, 
remain.  Dutch 
challenges 
households  have  high  mortgage  debt  levels  (see 
subsection 4.2.3),  driven by  tax  incentives as  well 
(see 
as 
subsection 4.2.4).  Since  2012,  recommendations 
have  been  issued  on  the  need  for  reforms  in  this 
area,  in  particular  to  adjust  the  favourable  tax 
treatment  of  home  ownership,  refocus  social 
housing and provide a more market-oriented price 
mechanism  in  the  rental  market.  The  government 
in 
has  acted  upon 
interest 
particular  by 
deductibility  rules  (including  a  requirement  to 
repay  mortgages  within  30  years  to  qualify  for 
mortgage  interest  deductibility)  and  by  gradually 
reducing  the  applicable  rate  for  the  deduction. 
Policy measures have also been taken to make rent 
setting  more  flexible  and  to  support  the  private 
rental housing supply. However, tax incentives for 

tightening  mortgage 

recommendations, 

those 

(mortgage-financed)  home  ownership 
remain 
generous,  and  the  private  rental  sector  is  still 
underdeveloped. 

Graph 2.1:  Overall multi-annual implementation of 2011-

2019 CSRs to date 

* The overall assessment of the country-specific 
recommendations related to fiscal policy excludes 
compliance with the Stability and Growth Pact. 
** 2011-2012: Different CSR assessment categories.  
*** The multi-annual CSR assessment looks at the 
implementation since the CSRs were first adopted until the 
February 2020 Ccountry report. 
Source: European Commission 

the 

2019 

The  Netherlands  has  made  some  progress  in 
addressing 
country-specific 
recommendations (Table 2.1). Some progress has 
been  made  in  addressing  CSR  1,  in  particular  on 
the  housing  market,  pension  reform,  increasing 
household  disposable 
income  and  addressing 
aggressive  tax  planning.  However,  challenges 
remain  in  each  of  these  areas.  Some  progress  has 
been  made  in  addressing  CSR  2,  notably  in 
strengthening  life-long  learning  and  upgrading 
skills.  Moreover,  some  progress  has  also  been 
made  in  addressing  CSR  3  as  the  government  is 
supporting overall investment as part of a broader 
fiscal  expansion  and  has  tackled  various  sector-
specific 
to  varying 
degrees. 

investment  needs,  albeit 

Some  progress  has  been  made  in  each  of  the 
policy areas covered by CSR 1. To address high 
household  debt,  the  applicable  rate  for  mortgage 
interest  tax  deductibility  is  being  reduced  by  3 
percentage  points  per  year  from  2020,  to  37%  in 
2023. While this helps to address the debt bias for 
households, a substantial subsidy on debt-financed 

15 

7%4%63%15%11%No ProgressLimited ProgressSome ProgressSubstantial ProgressFull Implementation 
 
  
2. Progress with country-specific recommendations 

home-ownership  remains  (see  subsection 4.2.3). 
The  Dutch  authorities  announced  a  package  of 
housing  market  measures  in  September  2019, 
aimed primarily at boosting construction, including 
in  the  private  rental  sector;  however,  its  impact 
remains  uncertain  (see  subsection  4.2.4).  On 
reforming the second pillar of the pension system, 
a  framework  agreement  was  reached  between 
social  partners  and  government,  and  its  further 
finalisation  is  currently  ongoing  (see  subsection 
4.2.5).  The  government  has 
tax 
measures 
that  support  higher  real  disposable 
incomes  of  households  (see  subsection  4.1),  and 
ongoing  favourable  labour  market  conditions  are 
translating  into  an  acceleration  of  nominal  wage 
growth  (see  Section  1).  On  aggressive 
tax 
planning, the Netherlands introduced a conditional 
withholding  tax  on  royalty  and  interest  payments 
from  2021  (see  subsection  4.1).  However,  its 
effectiveness in addressing aggressive tax planning 
remains to be seen. 

introduced 

tackling  bogus 

On  CSR  2,  which  focuses  on  issues  related  to 
self-employment  as  well  as  life-long  learning 
and  up-skilling,  limited  progress  has  been 
made.  Limited  progress  has  been  made  on 
reducing  the  incentives  for  the  self-employed 
without employees and promoting adequate social 
protection  for  the  self-employed.  While  a  number 
of proposals have been announced to tackle issues 
in  these  areas  (see  Table  2.1  for  an  overview  and 
subsection 4.3.1 for further details), most have not 
been adopted yet. Limited progress has been made 
self-employment:  while 
on 
suspension  of 
the  enforcement  of  measures 
adopted to tackle bogus self-employment has been 
further  extended  until  2021,  the  criterion  ‘under 
the  control  and  direction’  (‘gezagsverhouding’) 
has  been  clarified  as  of  January  2019.  A  draft 
questionnaire  has  also  been  developed 
to 
implement  a  web  module  that  will  qualify  the 
working relationship of self-employed workers. In 
addition,  some  progress  has  been  made  on  life-
long learning and upgrading skills thanks to a new 
strategy  that  aims  to  create  a  genuine  learning 
culture  and  give  individuals  more  ownership  of 
their  training,  including  via  individual  training 
budgets (see subsection 4.3.2). 

overall 

investment, 

supporting 
the  Dutch 
authorities  are  implementing  a  fiscal  expansion 
(see  subsection  4.1), 
including  by  boosting 
investment,  and  have  passed  legislation  to  launch 
Invest-NL,  a  national  promotional  institution  with 
a  mandate  to  support  private-sector  investment. 
However,  there  is  still  some  scope  to  do  more  as 
the  Netherlands  has  some  remaining  fiscal  space. 
Limited  progress  has  been  made  on  R&D 
investment.  Revised  R&D  figures  show  slow 
progress  on  private  R&D  intensity  and  a  slight 
decline  in  public  R&D  intensity  (see  subsection 
4.4.2).  Total  R&D  intensity  has  stabilised  at 
around 2.2%, but lags behind the national target of 
2.5% for 2020 and the R&D intensity of co-leaders 
in innovation. Although new policy measures have 
been  announced,  their  impact  remains  to  be  seen. 
Some  progress  has  been  made  on  energy  and 
climate-related  investment.  The  Netherlands  has 
adopted  a  climate  act  setting    greenhouse  gas 
reduction  targets  for  2030  and  2050,  as  well  as  a 
climate  agreement  with  a  set  of  adopted  and 
proposed  policies  for  meeting  the  2030  target, 
including  an  analysis  of  investment  needs  (see 
subsection 4.5). On investment to address transport 
bottlenecks,  some  progress  has  been  made.  The 
government  agreement  set  out  a  clear  path  with 
measures  to  address  the  increasing  traffic  on  the 
road, rail, water and in the air. However, room for 
further improvement remains.  

Upon  request  from  a  Member  State,  the 
Commission  can  provide  tailor-made  expertise 
via the Structural Reform Support Programme 
to  help  design  and 
implement  growth-
enhancing reforms. Since 2019, such support has 
been  provided  to  the  Netherlands  in  three  policy 
i)  enhancement  of  policy  evaluation 
areas: 
systems;  ii)  improvement  of  SOLVIT  service 
delivery to Dutch businesses; and iii) development 
tools  and  quality  assurance 
of  monitoring 
the  adult  education 
framework 
system. 

to  strengthen 

for 

Some progress has been made on CSR 3, which 
calls 
investment  with  a 
particular  focus  on  R&D,  energy  and  climate, 
terms  of 
infrastructure. 
and 

supporting 

transport 

In 

16 

 
2. Progress with country-specific recommendations 

Table 2.1: 

Assessment of 2019 CSR implementation (*) 

(Continued on the next page) 

17 

The Netherlands Overall assessment of progress with 2019 CSRs : some progress  CSR 1:   Reduce the debt bias for households and the distortions in the housing market, including by supporting the development of the private rental sector. Ensure that the second pillar of the pension system is more transparent, inter-generationally fairer and more resilient to shocks. Implement policies to increase household disposable income, including by strengthening the conditions that support wage growth, while respecting the role of social partners. Address features of the tax system that may facilitate aggressive tax planning, in particular by means of outbound payments, notably by implementing the announced measures. (MIP relevant) The Netherlands has made some progress in addressing CSR 1:    Some progress has been made on the housing market, although mortgage interest deductibility will remain generous even after being reduced to a maximum applicable rate of 37% by 2023, and the rental sector remains underdeveloped.  Some progress has been made on reforming the second pillar of the pension system. A framework agreement addressing key challenges in the system was reached between social partners and government, and preparatory work for implementation is currently ongoing.  Some progress has been made on policies to increase household disposable income. The government has introduced tax measures that support higher disposable real incomes of households. Moreover, ongoing favourable labour market conditions are translating into an acceleration of nominal wage growth.  Some progress has been made on addressing aggressive tax planning. The Netherlands introduced a conditional withholding tax on royalty and interest payments, which will enter into force from 2021. However, its effectiveness in addressing aggressive tax planning remains to be seen.   
 
 
 
 
2. Progress with country-specific recommendations 

Table (continued) 

(Continued on the next page) 

18 

 CSR 2:   Reduce the incentives for the self-employed without employees, while promoting adequate social protection for the self-employed, and tackle bogus self-employment. Strengthen comprehensive life-long learning and upgrade skills notably of those at the margins of the labour market and the inactive. The Netherlands has made limited progress in addressing CSR 2:    Limited progress has been made on reducing the incentives for the self-employed without employees. The government announced its intention to introduce a general minimum hourly rate of €16 for the self-employed without employees, in combination with an opt-out of payroll taxes and various other obligations for those self-employed charging an hourly rate of €75 or more. In addition, the tax deduction for self-employed workers will be gradually reduced from 2020. The government and social partners also agreed to introduce mandatory disability insurance for the self-employed and to assess possibilities to increase pension coverage for the self-employed on a voluntary basis.   Limited progress has been made on tackling bogus self-employment. Suspension of the enforcement of measures adopted to tackle bogus self-employment, initially planned until 2020, has been further extended until 2021. Nevertheless, the criterion ‘under the control and direction’ (‘gezagsverhouding’) has been clarified as of January 2019. A draft questionnaire has also been developed to implement a web module that will qualify the working relationship of self-employed workers.  Some progress has been made in strengthening life-long learning and upgrading skills. The government presented a new strategy to create a genuine learning culture and give more ownership to individuals over their training. This includes promoting individual training budgets through the ‘Stimulus for labour market participation’ (STAP / ‘Stimulans Arbeidsmarktpositie’) initiative, which replaces the tax deduction for educational expenses. A budget of €200 million per year will be allocated to it.   
 
 
 
 
2. Progress with country-specific recommendations 

Table (continued) 

(*) This does not include an assessment of compliance with the Stability and Growth Pact.  
     The assessment of CSR 3 does not take into account the contribution of the EU 2021-2027 cohesion policy funds. The  
     regulatory framework underpinning the programming of the 2021-2027 EU cohesion policy funds has not yet been  
     adopted by the co-legislators, pending inter alia an agreement on the multiannual financial framework (MFF). 
Source: European Commission 

19 

 CSR 3:   While respecting the medium-term budgetary objective, use fiscal and structural policies to support an upward trend in investment. Focus investment-related economic policy on research and development in particular in the private sector, on renewable energy, energy efficiency and greenhouse gas emissions reduction strategies and on addressing transport bottlenecks. The Netherlands has made some progress in addressing CSR 3:    Some progress has been made on supporting an upward trend in investment. The Dutch authorities are planning a fiscal expansion for 2020, including by increasing investment, and have passed legislation to launch Invest-NL, a national promotional institution with a mandate to support private-sector investment. However, there is still scope to boost public investment further as the Netherlands has some remaining fiscal space.  Limited progress has been made on investment in R&D.  Revised R&D figures show slow progress on private R&D intensity and a slight decline in public R&D intensity. Total R&D intensity has stabilised, but lags behind the national target of 2.5% for 2020 and the R&D intensity of co-leaders in innovation. Although new policy measures have been announced, their impact remains to be seen.  Some progress has been made on investment in renewable energy, energy efficiency and in reducing greenhouse gas emissions. The Netherlands adopted a climate act setting  greenhouse gas reduction targets for 2030 and 2050, as well as a climate agreement with a set of adopted and proposed policies for meeting the 2030 target, including an analysis of investment needs. However, some work still needs to be done to define an overarching and coherent climate investment agenda that addresses both public and private sectors.  Some progress has been made on addressing transport bottlenecks. The Government agreement set out a clear path with measures to address the increasing traffic on the road, rail, water and in the air. However, room for further improvement remains.   
 
 
 
 
2. Progress with country-specific recommendations 

Box 2.2: EU funds and programmes to address structural challenges and to foster growth 
and competitiveness in the Netherlands 

The Netherlands is benefiting from EU funds. The financial allocation from the EU Cohesion 
Policy funds(1) for the Netherlands, including national co-financing, amounts to €2.4 billion in the 
current Multiannual Financial Framework, equivalent to around 0.05 % of the GDP annually. By 
the end of 2019, the total allocation planned was assigned to specific projects and €1.3 billion was 
reported as spent by the selected projects, showing a level of implementation well above the EU 
average(2). 

EU Cohesion Policy funding supports transition challenges in the Netherlands by promoting 
growth and employment via investments in innovation, climate transition, employment and labour 
mobility. Investments driven by funding from the European Regional Development Fund (ERDF) 
have  already  supported  over  5,000  enterprises  of  which  over  2,000  enterprises  to  introduce  new 
products  to  the  market.  Almost  600  enterprises  received  support  to  cooperate  with  research 
institutions.  Private  investment  matching  the  support  for  R&D  and  innovation  projects  has 
exceeded  €425 million.  Also,  ERDF  funding  contributes  to  the  development  of  innovative  low-
carbon  technologies.  Under  the  social  inclusion  objective  the  European  Social  Fund  supported 
over 548,000 persons on their way to the labour market depending on their individual needs and 
financed  dedicated  traineeships  that  enabled  offering  a  job  to  62,000  participants  that  otherwise 
would have had very little chances on the labour market. 

The  EU  also  supports  investment  through  the  agricultural  and  fisheries  funds,  the 
Connecting Europe facility and Horizon 2020. Support from the European Agricultural Fund for 
Rural Development and the European Maritime and Fisheries Fund amounts to €1.27 billion €and 
€128 million €respectively (including the national co-financing for both). The Connecting Europe 
Facility  allocated  €508  million  to  77  transport  projects  with  a  total  investment  value  of  €1.6 
billion. Horizon 2020 provided €3.6 billion to boost innovation and research in the Netherlands, of 
which €697 million to SMEs. 

EU funding contributes to mobilisation of private investment. By the end of 2018, European 
Structural  and  Investment  Funds(3)  supported  programmes  mobilised  additional  capital  by 
committing about €158 million in the form of loans, guarantees and equity, which is 4.8% of all 
decided allocations of these funds. 

EU funds already invest on actions in line with the Sustainable Development Goals (SDGs). 
In  the  Netherlands,  up  to  98%  of  ESI  Funds  allocations  are  declared  to  support  9  out  of  the  17 
SDGs. 

(1)  European Regional Development Fund and European Social Fund. 
(2)  https://cohesiondata.ec.europa.eu/countries/NL  
(3)  European Regional Development Fund, Cohesion Fund, European Social Fund, European Agricultural Fund for Rural 

Development Fund and European Maritime and Fisheries Fund. 

20 

 
 
 
 
 
  
 
3.  SUMMARY OF THE MAIN FINDINGS FROM THE MIP IN-

DEPTH REVIEW 

in-depth  review 

The  2020  Alert  Mechanism  Report  concluded 
should  be 
that  a  new 
undertaken  for  the  Netherlands  to  assess  the 
persistence  or  unwinding  of  the  imbalances 
observed  (European  Commission,  2019f).  In 
spring  2019,  the  Netherlands  was  identified  as 
having  macroeconomic 
(European 
Commission,  2019b).  The  imbalances  identified 
related  in  particular  to  the  high  level  of  private 
debt  as  well  as  the  large  current  account  surplus. 
This  chapter  summarises  the  findings  of  the 
analyses  in  the  context  of  the  macro-economic 
imbalance procedure (MIP) in-depth review that is 
contained in various sections in this report (8).  

imbalances 

3.1.     IMBALANCES AND THEIR GRAVITY 

The  current  account  balance  increased  further 
in 2018 to a high of 11.2% of GDP. The surplus 
is the highest in the euro area as a share of GDP. A 
persistently high trade surplus in goods is the main 
driver  from  a  trade  perspective.  In  2018  the 
Netherlands  contributed  0.7  percentage  points  to 
the  euro  area  current  account  surplus,  the  second 
largest contribution after Germany (2.1 percentage 
points).  

sector  making 

All  domestic  sectors  are  in  surplus,  with  the 
corporate 
largest 
the 
contribution  to  net 
lending.  Both  financial 
corporations  and non-financial  corporations  are  in 
surplus,  with  the  latter  being the  main  driver.  Net 
lending by non-financial corporations amounted to 
6.7% of GDP in 2018. Compared to the rest of the 
euro area, profitability and net property income are 
relatively  high  for  Dutch  firms,  whereas  domestic 
investments are lower. This is linked in part to the 
large 
the 
Netherlands,  but 
and  medium-sized 
small 
enterprises  are  also  a  significant  contributor 
(see Section 4.2.6).  Households 
been 
recording  surpluses  since  the  crisis,  amounting  to 
1.5%  of  GDP  in  2018.  The  dip  in  the  housing 
market  following  the  crisis  led  to  a  decrease  in 

of  multinationals 

presence 

have 

in 

(8)  Analyses  relevant  for the  in-depth  review  can  be  found  in 
the  following  sections:  fiscal  policy  (Section 4.1),  private 
indebtedness,  house  price  developments,  developments  in 
the  field  of  pensions  (Section 4.2);  wage  developments 
(Section 4.3); 
imbalances 
and 
(Section 4.4).  Box  3  discusses  the  potential  effects  of  a 
stylised set of structural reforms. 

investment 

saving 

residential  investment,  while  at  the  same  time 
savings  via  deleveraging 
boosting  personal 
pressure  linked  to  high  household  debt.  Pension 
funds are also an important driver of household net 
lending  due 
to  relatively  high  second-pillar 
pension contributions (see subsection 4.2.5) which 
are largely invested abroad. The government sector 
recorded  a  headline  surplus  of  1.5%  of  GDP, 
driven  by  past  consolidation  measures  and 
increasing tax revenues.  

Private  debt  continued  to  decline  in  2018,  but 
remains  high. It reached 242% of GDP in 2018, 
down  from  252%  the  year  before.  Non-financial 
corporate  debt  accounted  for  140%  of  GDP. 
However,  around  60%  of  this  debt  is  owed  by 
multinationals.  As  multinationals’  debt  largely 
consists  of  intra-group  debt,  the  macro-economic 
risks appear to be limited (see subsection 4.2.3).   

to 

incentivises  households 

Household  debt  largely  consists  of  mortgage 
debt.  The  tax  deductibility  of  mortgage  interest 
take  on 
payments 
mortgage  debt.  The  household  debt  ratio  declined 
to  102%  of  GDP  in  2018  on  the  back  of  GDP 
growth  that  outpaced  household  debt  growth. 
Although  household  debt  continues  to  increase  in 
nominal  terms,  growth  remains  much  slower  than 
before  the  crisis,  at  around  1-1.5%  annually  in 
recent years. Growing mortgage debt can be linked 
to  strong  house  price  rises.  House  price  growth 
accelerated  in  2018  to  around  7%  in  real  terms, 
imbalance 
the  macro-economic 
exceeding 
procedure 
price 
threshold.  Overall, 
developments  suggest  a  lagged  supply  response 
rather  than  overvaluation  at  national  level  (see 
subsection 4.2.4).  

house 

Potential  spillovers  to  other  EU  countries  are 
relatively  moderate  given  the  size  of  the  Dutch 
economy.  Table 3.1  shows  that  exports  to  the 
Netherlands  constitute  a  relatively  large  share  of 
GDP  for  Belgium  (13%).  From 
the  Dutch 
largest  export 
perspective,  Germany 
destination,  followed  by  the  United  Kingdom.  On 
the  financial  side,  Belgium,  Cyprus,  Ireland, 
Hungary, Luxembourg and Malta have a relatively 
high  exposure  to  the  Netherlands.  Box 3.1  shows 
an  analysis  of  the  effects  of  a  stylised    public 
investment  boost  on  GDP,  indicating  small  but 

the 

is 

21 

 
 
                                                           
3. Summary of the main findings from the MIP in-depth review 

Table 3.1: 

Outward spill-over heat map for Netherlands 

Note: cross-border figures for Netherlands, expressed as a % of the GDP of the partner country. The darkest shade of red 
corresponds to percentile 95 and the darkest shade of green to percentile 5. The percentiles were calculated for each 
variable based on the full available sample of bilateral exposures among EU countries. The blank spaces represent missing 
data. Data refer to: Imports - 2017, Imports (in value added) - 2015, Financial liabilities - 2017, Financial assets - 2017, Liabilities 
(to banks) - 2019-Q2, Bank Claims - 2019-Q2.                             
Source: IMF, OECD, TiVa, BIS and Commission services 

positive  spillover  effects  on  the  rest  of  the  euro 
area. 

3.3.   OVERALL ASSESSMENT 

is 

The Netherlands has recorded persistently large 
current  account  surpluses.  The  net  lending 
largely  driven  by  non-financial 
position 
corporations, with relatively high savings and low 
domestic  investments.  Both  large  corporations, 
including  multinationals,  and  small  and  medium-
sized  enterprises  have  substantial  surpluses. 
Households  also  make  a  positive  contribution, 
among other things due to high mandatory pension 
contributions. Household debt as a share of GDP is 
around  50  percentage  points  higher  than  the  euro 
relevant 
area  average  and  well  above 
tax 
benchmarks 
(see 
incentives  encourage  households 
take  on 
mortgage  debt.  While  household  debt  is  coupled 
with  substantial housing  and pension  assets,  these 
assets  are  often 
leaving  households 
illiquid, 
vulnerable to shocks. 

subsection  4.2.3),  as 

the 

to 

supported  by 

rising  wages,  also 

The external surplus and the high private debt 
level  are  both  expected 
to  unwind  only 
gradually.  The  current  account  balance  is  set  to 
moderate slowly on the back of domestic demand 
the 
and 
expansionary  fiscal  stance.  However,  the  level  is 
expected  to  remain  well  above  the  threshold. 
While  household  debt  is  decreasing  as  a  share  of 
GDP,  it  is  growing  in  nominal  terms,  linked  to 
sharp  house  price  rises.  Despite  measures  taken, 
strong incentives to take on mortgage debt remain, 
also against the background of an underdeveloped 
private rental market. 

3.2.  EVOLUTION,  PROSPECTS  AND  POLICY  
          RESPONSES 

to 

The current account is set to fall gradually, but 
remains  high.  According 
the  European 
Commission’s Autumn Forecast, the surplus is set 
to  gradually  decline  from  11.2%  in  2018  to  8.6% 
in  2021  as  import  growth  is  projected  to  outpace 
export  growth.  This  reflects  a  weakening  external 
environment  combined  with  comparatively  robust 
domestic demand. The latter is in turn linked to a 
pick-up in wage growth and an expansionary fiscal 
stance  (see  Section  1  and  subsection  4.1). 
Declining natural gas exports following the phase-
out  of  gas  production  in  Groningen  are  also 
expected to weigh on the current account surplus. 

the 

relatively 

to  support 

in  nominal 

Private debt is expected to remain high. Overall, 
robust  nominal  GDP  growth 
still 
combined with ongoing deleveraging pressures are 
trend  of  passive 
projected 
deleveraging.  However, 
terms 
household  debt  growth  appears  likely  to  pick  up 
somewhat as a result of sharp house price rises in 
recent years (see subsection 4.2.3). The maximum 
applicable rate of mortgage interest deductibility is 
being  reduced  by  3  percentage  points  per  year, 
from  49%  in  2019  to  37%  in  2023.  While  this 
lowers  the  debt  bias  for  households,  a  substantial 
subsidy  for  mortgage  borrowing  remains.  The 
government  has  also  launched  initiatives  to  boost 
new housing supply, including in the private rental 
sector,  which  would  provide  households  with  an 
alternative  to  taking  on  mortgage  debt.  However, 
with  a  share  of  13%  of  the  total  housing  stock  in 
2018 
remains 
underdeveloped.  

private 

sector 

rental 

the 

22 

ATBEBGHRCYCZDEDKEEELESFIFRHUIEITLTLULVMTNLPLPTROSESISKUKImports1.3131.20.30.432.81.92.30.91.221.23.23.40.82.75.71.40.22.51.60.821.72.51.8Imports (in value added)0.62.70.60.50.40.80.80.70.60.30.40.50.50.81.40.30.72.50.60.30.80.40.50.80.50.60.5Financial liabilities13.780.83.20.8165.99.824.39.32.81.911.721.223.15.7123.38.33.71450.23.077.9 1.920.01.416.23.86.236.1Financial assets26.858.811.09.0141.117.219.210.77.313.220.720.319.545.2110.08.45.0954.01.964.6 9.723.512.015.32.714.739.4Liabilities (to banks)1.351.80.21.31.34.40.60.90.81.72.1Bank claims2.06.84.31.10.72.93.43.58.11.447.85.17.20.94.01.03.5EU partner 
 
  
 
3. Summary of the main findings from the MIP in-depth review 

Table 3.2: 

MIP assessment matrix(*) 

(Continued on the next page) 

23 

 Gravity of the challenge Evolution and prospects Policy response Imbalances (unsustainable trends, vulnerabilities and associated risks) Current account balance (see subsection 4.2.6) In 2018, the current account surplus reached 11.2% of GDP, one of the highest in the euro area, and well above fundamentally warranted levels (around 4% of GDP, according to Commission current account ‘norm’ estimates). The Netherlands has been running a current account surplus over the last three decades. This implies a persistent gap between savings and investment, with possible adverse consequences for the allocation of resources and therefore growth and welfare. A breakdown by sector points to non-financial corporations as the largest contributor, with a surplus of 6.7% of GDP in 2018 (see subsection 4.2.6), although all domestic sectors are net savers. Compared to the euro area average, the high corporate surplus is driven by a relatively high operating surplus and net property income, as well as low domestic investment. The large presence of multinationals is a significant contributor to corporate savings, but small and medium-sized enterprises also have a significant surplus, which in part appears linked to fiscal incentives to retain earnings. The household balance turned positive during the crisis and accounts for much of the surplus widening since then. It reached 1.5% of GDP in 2018 and is likely boosted by relatively large mandatory pension savings. Private consumption is relatively low as a share of GDP. After reaching a historic high of 11.2% of GDP in 2018, the current account surplus has declined somewhat in 2019 (to about 9.7% of GDP, based on the latest available quarterly data). The trade balance has remained persistently high in recent years on the back of buoyant global trade developments. The primary income balance is a source of short-term volatility and is largely responsible for the recent increase.   Still solid growth in domestic demand and increasing wages in this phase of the business cycle, coupled with the ongoing fiscal stimulus, is expected to lead to a gradual reduction of the surplus. Nevertheless, a surplus position linked in part to structural reasons is expected to persist in future, among others linked to the presence of multinationals.  The government is implementing a sizeable fiscal stimulus package, which should boost domestic demand and therefore help external rebalancing. Increased spending is focused on the areas of education, research and innovation, security and infrastructure. So far, stimulus has not accommodated substantial external rebalancing. In June 2019, the social partners reached an agreement on principles for a significant reform of the pension system, but important details will still need to be decided upon, so implementation uncertainty remains.  The implementation of measures in the area of corporate income taxation, including those to tackle aggressive tax planning, might affect cross-border income flows as well as headquarter location decisions for multinationals, with potential implications for corporate net saving. However, it remains to be seen to what extent this would affect the current account.  Recent tax reforms for small and medium-sized companies (see subsection 4.2.6) could reduce incentives to retain earnings, although in practice they may shift part of smaller companies’ savings surplus to the household sector rather than leading to an overall reduction.   
 
 
 
 
3. Summary of the main findings from the MIP in-depth review 

Table (continued) 

(*) The first column summarises 'gravity' issues which aim at providing an order of magnitude of the level of imbalances. The 
second column reports findings concerning the 'evolution and prospects' of imbalances. The third column reports recent and 
planned relevant measures to address these. Findings are reported for each source of imbalance and adjustment issue. The 
final three paragraphs of the matrix summarise the overall challenges in terms of their gravity, developments and prospects, 
policy response. 
Source: European Commission 

24 

Private debt  (see subsection 4.2.3) The private debt level in the Netherlands continues to decline but is still very high, standing at 242% of GDP in 2018. Household debt declined to 102% of GDP in 2018 but still exceeds the euro area average by some 50 percentage points, and the fundamental benchmark by around 30 percentage points. It is driven by tax incentives and an underdeveloped rental market. While households have a high positive net asset position due to housing and pension wealth, they remain vulnerable to financial shocks since those assets are often illiquid and subject to market risk. Non-financial corporate (NFC) debt declined further to 139% of GDP in 2018 from over 150% in previous years (see Section 4.2.3). The high level of NFC debt is largely driven by intra-group debt of multinationals.   Passive deleveraging is expected to continue on the back of still quite robust real GDP growth and increasing inflation. Nominal household debt continues to grow, although the increase remained limited to around 1.3% per year on average in 2016-2018. Moderate debt flows combined with the housing market recovery have greatly reduced the share of underwater mortgages (see Section 4.2.4). Overall, private debt as a percentage of GDP is expected to gradually decline further, but remain elevated over the medium term.  The accelerated reduction in mortgage interest deductibility is being implemented, cutting the maximum applicable rate to 37% by 2023. Nonetheless, a substantial subsidy on debt-financed homeownership remains. Initiatives are being undertaken to improve the functioning of the private rental market, but the effect remains to be seen.    Conclusions from IDR analysis  The current account balance is one of the highest in the euro area, peaking at 11% in 2018. The persistently high gap between savings and investment is significantly above norms implied by fundamentals and has possible adverse consequences for the allocation of resources and therefore growth and welfare. In addition, external rebalancing is important from the euro area perspective. Household debt, consisting mainly of mortgage debt, is high compared to the euro area average as well as relevant fundamental and macroprudential benchmarks. Tax incentives encourage households to take on mortgage debt, while the private rental market remains underdeveloped.  A gradual reduction in the current account is expected in line with solid growth in domestic demand and increasing wages in this phase of the cycle. However, it is expected to remain high, also driven in part by structural features such as the pension system with implications for household consumption and disposable income and the presence of multinationals. Nominal household debt is increasing again as the housing market has recovered, but is outpaced by nominal GDP growth, resulting in passive deleveraging.  Ongoing implementation of the fiscal stimulus package should support domestic demand and help external rebalancing. So far, fiscal stimulus has not contributed to substantial rebalancing of the external position. Although wage growth has started to pick up somewhat, it has remained relatively subdued in recent years given the cyclical position and low unemployment, limiting external rebalancing. The acceleration of the reduction in mortgage interest deductibility takes effect between 2020 and 2023, although a generous subsidy remains. An agreement on principles for a significant reform of the pension system has been reached between stakeholders, but important details still need to be decided upon, so implementation uncertainty remains.   
 
 
 
 
 
3. Summary of the main findings from the MIP in-depth review 

Box 3.3: Public investment and potential spillovers 

Following  the  2019  country-specific  recommendations  on  investment-related  economic  policy,  the 
European Commission QUEST model is applied to simulate the domestic and cross-border impact of 
a  public  investment  boost  of  1%  of  GDP  sustained  for  10  years.  The  Netherlands  maintains  an 
expansionary fiscal stance, via both lower taxes on labour income and increased expenditure, including on 
investment (see subsection 4.1). These measures are likely to yield a positive impact on economic growth in 
the Netherlands. High trade openness of the Dutch economy suggests potentially important spillovers to the 
rest of the euro area (REA), which is balanced, however, by the limited economic  size of the Netherlands 
compared to the EA aggregate. To illustrate the size of potential spillovers, this box describes the impact of 
a stylized debt-financed increase in productive public investment by 1% of GDP for the next 10 years. Such 
a  public  investment  boost  could  be  motivated  by  a  favourable  debt  trajectory,  low  borrowing  costs  and 
monetary policy constrained by the effective lower bound on nominal interest rates.  

The QUEST simulations show a positive impact on Dutch real GDP of around 0.6% in the first year, 
increasing to 1.2 % after ten years (Table 1). (1)  The current account surplus is reduced by around 0.1% of 
GDP. The spillover of the domestic investment impulse via the trade channel is positive, albeit small, with 
real  GDP  in  the  REA  rising  by  0.1%  in  the  first  few  years  and  then  gradually  tapering  off.  These  results 
describe the effects of  a public investment boost in the Netherlands on an ‘all else equal’ basis; of course, a 
coordinated  investment  programme  across  several  member  states  would  have  a  much  bigger  domestic  and 
cross-border impact. 

Table 3.3a:Simulated domestic impact and spillovers of a public investment boost of 1% of GDP for 10 years 

Source: European Commission 

(1)  Detailed 

on 

information 

at: 
http://ec.europa.eu/economy_finance/research/macroeconomic_models_en.htm.  In  this  simulation,  a  binding  effective 
lower bound for monetary policy is assumed for the first two years. The boost in public investment simulated in this 
scenario  is  assumed  to  incorporate  the  increase  in  investment  expenditure  included  in  the  2020  budget  already  and 
would thus be consistent with SGP requirements.  

applications 

available 

QUEST 

model 

and 

the 

is 

25 

2021202220232024202520262027202820292030NetherlandsReal GDP0,70,50,50,60,70,80,91,01,11,2Employment0,20,20,10,10,00,00,00,00,00,0Gov. debt over GDP0,10,91,82,73,54,45,36,16,97,8Current account over GDP0,0-0,1-0,1-0,1-0,1-0,1-0,1-0,1-0,1-0,1Rest of euro areaReal GDP0,10,10,10,00,00,00,00,00,00,0Inflation0,10,10,10,10,00,00,00,00,00,0 
 
 
 
 
 
 
 
 
4.  REFORM PRIORITIES 

4.1.  PUBLIC FINANCES AND TAXATION 

4.1.1.  EXPENDITURE AND REVENUE 
DEVELOPMENTS* (9)  

Graph 4.1.1:  General government expenditure, revenues 
and structural budget balance 

After  a  prolonged  period  of  zero  growth, 
nominal  government  expenditure  is  increasing 
again  (Graph 4.1.1).  Based  on  the  2018-2021 
multi-annual  government  agreement,  government 
expenditure is rising mainly in the field of defence, 
infrastructure  and  education.  Recent  additional 
fiscal  measures,  announced  in  the  2020  budget, 
involve  further  spending  on  climate  measures,  in 
particular an increase in the subsidy for sustainable 
energy  use (10),  and  higher  spending  on  state 
pensions (11).  The  government  also  announced 
additional budgetary measures to address nitrogen 
issues 
raise 
teacher’s salaries. Public investment is expected to 
have  increased  from  3.3% of GDP  in  2018  to 
3.5% of GDP  in  2019,  remaining  well  above  the 
euro area average, but below its longterm average 
(3.8% of GDP).  

(see  Sections 1 and 4.4)  and 

to 

Revenue  growth  outpaced  expenditure  growth 
and  has  led  to  headline  surpluses.  The  general 
government balance is forecast at 1.5% of GDP in 
2019. Tax relief (mainly for households) and faster 
expenditure  growth  are  expected  to  lead  to  a 
decline  in  the  surplus,  to  0.5%  of  GDP  in  2020, 
based  on 
the  European  Commission  autumn 
forecast.  In  structural  terms,  taking  the  economic 
cycle  and  incidental  measures  into  account,  the 
government  surplus  is  set  to  fall  from  0.9%  of 
GDP in 2018 to 0.2% of GDP in 2020, illustrating 
an expansionary fiscal stance (Graph 4.1.1).  

(9)  An  asterisk  (*)  indicates  that  the  analysis  in  the  section 
contributes  to  the  in-depth  review  under  the  MIP  (see 
Section 3 for an overall summary of main findings). 

(10)  Following  the  national  climate  agreement  (see  subsection 

4.5). 

(11)  Following  the  2019  pension  agreement  between  social 
partners  (see  Section 4.2.5).  The  pension  agreement 
includes  a  slowdown  in  the  increase  in  the  statutory 
retirement  age  for  the  first  pillar  state  pension,  an 
agreement  to  make  the  occupational  pension  pillar  more 
flexible  and  individual,  and  measures  to  accommodate 
workers in physically demanding jobs and self-employed. 

Source: European Commission 2019 autumn forecast 

Revenue side measures lower the tax burden on 
labour  by  roughly  0.5%  of  GDP.  In  2020,  the 
number of personal income tax brackets is reduced 
to  two,  with  a  base  rate  of  37.35%  for  all  annual 
incomes up to €68,507 and a marginal top personal 
income tax rate of 49.5% for all income above this 
threshold  (Graph 4.1.2).  This  measure  is  only 
partly financed by an increase in indirect taxes and 
leads to an overall lowering of the tax burden. This 
is  expected  to  increase  the  labour  supply  and 
employment.  It  reduces  progressivity,  but  the 
impact on income redistribution is partly offset by 
an increase in the general income tax credit and the 
earned income tax credit.  

The  government  is  also  reducing  corporate 
income  taxes,  but  less  than  announced  earlier. 
In  2020,  the  tax  rate  on  profits  up  to  €200,000  is 
reduced  from  19%  to  16.5%,  while  the  rate  on 
profits  exceeding  €200,000  remains  at  25%;  this 
goes  against  the  tax  rate  of  22.55%  that  was 
proposed in the 2018-2021 government agreement. 
From 2021 onwards, the lower tax bracket will be 
reduced  to  15%  and  the  higher  tax  bracket  to 
21.7%.  The  lowering  of  the  corporate  income  tax 
rates  is  partly  financed  by  an  increase  in  the  tax 
base, amongst others following implementation of 
the Anti-Tax Avoidance Directive. 

26 

-5-4-3-2-1012200220240260280300320340360380201020112012201320142015201620172018201920202021% of potential GDPEUR billionTotal government expenditureTotal government revenueStructural budget balance (rhs)forecast 
 
                                                           
  
 
4.1. Public finances and taxation 

making it financially unattractive to accept a job at 
this  income  level (13).  Despite  increasing  in  2019, 
the share of consumption taxes in the total tax mix 
remains  around  the  euro  area  average,  while  the 
share of recurrent property taxes is well below the 
euro  area  average.  A  comparison  with  other  EU 
countries  suggests  that  there  is  scope  to  improve 
the  tax  mix  by  shifting  taxes  on  labour  further  to 
areas 
to  growth,  such  as 
consumption or property income (14).  

less  detrimental 

Graph 4.1.4:  Tax mix in the Netherlands and the euro area 

(share in total tax revenues) 

(1) Environmental taxes include both consumption taxes 
and capital taxes. ‘3 highest/lowest’ refers to the average of 
the respective 3 Member States with the highest share in 
environmental, property and consumption taxes and the 
lowest labour tax share. 
Source: European Commission 

4.1.2.  AGGRESSIVE TAX PLANNING 

Evidence (15) suggests that the Netherland’s tax 
rules  are  used  by  companies  that  engage  in 
aggressive 
international 
tax  planning.  The 
corporate  tax  system  aims  to  tax  the  profits  of 
multinationals  where  they  arise.  However,  these 

(13)  These  ‘traps’  measure  the  marginal  tax  burden  to  move 
from  inactivity  or  unemployment  to  paid  employment  at 
different income levels. At 76.9 in 2018, the inactivity trap 
for  a  low-income  earner  (67%  of  the  average  wage)  was 
much higher in the Netherlands than the euro area average 
at  54.4.  The  unemployment  trap  at  this  income  level  was 
80.2, also significantly above the euro area average of 76.3 
(source: European Commission Tax and Benefits Indicator 
database based on OECD data). 

(14)  Based  on  2018  data;  the  lowering  of  labour  taxes  reduces 
its  share  in  total  tax  revenues  by  roughly  2  percentage 
points, while the 2019 increase in the reduced VAT rate is 
expected  to  increase  the  share  of  consumption  taxes  by  1 
percentage point. 

(15)  For  an  overview  of  the  high  level  of  incoming  and 
outgoing  dividend,  interest  and  royalty  payments,  as  well 
as  of  inward  and  outward  foreign  direct  investment 
positions, see European Commission (2019d).  

Graph 4.1.2:  Personal income tax rates, 2015-2020 

Source: European Commission 

The  tax  mix  is  relatively  green.  With  8.6%  of 
total  tax  revenue  coming  from  environmental 
taxes (12)  in  2018,  the  tax  mix  is  relatively  green 
by  European  standards  (Graph 4.1.3).  Moreover, 
the share of environmental taxes is set to increase. 
A  carbon  levy  will  be  introduced  for  the  non-
emission  trading  industrial  sector  by  2021,  while 
the energy taxes for households will also increase.  

Graph 4.1.3:  Environment taxes (2018) 

Source: European Commission 

is  not  particularly 
However,  the  tax  mix 
‘growth-friendly’.  With  over  50%  of  total  tax 
revenue coming from taxes on labour in 2018, the 
tax  burden  on  labour  is  around  the  euro  area 
average.  Inactivity  traps  and  unemployment  traps 
remain  relatively  large  for  low-income  earners, 

(12)  Environmental  taxes  refer  to  taxes  whose  tax  base  is  a 
physical  unit  of  something  that  has  a  proven,  specific 
negative  impact  on  the  environment.  They  comprise  taxes 
on 
resources. 
Environmental  taxes  are  considered  to  be  among  those 
taxes relatively less distortive in terms of market outcomes. 

transport, 

pollution 

energy, 

and 

27 

253035404550550100002000030000400005000060000700008000090000100000Marginal income tax rate (%)Taxable income (EUR)201520182020024681012LuxembourgGermanySwedenFranceSpainAustriaEA averageCzechiaBelgiumEU averageHungaryLithuaniaIrelandFinlandUnited KingdomSlovakiaPortugalPolandItalyRomaniaDenmarkMaltaCyprusEstoniaNetherlandsCroatiaSloveniaGreeceBulgariaLatvia% total tax revenue% GDP0102030405060labour taxconsumption taxrecurrent propertyenvironmentotherNetherlandsEuro area3 highest/lowest 
   
 
 
                                                           
 
 
                                                           
4.1. Public finances and taxation 

lower  than  9%.  It  uses  this  list  for  the  recent 
controlled  foreign  company  measure,  the  ruling 
rules  and  the  future  withholding  tax  on  interests 
and  royalties.  The  government  has  also  amended 
the  framework  for  granting  advance  tax  rulings, 
ensuring a more transparent process.  

announced 

government 

the 
has 
The 
introduction of a conditional withholding tax on 
outbound  payments,  but 
its  effectiveness 
remains  to  be  seen.  The  current  absence  of 
withholding  tax  on  royalty  and  interest  payments 
may lead to cross border payments being taxed at a 
very low rate or escaping tax altogether if they are 
channelled to a low or no tax jurisdiction. This has 
been  flagged  as  a  key  element  that  facilitates 
aggressive  tax  planning  through  the  Netherlands. 
The government has announced the introduction of 
a  conditional  withholding  tax  on  royalty  and 
interest payments, which should enter into force on 
financial 
1 January 2021.  This  should  affect 
payments  made 
tax 
to  certain 
jurisdictions. Nevertheless, the effectiveness of the 
withholding  tax  is  uncertain  -  countries  with  a 
statutory corporate tax rate above the threshold but 
offering special regime effectively reducing the tax 
rate  below  this  threshold  would  not  be  affected. 
Similarly,  countries  with  a  statutory  corporate  tax 
rate  above  the  threshold  but  with  a  territorial  tax 
regime 
that  effectively  exclude  profits  not 
repatriated on their territory would fall outside the 
scope of this measure. 

low  and  no 

4.1.3.  FISCAL FRAMEWORK 

The  Netherlands  has  a  well-established  fiscal 
framework.  For  more  than  25  years,  it  has  been 
conducting  a  trend-based  fiscal  policy  with  a 
strong multi-annual focus. The main characteristics 
of  this  fiscal  framework  include:  (i) the  use  of 
macroeconomic 
derived 
independently 
assumptions;  (ii) the  use  of 
inflation-adjusted 
expenditure  ceilings  for  the  government’s  entire 
term;  (iii) the  use  of  automatic  stabilisers  on  the 
revenue  side;  and  (iv) a  well-defined  budgetary 
process for decision-making and clear distribution 
of 
tasks  of 
independent  fiscal  institutions.  The  CPB  Bureau 
for  Economic  Policy  Analysis  carries  out 
independent  macro-economic  and  fiscal  forecasts 
while  the  Advisory  Division  of  the  Council  of 
State,  as  fiscal  council,  monitors  compliance  with 

responsibilities, 

including 

the 

firms have in some instances exploited mismatches 
and loopholes in the international tax framework to 
reduce their overall tax burden. This brings with it 
significant problems, such as revenue losses, unfair 
competitive  advantages  or  lower  tax  morale.  A 
study  commissioned  by  the  Dutch  Ministry  of 
Finance  shows  that  the  Netherlands  was  home  to 
some 15,000 letterbox companies in 2017,, with a 
balance sheet size of nearly €4,500 billion – about 
six times the country’s GDP and 80% of the stock 
of  foreign  direct  investments  in  the  Netherlands 
(SEO, 2018). According to a recent IMF paper, the 
Netherlands  is  the  second  biggest  recipient  of 
foreign  direct  investments  made  through  special 
purpose  entities  worldwide  after  Luxembourg, 
with  the  two  countries  hosting  nearly  half  of  the 
world’s  letterbox  companies  (Damgaard  et  al, 
2019).  Several 
the 
Netherlands  is  used  as  a  conduit  country,  i.e. 
certain multinationals use the country’s tax rules to 
route  their  profits  to  low  or  no  tax  jurisdictions 
(Garcia-Bernardo  et  al,  2017).  A  recent  study  by 
the  CPB  Bureau  for  Economic  Policy  Analysis 
(CPB 2019e) shows that, between 2014 and 2016, 
around  25%  of  dividend  payments  and  45%  of 
interest  payments  from  the  Netherlands  had  low 
tax jurisdictions or tax havens as their destination. 
For  royalty  payments,  this  ratio  reached  75% 
between 2008 and 2010 (most recent figures in the 
study).  

studies  highlight 

that 

The government is implementing European and 
internationally  agreed  initiatives  as  well  as 
unilateral  measures.  The  bill  on  implementing 
the  second  Anti-Tax  Avoidance  Directive  should 
neutralise  certain  hybrid  mismatch  arrangements 
that would otherwise result in double non-taxation 
(effective  as  of  1 January 2020).  The  government 
has  also  transposed  the  sixth  amendment  of  the 
Directive  on  Administrative  Cooperation 
into 
national  law,  which  will  enter  into  effect  as  of  1 
July  2020.  This  will  force  intermediaries  to 
disclose  aggressive  tax  planning  schemes  to  tax 
authorities.  The  Netherlands  adopted  most  of  the 
provisions  of  the  OECD  Multilateral  Convention 
to Prevent Base Erosion and Profit Shifting, which 
has  entered 
force  on  1 January 2020. 
However,  the application of the  provisions of  this 
multilateral instrument will depend on the choices 
made  by  the  relevant  treaty  partners.  In  2019,  the 
government also introduced a dynamic ‘black list’ 
of  jurisdictions,  comprising  those  on  the  EU  list 
and  countries  with  a  statutory  corporate  tax  rate 

into 

28 

 
4.1. Public finances and taxation 

rating agencies, and with low spreads on sovereign 
yields and credit default swaps.  

The  fiscal  sustainability  gap  indicator  (S2) 
points to medium risk in the long term (19). This 
is  mainly  due  to  the  projected  increase  in  ageing 
costs.  While  the  Netherlands  scores  well  on  the 
fiscal  sustainability  of  its  public  pension  system 
and  other 
expenditures, 
age-related  public 
spending  on  long-term  care  stands  out.  In  the 
baseline  reference  scenario,  public  spending  on 
long-term  care  is  expected  to  grow  from  3.5%  of 
GDP in 2016 to 6% of GDP in 2070, with both at a 
much  higher  initial  level  and  rising  much  faster 
than  in  peer  countries.  In  this  context,  while  the 
2015 reform in the long-term care system aims to 
increase  the  efficiency  of  the  system  and  contain 
public  expenditures,  more  recent  policy  measures 
such  as  the  additional  investment  to  meet  the 
requirements of the quality framework for nursing 
in  an  opposite  direction.  The 
homes  go 
government also softened the increase in the first-
pillar retirement age and its link to life expectancy. 

(19)  The  long-term  sustainability  indicator  (S2)  is  currently 
2.8%  of  GDP  in  the  Netherlands.  This  shows  the  upfront 
adjustment  needed  to  the  current  primary  balance  (in 
structural terms) to stabilise the debt-to-GDP ratio over the 
infinite  period,  including  financing  for  any  additional 
expenditure arising from an ageing population. 

of 

numerical  fiscal  rules  and  performs  a  normative 
assessment 
finances.  The 
government 
commitment  to  comply  with  EU  fiscal  rules  is 
embedded in the legal framework, in particular via 
the  law  on  sustainable  public  finances  (Wet 
Houdbare Overheidsfinancien). 

to 

uses 

fixed (16) 

In the 2020 budget, a relatively large number of 
ad  hoc  adjustments  were  made 
the 
expenditure  and  revenue  ceilings.  The  fiscal 
framework 
multi-annual 
expenditure  ceilings,  with  automatic  stabilisation 
mostly  taking  place  via  the  revenue  side  of  the 
budget. In normal economic times, the framework 
provides for stability, by setting budgetary anchors 
well  in  advance.  However,  in  the  2020  budget 
relatively  large  ad-hoc  adjustments  were  made  to 
the  expenditure  and  revenue  ceilings.  This  was 
done  (i)  to  accommodate  higher  spending  on 
climate  and  pensions  following  discretionary 
policy  decisions;  and  (ii)  to  allow  under-spending 
compared  to  the  expenditure  ceilings  in  2018  and 
2019  to  be  effectuated  in  later  years  after  the 
current government’s period.  

4.1.4.  DEBT SUSTAINABLITY ANALYSIS AND 

FISCAL RISKS 

short-term 

Short-term  and  medium-term 
fiscal  risk 
indicators  do  not  give  cause  for  concern.  The 
European  Commission’s 
indicator 
S0 (17)  does  not  flag  significant  fiscal  risks.  The 
medium-term  S1  indicator,  which  measures  the 
effort  required  to  achieve  a  debt  level  of  60%  of 
GDP  by  2033 (18),  is  also  negative  (-3.2%  of 
GDP).  This  implies low  fiscal sustainability  risks, 
which  is  explained  by  a  debt  level  below  the 
reference  value.  The  low  short-term  and  medium-
term risk is consistent with the ‘AAA’ rating given 
to Dutch government debt by the three major credit 

(16)  Fixed  in  real  terms;  the  expenditure  ceilings  are  indexed 

with wage and price developments. 

(17)  The  S0-indicator  aims  to  detect  of  fiscal  stress  early  on 
stemming from risks within a one-year period, making use 
of  the  signalling  power  of  its  components  (a  set  of  25 
indicators) 

(18)  The  medium-term  sustainability  indicator  (S1)  shows  the 
additional  adjustment  required,  in  terms  of  improving  the 
government  structural  primary  balance,  over  5  post-
forecast  years  to  achieve  a  60%  public  debt-to-GDP  ratio 
future  additional 
financing 
by  2033, 
expenditure arising from population ageing. 

including 

for 

29 

 
                                                           
 
                                                           
4.2.  FINANCIAL SECTOR 

4.2.1.  BANKING SECTOR 

Overall  the  banking  sector  appears  resilient. 
Dutch  banks  remain  well  capitalised,  with  a 
common  equity  tier  1  ratio  of  around  17%  (well 
above 
the  euro  area  average  of  14.8%). 
Profitability has improved over the last 5 years and 
the  return-on-assets  stood  at  0.5%  in  Q2  2019 
while  the  return-on-equity  reached  8.7%  (see 
Table 4.2.1).  

Table 4.2.1: 

Financial soundness indicators 

Source: ECB  

Despite  banks’  overall  financial  soundness  and 
a  low  level  of  non-performing  loans,  there  are 
linked  to  their  mortgage 
underlying  risks 
exposure.  The  share  of  non-performing  loans 
continued  to  decrease  across  all  sectors,  reaching 
1.8% in mid-2019, a 10% decrease compared with 
the  year  before.  However,  with  mortgage  debt 
levels  remaining  high  and  continued  house  price 
rises  (see  subsections  4.2.3  and  4.2.4),  combined 
with  risk  weights  at  low  levels,  risks  are  building 
up.  In  recent  years,  several  measures  have  been 
taken  to  rein  in  mortgage  debt  growth.  This 
includes 
taking  macroprudential  policy  steps 
(European  Commission,  2018a)  as  well  as 
reducing  tax  incentives  for  taking  on  mortgage 
debt  (see  Section  4.2.3  below).  In  addition,  to 
further  improve  financial  sector  resilience  against 
vulnerabilities associated with the banking sector’s 
high  mortgage  debt  exposure,  the  Dutch  central 
bank  intends  to  introduce  a  risk  weight  floor  for 
banks’  mortgage  holdings,  with  the  level  of  the 
floor  linked  to  the  loan-to-value  ratio  of  the 
underlying  loans (20).  The  floor  is  expected  to 
come into force in autumn 2020.     

Although Dutch banks are well capitalised, they 
continue to rely heavily on market funding, and 

(20)  According  to  central  bank  estimates,  this  measure  will 
boost average risk weights in the Dutch banking system  to 
14-15%, from around 11% at present (DNB, 2019b). 

leverage  remains  high.  The  financial  sector’s 
solvency  position  and  capital  ratios  continue  to 
exceed  regulatory  requirements.  Both  capital 
adequacy  and  the  tier  1  ratios  improved  further, 
reaching 22.6% and 18.7% in Q2-2019. Given the 
gap between actual lending and its long-term trend, 
the countercyclical buffer has been kept at 0% by 
the Dutch central bank (DNB, 2019b). At the same 
time,  the  additional  buffers  imposed  on  the  five 
systemic  banks  remain  in  force,  and  their  gradual 
build-up should be completed this year. However, 
despite  its  relatively  high  capital  ratios  relative  to 
risk-weighted  assets,  the  banking  sector  continues 
to  be  highly  leveraged.  Its  leverage  ratio  (capital 
and  reserves  as  a  share  of  total  —  i.e.  non-risk-
weighted  —  assets)  has  declined  somewhat,  to 
5.8% in June 2019. This is one of the lowest levels 
in the euro area. The sector also continues to rely 
heavily  on  market  financing,  with  deposits  as  a 
share of total liabilities declining further to 48.7% 
in September 2019. Consistent with this, the loan-
to-deposit  ratio  started  to  pick  up  again,  reaching 
118.7% in Q2-2019 — one of the highest levels in 
the euro area.  

boost 

to  minimum 

to  analysis  by 

Dutch  banks  will  also  have  to  comply  with  the 
final Basel III framework from 2022, implying a 
capital 
significant 
the 
requirements.  According 
European  Banking  Authority  (European  Banking 
Authority,  2019),  this  reform  could  increase  the 
tier  1  minimum  required  capital  and  will  affect 
mainly the large and systemically important banks 
(Bank 
International  Settlements,  2017). 
Although Dutch banks should be able to fulfil the 
new  requirements,  the  impact  on  their  capital 
position  could  be  significant(21).  However,  since 
for  a  5-year 
the  new 
implementation  period,  beginning  in  2022,  any 
additional  capital  needs  will  be  phased 
in 
gradually. 

framework  provides 

for 

Dutch  banks  maintain  healthy  profitability, 
although  margins  are  coming  under  pressure. 
The  sector’s  return  on  equity  stayed  almost  flat 
(8.7% in Q2-2019, from 8.8% the year before). At 
73.8%,  the  net  interest  margin  in  mid-2019  is  on 
an upward trend and one of the highest in the EU. 

(21)  The three largest  Dutch banks face an expected additional 
capital requirement of €7 billion in Common Equity Tier 1 
and  €4.6  billion  in  additional  tier  1  (AT1)  capital 
instruments (DNB, 2019b). 

30 

201420152016201720182019q2Non-performing loans3,42,72,42,11,91,8o/w NFC & HH sectors3,83,23,02,72,52,4o/w NFC sector6,35,35,34,84,34,2o/w HH sector2,11,71,31,21,11,0Coverage ratio37,837,835,629,826,224,4Return on equity3,37,07,38,88,18,7Return on assets0,20,40,40,50,50,5Total capital ratio18,420,622,422,122,422,6CET 1 ratio14,414,615,716,817,016,9Tier 1 ratio15,416,617,918,619,018,7Loan to deposit ratio127,0122,2119,6117,7117,6118,7 
 
 
 
 
                                                           
                                                           
However,  with  low  interest  rates  putting  pressure 
on margins, banks are looking for ways to improve 
their returns. One strategy that banks are focusing 
on  is  increasing  efficiency  by  introducing  digital 
solutions  and  reducing  the  number  of  branches 
(European  Central  Bank,  2019b;  DNB,  2019c). 
Another,  potentially  more  worrying,  emerging 
trend  is  that  banks  appear  to  be  easing  their 
lending  conditions  and  acceptance  criteria  for 
mortgage  loans  and  credit  facilities  for  non-
financial  corporations  (European  Central  Bank, 
2019a).  While  the  latter  could  have  a  positive 
financing 
impact 
bottlenecks (e.g. in relation to small and medium-
sized enterprises; see subsection 4.2.2), it also risks 
increasing  the  vulnerability  of  banks’  loan  books 
to shocks. 

addressing 

genuine 

by 

The  Netherlands  has  deep  financial  markets 
that are attractive for international players. The 
Dutch  market  is  attracting  various  new  financial 
players,  partly  due  to  its  technical  and  logistical 
infrastructure.  Moreover,  Cboe  Global  Markets 
Inc.,  one  of  the  world’s  largest  exchange  holding 
companies,  has  entered  into  an  agreement  to 
acquire  European  Central  Counterparty  NV 
(EuroCCP),  a  Dutch  equity  clearing 
firm, 
increasing the potential for developing derivatives 
clearing  capabilities  in  the  Netherlands. However, 
the  growing  prominence  of  electronic  trading  and 
the arrival of new trading platforms raise concerns 
over  IT  risks,  the  control  of  trading  algorithms  in 
volatile  markets  and  supervision  of  market  abuse 
in rapidly moving and globally dispersed markets. 
To  support  market  operators,  the  Dutch  central 
bank  and  the  Dutch  Authority  for  Financial 
Markets  have  already  put 
forward  several 
initiatives (22)  to  inform  on  relevant  risks  and 
opportunities.  

Sustainable finance 

The  financial  sector  plays  a  key  role 
in 
mobilising  finance  to  fulfil  the  environmental 
sustainability  agenda.  At  international  level,  the 
Dutch central bank is one of the founding members 
of  the  Network  of  Central  Banks  and  Supervisors 
for Greening the Financial System, which aims to 
strengthen  the  efforts  of  the  financial  sector  in 

(22)  These include the InnovationHub, the Regulatory Sandbox, 
and the general principles for using artificial intelligence in 
the financial sector. 

4.2. Financial sector 

meeting  the  climate  goals.  At  national  level,  the 
Dutch central bank set up the Sustainable Finance 
Platform,  which  aims  to  promote  and  increase 
awareness  of  sustainable  funding  in  the  financial 
sector.  Due  to  the  risks  that  the  energy  transition 
might  have  on  financial  institutions,  the  central 
bank  is  also  including  the  data  on  sustainable 
assets  owned  by  financial  institutions  in  its  stress 
test  scenarios.  Furthermore,  Dutch  banks  have 
pledged  to  measure,  monitor,  manage  and  reduce 
the environmental footprint of their balance sheets.  

Anti-money laundering 

The  Netherlands  is  among  the  countries  with 
the largest flows of inward and outward foreign 
direct  investment.  In  2017,  this  involved  a  total 
amount of over  €4.5  trillion. A  substantial  part of 
these flows (some 80%) is ultimately transferred to 
a  foreign  destination  through  special  purpose 
entities,  letterbox  or  shell  companies  with  no  real 
economic  activity 
the  Netherlands  (CBS, 
2018b).  Against  this  backdrop,  it  is  key  that 
entities  involved  in  company  and  trust  formation 
(trust and company service providers (TCSPs), tax 
advisors, public notaries, lawyers) are aware of the 
money  laundering  risks  linked  to  those  business 
structures.  

in 

are  vulnerable 

The 2017 national risk assessment considers the 
money laundering risks posed by TCSPs and by 
complex  fiscally  driven  legal  structures as high 
and  medium-high,  respectively.(23)  The  national 
risk  assessment  justifies  the  high  risk  rating  for 
TCSPs  with  the  fact  that  these  services  are  often 
directed towards fiscally-driven structures of legal 
entities,  which 
to  misuse. 
Inadequate  understanding  of  risk  exposure  to 
money  laundering  by  professionals  that  service 
such  entities,  particularly  when  complex  schemes 
are  involved,  hampers  their  role  as  gatekeepers. 
Trust  and  company  service  providers,  including 
legal  professionals  and  tax  advisors,  are  the  first 
line  of  defence  against  money  laundering  risk,  as 
they are involved in company formation. However, 
the  Dutch  Financial 
statistics  provided  by 
Intelligence  Unit  on  unusual  transaction  reports 
(UTRs)  highlight  concerns  in  this  area.  The 
number of UTRs filed by TCSPs has been low and 

(23)  See  van  der Veen  et  al.  (2017),  p.  40  and  Table  6.1  on  p. 

64.  

31 

 
                                                           
                                                           
4.2. Financial sector 

sector 

the  Dutch 

to  peer  countries  (European  Commission,  2019a). 
This may be due to the high market concentration 
in 
(European 
banking 
Commission, 2019a) and the absence of a national 
credit  register (Dubovik  et  al.,  2019; van  Solinge, 
2019).  However,  in  recent  years  some  alternative 
(non-bank)  providers  of  financing  have  emerged. 
These  are  challenging  the  dominant  position  of 
traditional banks as lenders to small and medium-
sized  enterprises,  including  by  offering  a  wider 
range  of  financial  instruments.  Moreover,  the 
Dutch  authorities  are  considering  creating  new 
existing 
instruments 
instruments (27)  to  improve  access  to  finance  for 
small and medium-sized companies (EZK, 2019a). 

expanding 

and 

4.2.3.  PRIVATE DEBT* 

the 

prudential 

Private debt continues to decline gradually, but 
remains high by international standards. At the 
end  of  2018,  it  amounted  to  242%  of  GDP.  This 
represents a significant reduction from its peak of 
267% of GDP in 2014, but remains well above the 
euro  area  average  of  about  135%  of  GDP  (Graph 
4.2.1). Both household debt, at 102% of GDP, and 
non-financial corporate debt, at 140% of GDP, far 
exceed 
fundamental 
threshold(28)  levels  of  65%  and  96%  of  GDP 
(prudential)  and  75%  and  104%  of  GDP 
(fundamental) 
to 
respectively, 
Commission calculations. However, the high level 
of corporate indebtedness is mainly due to the debt 
of multinationals (about 60% of total non-financial 
corporate  debt).  As  this  consists  largely  of  intra-
group  debt,  it  does  not  raise  immediate  financial 
stability  concerns  (European  Commission,  2019a 
and 2018a). With regard to private debt, the  main 
concern is therefore household debt. 

according 

and 

(27)  These  include  offering  support  to  regional  development 
(regionale  ontwikkelingsmaatschappijen); 
undertakings 
holding  discussions  with  pension 
funds  and  other 
institutional investors to facilitate investments in small and 
medium-sized  companies;  encouraging  the  ‘alternative 
sector’  of  credit  by  expanding  a  number  of  existing 
instruments;  and  assessing  the  need  for  a  national  credit 
register. 

declining in recent years (24). The number of UTRs 
filed by tax advisors has been low as well (25). 

The  Dutch  administration  has  proposed  some 
measures to combat the misuse of company and 
legal structures for money laundering purposes. 
The prevention of letterbox companies is also one 
on  the  measures  mentioned  in  the  Dutch  Anti-
Money-Laundering  (AML)  Action  Plan  from 
mid-2019  (Ministry  of  Finance,  2019d),  with  a 
specific focus on the trust sector. Also stricter rules 
to monitor TSCPs is an important part of the AML 
Action  Plan,  as  well  as  the  establishment  of  the 
ultimate beneficial owner registers on legal entities 
and  on  legal  arrangements.  However,  the  laws 
setting up the registers have not been adopted yet. 
Upon  adoption  and  establishment  of  the  registers, 
operators  will  have  18  months  to  register,  well 
after  the  deadlines  of  10  January  and  10  March 
2020 laid down in EU law. 

The  criminal 
into  the  AML 
investigation 
compliance practices of Dutch bank ING led to 
an  out-of-court  settlement,  including  a  record 
fine,  in  September  2018.  The  settlement  found 
ING  guilty  of  criminal  offences  in  violating 
compliance  rules  on  anti-money-laundering  and 
financing.(26)  Another 
combating 
is 
investigation 
ongoing.  These  cases  illustrate  how  the  services 
provided  by  the  big  financial  institutions  are 
exposed to money laundering risks, and also draw 
attention  to  systemic  issues  in  relation  to  AML 
supervision and enforcement in this sector.   

to  ABN  Amro  Bank 

terrorism 
linked 

4.2.2.  ACCESS TO FINANCE 

Access  to  finance  for  smaller  companies  is 
hampered  by  some  bottlenecks,  in  part  linked 
to a high degree of market concentration in the 
banking  sector.  While  sufficient  financing  seems 
to  be  available 
low-risk 
investments,  smaller  Dutch  companies  experience 
a 
for  credit 
applications.  Firms  taking  out  smaller  loans  are 
also charged wider mark-ups on average compared 

relatively  high 

rejection 

larger, 

fund 

rate 

to 

(24)  Dutch trust offices filed 60 UTRs in 2016, 49 in 2017 and 
19 in 2018 (Financial Intelligence Unit, 2019, p. 43). 
(25)  Tax advisors filed 20 UTRs in 2016, 18 in 2017 and 20 in 

2018 (Financial Intelligence Unit, 2019, p. 43). 

(26)  For  an  in-depth  analysis  of  the  surrounding  events,  see 

European Commission (2019g). 

32 

(28)  Fundamentals-based  benchmarks 

are  derived 

from 
regressions  capturing  the  main  determinants  of  credit 
growth and taking into account a given initial stock of debt. 
Prudential thresholds represent the debt level beyond which 
the probability of a banking crisis becomes relatively high, 
based  on  a  signalling  approach  (European  Commission, 
2017a). 

 
                                                           
                                                           
4.2. Financial sector 

Graph 4.2.1:  Private debt developments versus euro area 

Graph 4.2.2:  Household debt versus GDP growth 

average 

Source: Eurostat 

Source: Eurostat 

Household  debt  continues  to  decline as  a share 
of GDP, although it is still increasing in nominal 
terms.  Following  the  post-crisis  housing  market 
correction,  nominal  household  debt  declined  over 
the  course  of  2013-2014  as  households  actively 
deleveraged.  As  house  prices  started  to  recover, 
debt  growth  started  rising  again.  However,  at  a 
pace  of  around  1-1.5%  year-on-year, 
it  has 
remained  subdued,  both  compared  with  pre-crisis 
household  debt  developments  and  relative  to 
nominal annual GDP growth of 2% to 5% (Graph 
4.2.2).  This  is  in  part  attributable  to  policy 
in  mortgage  debt  growth, 
measures 
including  restrictions  on  interest-only  loans  (see 
below)  as  well  as  tighter  rules  for  loan-to-value 
and  loan-to-income  ratios.  Voluntary  mortgage 
repayments,  which  became  financially  attractive 
due to low interest rates on deposits, also played a 
significant  role  (DNB,  2018a).  Going  forward, 
household  debt  growth  appears  likely  to  pick  up 
somewhat,  as  the  sharp  house  price  rises  seen  in 
recent  years  (see  subsection  4.2.4)  feed  through 
into higher mortgage amounts for new borrowers.  

to  rein 

Mortgage  interest  tax  deductibility  is  being 
reduced,  but remains  generous.  High  household 
indebtedness  is  largely  due  to  mortgage  debt, 
which is fuelled by the fact that mortgage interest 
on  owner-occupied  homes  is  treated  as  a  fully 
deductible  expense  in  income  taxation.  Dutch 
authorities have taken some steps to limit this, both 
by disqualifying new interest-only mortgages from 
tax  deductibility  (in  force  since  2013)  and  by 
reducing  the  maximum  applicable  rate  at  which 
mortgage interest is deductible. This reduction was 
very gradual at first (0.5 percentage points per year 
from  2014),  but  from  2020  it  will  proceed  at  an 
accelerated  pace,  with  the  maximum  rate  lowered 
in three steps from 49% at present to 37% in 2023. 
However, this reduction only affects households in 
the top tax bracket (some 10% of the labour force), 
and  a  rate  of  37%  still  signifies  a  strong  implicit 
subsidy  on  mortgage  borrowing, 
currently 
amounting to around €10 billion (1.4% of GDP). It 
also contrasts with policies in other EU countries, 
where  mortgage  interest  deductibility  has  mostly 
been  phased  out  or  capped  at  a  relatively  low 
nominal  amount,  or  where  the  applicable  rate  is 
substantially lower. (29) 

(29)  See  Geng  (2018),  p.  12,  for  an  overview  of  mortgage 
interest  deductibility  rates  in  a  number  of  countries  that 
have implemented reforms in this area. 

33 

0501001502002503000506070809101112131415161718HouseholdNon financial corporationsTotal private debt (Netherlands)Total private debt (euro area average)9095100105110115120125-6-4-20246820092010201120122013201420152016201720182019% of GDPy-o-y changeNominal household debt growth (LHS)Nominal GDP growth (LHS)Household debt-to-GDP ratio (RHS) 
  
  
                                                           
4.2. Financial sector 

4.2.4.  HOUSING MARKET* 

The  housing  market  upswing  continues,  albeit 
at  a  slower  pace  and  with  significant  regional 
differences. At national level, nominal house price 
growth  slowed from  9%  in  2018  to  around 6%  in 
2019. In major cities, where the recovery in prices 
had  been  particularly  steep,  the  market  cooled 
more  notably.  This  was  especially  the  case  in 
Amsterdam,  where  prices  rose  by  about  3%  over 
the course of 2019 – just slightly above inflation – 
following  price  rises  of  10-15%  per  year  since 
2016.  Nationwide,  house  prices  are  now  around 
12%  above  their  pre-crisis  peak  although  they 
remain  somewhat  lower  in  real  terms,  whereas  in 
the  largest  cities  prices  are  substantially  above 
previous highs (Graph 4.2.3). 

Graph 4.2.3:  House price developments (2008 Q1 = 100) (1) 

market  will  re-enter  overvalued  territory.  This  is 
particularly  the  case  for  regions  where  price 
growth  has  outstripped  the  national  average  and 
key  indicators,  notably  the  price-to-income  ratio, 
appear  more  stretched.  For  Amsterdam,  for 
example,  econometric  models  do  indeed  suggest 
that  price  developments  have  already  decoupled 
from  fundamentals  for  several  years  (Houben  et 
al.,  2017).  Risks  related  to  the  Dutch  housing 
market  are  also  highlighted  in  the  European 
Systemic  Risk  Board  recommendation  to  the 
Netherlands issued in June 2019 (ESRB, 2019). 

Graph 4.2.4:  House price valuation indicators 

(1) Prices exclude new-build homes and are in nominal 
terms unless otherwise stated 
Source: Statistics Netherlands (nominal house prices); 
Eurostat (deflated house price index) 

linked 

indicator 

While  valuation  indicators  do  not  show  clear 
signs  of  overheating  at  present,  the  risk  that 
house prices exceed fundamentals appears to be 
rising. At national level, the price-to-income ratio 
(a  valuation 
to  housing 
affordability) rose to about 9% above its long-term 
average in Q3 2019 (Graph 4.2.4). A model-based 
estimate  still  points  to  undervaluation  based  on 
2018  data  (although  this  is  partly  a  reflection  of 
relatively  weak  residential  investment  in  the post-
crisis  period  combined  with  low  interest  rates). 
Overall,  with  continued  above-income  price  rises, 
it  appears  increasingly  likely  that  the  housing 

(1) The model-based gap is based on a vector error 
correction model estimated on a panel of EU countries, 
using five fundamental variables (relative house prices, 
population, real housing investment, real disposable income 
per capita and real long-term interest rates). 
(*) 2019 price-to-income ratio based on Q3 figures. 
Source: European Commission 

the  demand-side,  house  prices  are 
On 
supported  by  the  favourable  tax  treatment  of 
owner-occupied  housing.  Under  the  Dutch  tax 
system,  most  investment  assets  are  subject  to 
income  taxation  based on  a deemed  rate of return 
under  the  ‘box  3’  approach,  implying  annual  tax 
payments  of  about  0.9-1.6%  of  their  net  financial 
value  under  current  rules(30).  Owner-occupied 

(30)  From  2022,  the  rules  pertaining  to  ‘box  3’  taxation  will 
change  somewhat,  with  a  differentiated  deemed  rate  of 
return  for  cash  savings  versus  other  financial  assets.  In 
addition,  debt  used  to  acquire  an  asset  (e.g.,  a  rental 
property)  will  be  factored  in  using  a  separate  deemed 
interest  rate  rather  than  simply  deducted  from  the  asset 
value. The overall effect of these changes will be to further 
widen  the  difference  in  tax  treatment  between  owner-

34 

60708090100110120130140150160AmsterdamDen HaagRotterdamUtrechtNetherlandsNetherlands (real)-15-10-5051015209901030507091113151719*% deviation of current pricePrice to income vs. hist. avg.Model-based valuations gap (1) 
  
  
                                                           
4.2. Financial sector 

housing  is  exempted  from  this  approach,  and  is 
instead  subject  to  a  (generally  lower)  recurrent 
property  tax(31).  Moreover,  when  financed  with  a 
mortgage,  it  benefits  from  a  substantial  additional 
tax  advantage  linked  to  mortgage  interest  tax 
deductibility (see subsection 4.2.3).  Overall, these 
tax  benefits  represent  a  significant  subsidy  that 
favours  owner-occupied  housing  over  other 
investment  opportunities  as  well  as  over  rental 
housing.  Möhlmann  et  al. (2019)  estimate  that 
their  impact  on  house  prices  (relative  to  a  fully 
neutral  taxation  scenario(32))  amounts  to  around 
10%,  and  on  the  share  of  rental  homes  in  the 
overall  housing  market  to  around  5  percentage 
points.  

Demand  for  owner-occupied  housing  is  also 
driven by the lack of a viable alternative on the 
rental  market.  The  Dutch  housing  market  is 
characterised  by  large  owner-occupied  and  social 
housing  sectors,  each  of  which  are  subsidised 
through  different  channels(33).  The  private  rental 
market  is  the  only  sector  not  receiving  any 
subsidy,  and  with  a  share  of  about  13%  of  the 
overall  number  of  homes  it  remains  relatively 
underdeveloped.  This  leads  to  poor  availability of 
rental  housing  and  high  rent  levels.  As  a  result, 
middle-income  households  –  whose  earnings  are 
the  social-housing  ceiling  yet  often 
above 
insufficient  to  comfortably  afford  private-sector 
rents  –  can  be  pushed  into  (largely  mortgage-
financed)  home  ownership.  This  particularly 

occupied  housing  and  other  financial  investments  (except 
for cash). 

(31)  Owner-occupied  homes  are 

taxed  by  adding 

the 
‘eigenwoningforfait’, calculated as a percentage (0.65% for 
most  properties)  of  the  assessed  value  to  employment 
income, which is then taxed at the marginal rate (currently 
about 37-52%). If the eigenwoningforfait exceeds mortgage 
interest,  it  is  capped  at  that  level  so  that  no  net  tax  is 
payable, although from 2019 this is gradually being phased 
out  over  a  period  of  30  years  (European  Commission, 
2018a).  

concerns  younger  families,  leading  to  a  relatively 
young  average  first-time  buyer  age  accompanied 
by  high  debt-to-income  and  loan-to-value  ratios. 
financial 
This, 
vulnerability  issues  for  this  age  group  (DNB, 
2019b; European Commission, 2017b). 

creates  potential 

turn, 

in 

The  housing  supply  continues  to  fall  short  of 
estimated  needs,  particularly  in  major  cities. 
Following  the  financial  crisis,  the  Netherlands 
experienced a prolonged period of weak residential 
construction (European Commission, 2019a). This 
in  a  significant  housing  shortage, 
resulted 
estimated  by  the  Dutch  authorities  to  be  around 
294 000 homes in 2019, equivalent to 3.8% of the 
overall  housing  stock  (BZK,  2019a).  Shortages  in 
large  metropolitan  areas  are  especially  severe, 
amounting  to  5-7%  of  the  local  housing  stock 
(ABF  Research,  2019).  To  address  the  existing 
shortage  as  well  as  expected  demographic 
developments,  the  government  set  a  target  for  net 
new housing of 75 000 homes per year until 2025 
(BZK,  2018a).  Thanks  to  a  gradual  recovery  in 
construction output, this target was just about met 
in  2018  and  2019,  but  a  sharp  fall  in  building 
permits  in  2019  (partly  linked  to  the  ‘nitrogen 
problems’ 
(‘stikstofproblematiek’),  see  below) 
suggests  this  is  unlikely  to  be  the  case  in  the 
coming years (Graph 4.2.5). Moreover, the 75 000 
target  possibly  understates  actual  building  needs 
going  forward  (34),  so  even  if  it  is  achieved 
shortages may well persist.  

(34)  This is due to the fact that estimates of the current housing 
shortage have been significantly revised upwards since the 
75  000  target  was  set  in  mid-2018  (see  note  to  Graph 
4.2.5). More recent private-sector estimates of construction 
needs are also higher; e.g., ABF Research (2019) estimates 
that another 20 000 to 40 000 homes will be needed above 
and beyond the 75 000 target.  

(32)  In  particular,  taxing  an  owner-occupied  home  in  the  same 
way  as  any  other  investment  asset  (under  ‘box  3’), 
combined  with  a  generalised  exemption  for  the  first 
€300 000 in assets (whether housing or not) per household 
from taxation under ‘box 3’, abolishment of the 2% transfer 
tax  for owner-occupied  homes,  and  a  generic  reduction  in 
income taxes to maintain overall budget neutrality.  

(33)  For  owner-occupied  housing,  the  subsidy  results  from  the 
favourable  tax  treatment  discussed  above.  For  the  social 
housing  sector,  it  mainly  stems  from  land  values:  by 
designating  land  as  intended  for  social  housing  in  zoning 
plans,  it  can  be  sold  to  social  housing  corporations  at  a 
fraction of the price of land intended for regular residential 
construction. 

35 

 
                                                                                   
                                                           
4.2. Financial sector 

Graph 4.2.5:  New housing supply versus expected needs 

uncertainty  for  developers.  As  a  result, 
the 
responsiveness  of  housing  supply  to  house  price 
rises in the Netherlands is one of the lowest among 
OECD countries (Caldera et al., 2013). 

The ‘nitrogen problems’ (‘stikstofproblematiek’) 
create  additional  near-term  downside  risks  to 
new  housing  construction.  As  a  result  of  a 
judgment  of  the  Council  of  State  in  June  2019, 
construction  projects  leading  to  the  incremental 
deposition  of  a  number  of  harmful  nitrogen 
compounds  near  to  118  Natura  2000  nature 
the  Netherlands  are 
protection  areas  across 
generally 
permitted  without 
longer 
compensatory measures (see Box 1.1 in Section 1). 
Estimates  indicate  this  would  reduce  housing 
dwellings 
about 
completions 
cumulatively over 2020-2024 in a scenario with no 
mitigating policy steps (Manshanden et al., 2019). 
Although 
the  government  has  announced  a 
package  of  measures  to  alleviate  the  judgment's 
impact  on  new  construction  (LNV,  2019),  it 
remains a significant source of uncertainty. 

36 000 

no 

by 

Policy developments 

The  Netherlands  has  taken  some  steps  to 
improve  rental  market  functioning  in  recent 
years,  albeit  with  a  limited  impact  so  far 
(European  Commission,  2019a  and  2018a). These 
include measures to allow higher rent increases for 
‘scheefhuurders’ (middle and high income earners 
in social housing), a regulatory change facilitating 
more  short-term  rental  contracts  since  2016,  and 
the  possibility  for  municipalities  to  designate  a 
portion  of  dwellings  as  intended  for  the  private 
rental  sector  in  their  zoning  plans  since  2017. 
While  positive  steps,  so  far  these  measures  have 
not  translated  into  a  meaningful  expansion  of  the 
private rental sector relative to the overall housing 
market. 

In  September  2019,  a  package  of  further 
housing  market  measures  was  announced, 
aimed  primarily  at  boosting  construction.  
to  €1  billion, 
Investment  subsidies  of  up 
distributed over a period of 4 years, will be  made 
available  to  municipalities  where  shortages  are 
most  acute.  A  further  €1  billion,  spread  evenly 
over  10  years,  will  be  allocated  to  targeted  tax 
reductions for social housing corporations building 
new  homes.  These  measures  could,  over  time, 
contribute to raising new housing construction, but 

(1) For 2019, permits issued extrapolated to full year based 
on monthly data for January-November. 
(2) At the time the 2018 target was set, the projected 
housing shortage for 2019 was about 200 000 homes (BZK, 
2018b). In 2019, the actual housing shortage was estimated 
at 294 000 homes (BZK, 2019). The adjusted target (dotted 
red line) allocates this incremental shortage evenly over 
2019-2025 period. 
Source: Statistics Netherlands (historical data); BZK (2018a) 
(2018 target) 

remains 

in  size.  Following 

recovery,  developers  now 

structural  bottlenecks  are 
Cyclical  and 
constraining  housing 
supply  and  raising 
construction  costs.  As  a  result  of  a  sharp  fall  in 
building activity after the financial crisis, both the 
sector  and  municipal  planning 
construction 
the 
departments  declined 
face 
subsequent 
increasingly  tight  capacity  constraints.  From  a 
more structural perspective, a key impediment for 
more  construction  is  a  lack  of  buildable  land:  the 
amount of land allocated to housing has risen at a 
far  slower  pace  than  new  residential  construction, 
and 
international 
scarce  both  by 
comparison  and  relative  to  land  designated  for 
other  purposes,  such  as  industrial  use.  This  is  in 
part  linked  to  the  role  of  local  governments: 
decisions  on  zoning  plans  are  generally  made  by 
municipalities  and  are 
thus  not  necessarily 
conducive  to  addressing  overall  housing  needs 
(Michielsen  et  al.,  2019).  This  can  translate  into 
cumbersome and unpredictable requirements being 
imposed  on  projects,  raising  costs  and  reducing 
scope  for  exploiting  economies  of  scale.  Another, 
partly  related,  issue  are  long  throughput  times  in 
the planning and development process, particularly 
for  inner-city  construction,  which  creates  further 

36 

 
 
 
4.2. Financial sector 

level  and 

linked  to  life  expectancy  since  2012.(37)  The 
second  pillar  is  typically  organised  at  industry  or 
company 
is  capital-funded,  with 
compulsory participation. Although there has been 
a  gradual  shift  towards  defined  contributions  in 
recent years, about 90% of all participants still fall 
under (quasi-)defined-benefit(38) pension schemes. 
The  third  pillar  is  formed  by  individual  pension 
plans,  supported  by  a  targeted  tax  relief  on 
premiums  paid  on  such  products.  The  first  and 
second  pillar  aim  to  provide  a  retirement  income 
that  replaces  around  75%  of  the  average  lifetime 
gross salary. Given that retirees are exempted from 
paying the specific first pillar pension contribution, 
net  replacement  rates  are  often  around  100% 
(OECD, 2017a). 

a 

the 

impact 

significant 

Second-pillar  pension  contributions  are  a  key 
driver  of  relatively  high  compulsory  savings, 
having 
the 
on 
  With  a  typical 
savings/investment  balance. 
contribution rate of around 20% of gross earnings, 
second-pillar  premiums  are  responsible  for  the 
bulk  of 
large  non-tax 
comparatively 
compulsory  payment  wedge  in  the  Netherlands 
(Graph  4.2.6).  As  such, 
to 
suboptimal 
across 
consumption 
different  lifetime  phases,  particularly  as  younger 
households  typically  also  experience  significant 
forced  savings  via  principal 
repayments  on 
relatively  large  mortgages  (see  subsection  4.2.2). 
In  contrast,  older  age  cohorts  on  average  enjoy 

they  can 
smoothing 

lead 

(37)  As  part  of  the  pension  agreement  of  June  2019  (further 
discussed below), it was decided that the steps with which 
the  retirement  age  will  rise  will  become  less  steep.  In  the 
original  system,  a  one  year  rise 
life 
expectancy  at  65  would  lead  to  a  one  year  rise  in  the 
retirement age. In the new system, a rise in life expectancy 
with one year will lead to a rise in the retirement age of 8 
months.  

in  remaining 

their 

income 

through 

(38)  These  second-pillar  pension  funds  have  some  features  of 
standard  defined-benefit  schemes,  in  that  they  target  a 
defined  retirement 
investment 
strategy,  which  is  used  to  calculate  the  present  value  of 
future  pension  pay-outs.  However,  they  also  share  some 
characteristics of defined-contribution schemes, as the final 
benefit  can  be  adjusted  over  time  depending  on  the 
financial  performance  of  the  underlying  investments. 
Generally, pension funds aim to index benefits with wages 
or inflation, but if the asset/liability ratio deteriorates, they 
can be frozen or cut in nominal terms. Nevertheless, there 
tends  to  be  a  perception  that  expected  benefits  are 
guaranteed (rather than merely targeted). This expectations 
mismatch has negatively affected trust in the system as cuts 
became  necessary  in  recent  years  (European  Commission, 
2019a). Partly linked to this, specific policy measures were 
taken in November 2019 to limit the risk of further cuts in 
the near-term (SZW, 2019c). 

significant implementation uncertainty remains. In 
particular, it may be challenging to determine that 
new  homes  built  under  the  schemes  genuinely 
represent a net addition to the housing stock, rather 
than projects that would have happened anyway or 
that  simply  shift  resources  away  from  other 
potential developments.  

to 

simplify 

the  market 

Other  recent  policy  steps  risk  having  a  limited 
or even negative impact on the supply of private 
rental  housing.  In  May  2019,  legislation  was 
adopted 
criterion 
(‘markttoets’) for social housing corporations. This 
should  allow  them  to  engage  in  construction  of 
mid-priced  (non-regulated)  rental  housing  more 
easily.  However,  against  the  current  backdrop  of 
strong  private-sector  development  activity  and 
capacity constraints in the construction sector, this 
appears  unlikely  to  create  significant  incremental 
rental  housing  supply  in  the  near-term,  while  –  if 
successful in the longer run – it risks crowding out 
the  role  of  the  private  sector  in  the  non-regulated 
rental market. In addition, adjustments to the rent-
setting system for social housing(35), announced as 
part  of  the  September  2019  housing  market 
package mentioned above, imply that more homes 
regulated  sector 
remain 
than 
transitioning 
rental  market. 
the  private 
Moreover,  measures  to  discourage  ‘buy-to-let’ 
purchases  (also  proposed  as  part  of  the  same 
package)  may  favour  expansion  of  the  owner-
occupier  market  at  the  expense  of  rental  housing 
availability.  

the 
to 

rather 

in 

4.2.5.  PENSIONS* 

The  three-pillar  pension  system  scores  well  on 
pension  adequacy  and  fiscal  sustainability.  The 
first  pillar  is  the  pay-as-you-go  state  pension, 
which  is  non-means-tested  and  independent  of 
employment  history(36).  It  is  funded  by  a  specific 
contribution  and  general  income  taxes,  with  a 
current cost of about 5% of GDP. To limit its fiscal 
impact,  the  statutory  retirement  age  has  been 

(35)  In  particular,  lowering  the  weight  of  the  assessed  value 
(‘WOZ-waarde’)  in  setting  the  maximum  rent  for  a 
property,  which  in  turn  determines  whether  it  falls  within 
the social (regulated) or private rental sector. 

(36)  It  is,  however,  dependent  on  residency  history  in  the 
Netherlands. This can be relevant for e.g. migrant workers, 
as the period before their arrival does not give rise to state 
pension entitlements in the Netherlands. 

37 

 
                                                           
                                                           
4.2. Financial sector 

labour  market 

workers  remaining  employed  within  the  same 
company or sector throughout their working lives. 
As  it  now  stands,  it  is  not  well  equipped  to  deal 
trends, 
with  current  structural 
including flexible career paths with increasing job 
mobility  between  sectors  and  a  growing  share  of 
self-employed  workers  (who  are  not  normally 
covered within the system). In addition, the system 
involves systematic redistribution from younger to 
older  workers,  via  the  ‘average  contribution, 
average 
(‘doorsneesystematiek’) 
approach (39) (CPB, 2018). As this makes the link 
between  contributions  and  pension  savings  less 
clear, it also reduces transparency. 

accrual’ 

in 
its 

The  social  partners  and  government  reached  a 
framework  agreement  on  pension  reform  in 
June 2019. Overall, the agreement aims to address 
the  pension  system  while 
vulnerabilities 
maintaining 
compulsory 
participation, collective implementation, collective 
risk  sharing  and  supportive 
tax  rules.  The 
agreement and its subsequent implementation steps 
imply  a  number  of  key  changes,  including  (SZW, 
2019a, 2019b and 2019c):  

strengths: 

  Transitioning 

the 

from 

current 
doorsneesystematiek 
to  an  actuarially  fair 
system.  This  will  be  based  on  a  fixed 
contribution  percentage  combined  with  an 
accrual  rate  that  declines  with  age,  reflecting 
the  shorter  investment  horizon  for  premiums 
from older workers. 

  A  tighter  linkage  between  changes  in  pension 
funds' financial position and pay-outs, implying 
a lower threshold for both benefit increases and 
cuts (albeit smoothed over a period of up to 10 
years  in  most  cases).  This  also  implies  that 
benefit  adjustments, 
than  premium 
changes,  will  become  the  primary  mechanism 
to absorb asset/liability imbalances. 

rather 

  More 

flexibility 

individual 

using 
accumulated  pension  assets,  in  particular  the 
option  to  redeem  part  of  it  as  a  lump-sum 
payment  at  the  pensionable  age  under  certain 
conditions. 

in 

(39)  In  the  current  set-up,  pension  contributions  paid  in  at  any 
point  of  one’s  career  entitles  the  beneficiary  to  the  same 
amount  of  pension  benefits,  irrespective  of  their  age  and 
the  investment  horizon.  While  this  system  facilitates 
collective risk sharing, it is not actuarially fair 

income,  with 
lower  overall 

limited  housing 
high  pension 
expenses  and 
living  costs.  At 
macroeconomic  level,  compulsory  savings  via 
pension  funds  are  a  significant  driver  of  the 
household  sector's  savings/investments  imbalance 
(European  Commission,  2019a)  and  therefore  of 
the overall current account surplus (see subsection 
4.2.6). 

Graph 4.2.6:  Compulsory payment wedge on labour 

income (2018) 

The chart shows the average compulsory payment wedge 
and average tax wedge for single taxpayers without 
children and with average earnings. 
Source: OECD (2019a) 

the 

that  dampen 

The funding ratio of pension funds is negatively 
affected  by  falling  interest  rates,  triggering 
adjustments 
impact  of 
monetary  policy  transmission.  The  defined-
benefit nature of  most second-pillar  funds implies 
that  the  present  value  of  their  liabilities  –  i.e., 
future pension pay-outs – increases as interest rates 
decline. The resulting asset/liability  mismatch can 
make  it  necessary  to  forgo  anticipated  benefit 
increases,  raise  premiums,  or  cut benefits outright 
(Lever et al., 2018). This has a negative impact on 
disposable  household  income  and  can  encourage 
precautionary  savings  behaviour,  weighing  on 
household  consumption  when  monetary  policy 
aims to stimulate domestic demand. 

The  second  pillar  in  its  current  form  also  has 
structural  drawbacks  in  terms  of  coverage, 
transparency  and  intergenerational  fairness. 
The  Dutch  pension  system  emerged  in  the  mid-
twentieth century, and was mainly geared towards 

38 

0102030405060USCAUKJPIEDKEELUOECDESPTPLELFILVSESICZSKHUATFRITDENLBEaverage tax wedgeaverage compulsory payment wedge 
  
                                                           
  A  slower  increase  in  the  first-pillar  retirement 
age  (see  subsection  4.1),  and  more  scope  for 
workers  in  occupations  deemed  particularly 
arduous to retire earlier. 

  The 

introduction  of  mandatory  disability 
insurance for the self-employed (see subsection 
4.3.1). 

under 

effective 

  In  particular, 

implementation  of 

Overall, 
the 
planned reform could address key challenges in 
the  second-pillar  system. 
it 
removes  the  structural  intergenerational  transfers 
present 
doorsneesystematiek 
the 
approach(40), reduces the procyclical impact of the 
system (as market shocks should no longer impact 
premiums),  and  is  better  equipped  to  deal  with 
flexible  career  paths.  Some  further  potential 
changes are still under discussion and will depend 
on  the  outcome  of  preparatory  research  and 
consultation work. This includes introducing wider 
and  more  flexible  coverage  options,  including  for 
self-employed  workers  (albeit  on  a  voluntary 
basis),  as  well  as  further  increasing  individual 
the 
flexibility,  for 
possibility  to  allocate  part  of  pension  premium 
payments to mortgage amortisation (SZW, 2019b).  

instance  by  opening  up 

While  the  planned  reform  holds  significant 
promise,  implementation  is  still  ongoing.  At 
present,  an  agreement  on  overall  principles  is  in 
place.  Crucial aspects  are  still  to be decided upon 
under  the  guidance  of  a  steering  committee  of 
social  partners  and  government.  This  includes  the 
precise  rules  for  adjusting  pension  benefits  based 
on funding ratio changes, as well as compensation 
mechanisms  for  age  cohorts  who  will  loose  out 
under  the  new  system  (Zwaneveld,  2019).  The 
legislative  process  is  expected  to  take  until  early 
2021,  with  the  new  framework  gradually  being 
phased  in  from  2022.  Implementation  of  the 
pension  agreement  should  therefore  be  closely 
monitored. 

(40)  However,  the  new  system  could  still  involve  some  degree 
of  systematic  intergenerational  transfers  depending  on  the 
precise  rules  governing  benefit  adjustments  based  on 
funding ratio developments.  

4.2. Financial sector 

4.2.6.  SAVINGS AND INVESTMENT IMBALANCE* 

The  Dutch  economy’s  long-standing  current 
account  surplus  widened  to  a  record  11.2%  of 
GDP in 2018 before declining somewhat. From a 
balance  of  payments  perspective,  the  surplus  is 
almost entirely attributable  to  a  structural  positive 
trade balance in goods of about 9% to 10% of GDP 
(Graph 4.2.7). In terms of product groups, exports 
of chemicals, foodstuffs and animal products make 
a  significant  contribution.  Over  half  of  total 
exports  are  re-exports,  linked  to  the  port  of 
Rotterdam’s  role  as  a  global  trade  and  logistics 
hub, with an estimated overall impact on the goods 
surplus of at least 3% of GDP (Suyker et al., 2019; 
CBS,  2017).  Trade  in  services  and  the  primary 
impact  on 
income  balance  have 
average (41),  but  do  contribute  substantially  to  the 
year-to-year  volatility  of  the  overall  surplus.  In 
2019, the latest available quarterly data(42) suggest 
that  the  current  account  surplus  has  started  to  fall 
somewhat.  It  is  expected  to  decline  further  in  the 
coming  years  as  import  growth  outpaces  exports, 
reflecting  a  weakening  external  environment 
combined  with  relatively  robust domestic  demand 
(linked  to  accelerating  wage  growth  and  an 
expansionary  fiscal  stance,  see  sections  1  and 
4.3.1). 

limited  net 

levels.  According 

The  current  account  surplus  is  well  above 
fundamentally  justified 
to 
Commission current account ‘norm’ estimates (43), 
fundamental  drivers  explain  only  around  4 
percentage  points  of 
the  surplus.  The  most 
important  explanatory  factors  for  the  Netherlands 
are  its  relatively  high  income  level  per  person, 
expected  ageing  relative  to  the  rest  of  the  world, 

(41)  The  underlying 

inflows  and  outflows,  however,  are 
sizeable,  amounting  to  around  20%  of  GDP  for  services 
trade and 35% of GDP for primary income flows. This  is 
in part linked to the activities of multinationals, which can 
involve  significant  intra-group  payments  categorised  as 
services  trade  or  primary  income  flows  (Suyker  et  al., 
2019).  In  addition,  the  second-pillar  pension  funds  (see 
subsection  4.2.5)  are  a  significant  primary 
income 
recipient, as their assets are largely invested abroad. 

(42)  Over  the  latest  four  quarters  for  which  data  is  available 
(Q4-2018 to Q3-2019), the current account balance stood at 
9.7% of GDP. 

(43)  This  benchmark  is  derived  from  regressions  capturing  the 
main fundamental drivers of the saving-investment balance 
(e.g.  demographics,  resources),  as  well  as  policy  factors 
and  global  financial  conditions  (Countinho  et  al.,  2018). 
Corresponding  IMF  current  account  norm  estimates 
suggest  a  fundamentally  justified  level  in  the  range  of 
1.3%-5.3% of GDP for 2018 (IMF, 2019a). 

39 

 
                                                           
                                                           
4.2. Financial sector 

and  its  status  as  a  corporate  financial  centre.  The 
latter  is  linked  to  its  geographical  location  and 
infrastructure  network  as  well  as  its  business 
environment  and  institutional  framework,  making 
it attractive as an international corporate hub. 

Graph 4.2.7:  Current account balance components 

been  difficult  to  quantify.  Recent  research  by  the 
Dutch  central  bank  has  now  made  it  possible  to 
break down the non-financial corporate surplus by 
company  size  using  a  bottom-up  methodology 
(Graph  4.2.8)  (DNB,  2019a).  This  confirms  that 
Dutch  multinationals  have  made  a  large  but  quite 
volatile  contribution(44)  to  the  surplus,  averaging 
about 4% of GDP since the early 2000s. However, 
it  also  shows 
that  small  and  medium-sized 
companies  play  a  larger  role  than  previously 
thought, with a substantial and fairly stable surplus 
of around 2% to 3% of GDP. 

large 

(CBS, 

output 

surplus 

contribution 

The 
from 
multinationals  is  due  to  the  sector’s  size  and 
global investment footprint. While multinationals 
represent only 1.4% of all companies active in the 
Netherlands, they account for around 40% of total 
economic 
2018).  Dutch 
multinationals  tend  to  have  strong  profitability 
(European  Commission,  2019a),  and  their  world-
wide  earnings  are  generally  fully  attributed  to  the 
Netherlands  in  national  accounts,  even  when 
retained  and  invested  abroad.  Due  to  their  global 
footprint, a large share of these earnings are indeed 
typically  recycled  into  foreign  direct  investment 
across the world. Therefore, Dutch multinationals' 
(global)  retained  earnings  systematically  exceed 
(domestic)  investment,  leading  to  a  structural 
savings surplus. 

The savings surplus of small and medium-sized 
enterprises appears to be driven in part by tax 
incentives  discouraging  the  distribution  of 
retained  earnings.  Small  and  medium-sized 
companies tend to pay out a relatively small share 
of  their  profits  as  dividends  (DNB,  2019a). 
Particularly for firms owned by a small number of 
shareholders with a controlling interest (‘directeur-
grootaandeelhouders’),  this  can  in  part  be  due  to 
fiscal  incentives  that  favour  the  accumulation  of 
retained  earnings  within  the  company  in  order  to 
defer  or  avoid  tax  payments  (Jansen  et  al.,  2014). 
Some  recent  tax  reforms  (45)  could  help  address 

(44)  In particular, the study shows that large companies (defined 
as firms with over 250 employees at group level) have on 
average  accounted  for  about  60%  of  the  overall  non-
financial  corporate surplus  since  the  early  2000s,  the  bulk 
of  which  (about  85%)  is  due  to  Dutch  multinational 
corporates.  In  addition,  most  of  the  year-to-year  volatility 
in  the  corporate  surplus  is  due  to  a  small  number  of  very 
large corporations. 

(45)  These  include  in  particular  the  phasing  out  of  tax-
advantaged internally managed pension plans (‘Pensioen in 

Asterisk (*) indicates forecast figures 
Source: Statistics Netherlands; European Commission 

The  large  current  account  surplus  is  mirrored 
in  savings  exceeding  domestic  investment,  with 
all institutional sectors in surplus. The corporate 
sector has consistently been the largest contributor, 
driven mainly by non-financial firms (Graph 1.7 in 
Section  1).  Although  households  were  net 
borrowers  before  the  crisis,  they  have  since 
become  net  savers  as  a  result  of  deleveraging 
pressures 
residential 
investment.  The  government  sector  was  running 
large deficits during the crisis and in its aftermath. 
Since 2017, the government has turned net lender, 
although  this  is  set  to  fade  given  the  current 
expansionary fiscal stance (see subsection 4.1). 

relatively  weak 

and 

the  most 
Non-financial  corporations  are 
important  structural  driver  of  the  savings 
surplus,  with  both  large  and  smaller  firms 
playing  a  role.  Over  the  past  two  decades,  the 
non-financial  corporate  sector  has  accounted  for 
about  80%  of  the  overall  savings  surplus  on 
average,  albeit  with  significant  volatility.  Large 
companies,  and  multinationals  in  particular,  have 
long  been  known  to  be  a  key  factor  in  this 
(European  Commission,  2019a  and  2018a;  IMF, 
2019b),  although  their  precise  contribution  has 

40 

-6-4-2024681012141604050607080910111213141516171819*20*21*% of GDPGoods balanceServices balanceNet primary incomeNet secondary incomeTrade balanceCurrent account balance 
  
                                                           
4.2. Financial sector 

this,  although  in  practice  they  may  shift  part  of 
small companies’ savings surplus to the household 
sector  rather  than  leading  to  an  overall  reduction. 
In  addition  to  tax  aspects,  (perceived)  financing 
bottlenecks (see subsection 4.2.2) are also likely to 
play  a  role  as  they  can  force  companies  to  retain 
earnings to fund future investment (DNB, 2019a).  

Graph 4.2.8:  Non-financial corporate savings surplus: 

breakdown by company size (1) 

(1) Companies are classified as large if they have over 250 
employees at group level 
Source: Dutch central bank (DNB, 2019a) 

Housing  market  dynamics  and  institutional 
features  of  the  pension  system  drive  household 
net  saving.  Following  the  financial  crisis,  the 
household sector turned from a savings deficit to a 
significant surplus, peaking at about 4% of GDP in 
2014.  This  was  mainly  driven  by  housing  market 
developments:  the  crisis  weighed  heavily  on  new 
housing  investment,  while  at  the  same  time 
boosting  personal 
savings  via  deleveraging 
pressure  linked  to  high  household  debt  (see 
subsection  4.2.3).  In  recent  years,  residential 
investment  has  picked  up  again  as  the  housing 
market  has  recovered  (see  subsection  4.2.4), 
resulting  in  a  gradual  decline  of  the  household 
surplus.  On  a  more  structural  level,  household 
savings  are  fuelled  by  the  pension  system  via 
relatively high second-pillar pension contributions 
(see  subsection  4.2.5)  that  are  largely  invested 
abroad. 

eigen  beheer’)  since  2017,  and  new  legislation  that  will 
make large debts owed by controlling shareholders to their 
companies partially subject to tax from 2022. 

funds  are 

the  Dutch  headquarters(46), 

The  corporate  and  household  sector  surpluses 
are  subject  to  statistical  distortions,  with 
potentially  significant  policy  implications.  As 
mentioned, a sizeable part of the corporate surplus 
stems  from  retained  earnings  from  multinationals. 
Although  in  national  statistics  these  are  attributed 
to 
their  ultimate 
owners  are  the  (largely  foreign)  shareholders. 
Conversely,  Dutch  pension 
large 
portfolio  investors  in  foreign  companies,  which 
also  have  considerable  non-distributed  earnings. 
These are not included in Dutch national accounts 
even though their ultimate beneficiaries are Dutch 
households (via the second-pillar pension system). 
Correcting 
the 
corporate surplus and raises the household surplus 
by  2%  to  4%  of  GDP  (Rojas-Romagosa  et  al., 
2015;  Eggelte  et  al,  2014).  These  adjustments  are 
roughly offsetting, with only a minor effect on the 
overall  surplus  (Adler  et  al.,  2019).  Nevertheless, 
they are relevant from a policy perspective, as the 
household  surplus  –  unlike  the  surplus  from 
multinationals – is in part driven by specific policy 
distortions  with  wider  economic  consequences, 
‘forced  savings’  via  second-pillar 
including 
pension  contributions  (see  subsection  4.2.5).  The 
fact  that  the  household  surplus  is  substantially 
larger 
the 
importance of the underlying policy challenges. 

the  eye  underscores 

these  distortions 

than  meets 

lowers 

for 

excess 

rather 

savings 

Overall,  the  savings  surplus  seems  primarily 
driven  by 
than 
underinvestment.  As  discussed  above,  several 
policy distortions boost savings by households and 
smaller  companies.  Conversely,  there  do  not 
appear  to  be  major  structural  policy  bottlenecks 
investment (47),  nor  do 
weighing  on  overall 
macroeconomic  data  point  to  underinvestment  at 
aggregate level in the Netherlands. Investment as a 
share  of  GDP  is  in  fact  broadly  in  line  with  the 
euro  area  average.  Moreover,  if  the  long-standing 
savings  surplus  reflected  a  structural  lack  of 
investment,  its  cumulative  impact  over  several 
decades  would  be  expected  to  translate  into 
relatively  weak  labour  productivity.  In  fact,  the 

(46)  In the national accounting framework, retained earnings are 
only  allocated  to  their  ultimate  investor  in  case  of  direct 
foreign  investment.  For  portfolio  investments,  only  actual 
earnings  distributions  (i.e.  dividends)  are  considered  as 
flowing back to end investors. 

(47)  There  are,  however,  some  ad  hoc  and  industry-specific 
challenges  in  some  areas  (e.g.,  the  ‘nitrogen  problems’). 
See subsection 4.4, and box 4.4.1 in particular, for further 
discussion. 

41 

0%2%4%6%8%200020022004200620082010201220142016Large companiesSMEsTotal 
  
                                                                                   
                                                           
4.2. Financial sector 

Dutch  economy 
productive in the EU (see subsection 4.4). 

remains  one  of 

the  most 

is 

Nevertheless, the large surplus suggests that the 
Netherlands 
leaving  some  opportunities 
untapped  to  raise  productive  investment  or 
boost  the  economy  more  generally.  The  savings 
that  domestic 
surplus,  by  definition,  means 
investment  levels  can  be  increased  without  any 
need  for  foreign  financing.  This  opens  up 
opportunities  to  expand  investment  in  strategic 
areas  that  could  improve  long-run  productivity 
growth or help address key societal challenges (see 
subsection  4.4  for  a  discussion  of  possible 
investment priorities). From a balance of payments 
perspective,  the  high  current  account  surplus 
implies there can be room to boost wages without 
an  excessive  deterioration 
in  competitiveness 
(DNB,  2016).  Finally,  as  discussed  above  and  in 
subsection 4.2.5, the surplus is also closely linked 
to  households’  suboptimal  lifetime  consumption 
smoothing.  

42 

 
4.3. Labour market, education and social policies 

4.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

4.3.1.  LABOUR MARKET 

Graph 4.3.2:  Vacancy rate by sectors (%, Q2 2019) 

The  labour  market  is  performing  well.  Labour 
force  participation  continues  to  increase,  and  was 
among the highest in the EU at 80.3% in Q3-2019, 
well above the pre-crisis level. The unemployment 
rate reached close to historically low levels – 3.4% 
in 2019 (Graph 4.3.1) – on the back of robust GDP 
growth.  The  long-term  unemployment  rate  also 
stood  at  1.4%  in  Q3  2019  (well  below  the  EU 
average of 2.5%) and has been declining for all age 
groups. 

Graph 4.3.1:  Labour market indicators (1) 

Source: European Commission 

Wage developments* 

Real  wages  have  declined  somewhat  in  recent 
years  but  are  expected  to  pick  up  in  2020.  In 
spite  of  a  further  tightening  of  the  labour  market, 
nominal compensation  per  employee  increased  by 
1.7% in 2018 and is expected to have increased to 
2.5% in 2019, following 1.0% in 2017, persistently 
below  inflation  developments.  Wage  growth  in 
collective  agreements  increased  on  average  by 
2.6%  in  2019  –  the  fastest  in  10  years.  Wage 
increases  were  the  highest  in  the  construction 
sector  (one  of  the  sectors  with  the  biggest  labour 
the  hospitality  and  restaurant 
shortages)  and 
sectors.  In  other  sectors,  wage  growth  remained 
relatively  muted  despite  fast-growing  vacancy 
rates.  Real  wage  growth  was  still  [minimal]  in 
2019 (-0.03%) due to a hike in inflation (linked to 
the  increase  in  indirect  taxes).  This  hampers 
it  external 
consumption  growth  and  with 
rebalancing.  The  government  has 
repeatedly 
acknowledged  the  need  for  higher  real  wage 
growth and has introduced tax measures for 2020, 
tax 
including 
credit 
(arbeidskorting)  and 
tax  credit 
(algemene heffingskorting) to stimulate disposable 
income (see subsection 4.1). The lagged impact on 
nominal  wage  growth  of  robust  GDP  growth  in 
2019  and  moderating  inflation  (see  Section  1) 

the  working 
the  general 

raising 

(1) NEET: Not in employment, education or training (% of 
population), total, ages 15-24 
Source: Eurostat 

Labour  shortages  have  increased  further  to  a  
record  high.  The  total  number  of  vacancies 
increased  to  284.100  (Q3  2019).  The  vacancy 
rate (48) reached 3.4% in the third quarter of 2019, 
and  is  particularly  high  in  the  information  and 
communications technologies, health, construction 
and  hospitality  and  restaurant  sectors  (Graph 
4.3.2).  There  is  also  a  growing  labour  shortage  in 
certain professions, such as primary and secondary 
school 
albeit  with 
nurses, 
considerable regional variation. (49) 

teachers 

and 

(48)  The number of vacant positions as a percentage of the sum 

of the number of vacant and occupied positions. 

(49)  Bijlage:  de  stand  van  de  krapte  op  de  Nederlandse 
arbeidsmarkt,  Appendix  letter  Arbeidsmarktbeleid  of  the 

Ministry  of  Social  Affairs  and  Employment  to  Parliament 
of 15.6.2018, Kamerstuk 29544 nr. 833, vergaderjaar 2017-
2018. 

43 

7475767778798081828302468101214200120022003200420052006200720082009201020112012201320142015201620172018%%NLActivity rate 20-64 (rhs)Unemployment rate 15-74 (lhs)Long-term unemployment rate 15-74 (lhs)Youth unemployment rate 15-24 (lhs)NEET rate 15-24 (lhs)0246810121416Industry, construction and servicesConstructionInformation and communication 
  
                                                           
  
                                                                                   
4.3. Labour market, education and social policies 

Labour market segmentation 

Flexible  employment  remains  an  important 
share of the labour market, pointing to a risk of 
labour market segmentation. Although the Dutch 
labour market performs well overall and is among 
the  top  performers  in  the  OECD  (OECD,  2019c), 
the  high  level  of,  and  strong  growth  in,  non-
standard  employment  remains  a  concern.  Both 
temporary  employment  and 
self-employment 
without employees have increased considerably in 
the last 10 years, which makes the Netherlands an 
outlier  in  the  EU.  Almost  one  in  five  Dutch 
workers  have  a  temporary  contract  (51),  and  the 
country  has  seen  the  fastest  growth  in  self-
employment  (OECD,  2019c).  Distinct  drivers  and 
financial 
institutional 
(dis)incentives,  with  particularly  distortive  effects 
at the margins of the labour market, impeding fair 
working  conditions,  hampering  smooth  labour 
market  transitions  and  inclusive  growth.  Labour 
market  segmentation  may  also  have  a  negative 
impact  on  wage  developments,  investment  in 
training and social protection coverage. 

factors(52)  create 

large 

contracts  has  more 

While  job  creation  was  mainly  in  temporary 
and  self-employment  up  until  2017,  growth  in 
permanent 
recently 
outpaced  that  of  temporary  employment.  Since 
the second half of 2017, the increase in permanent 
contracts  has  outpaced  that  of  temporary,  flexible 
contracts.  This  applies  to  all  education  levels,  but 
is  particularly  pronounced 
for  high-skilled 
workers. (53) In addition, for the first time in years 
the share of temporary employees (as a percentage 
of total employment) fell slightly in 2018 (14.6%) 
compared 
(15.2%).  An 
labour  market  may  have 
increasingly 
provided  incentives  for  employers  to  offer  more 
open-ended contracts, in particular for high-skilled 
workers but to a lesser extent also for middle- and 
low-skilled workers (CPB, 2019f) (Graph 4.3.4).  

to  a  year  before 

tight 

(51)  Compared  to  one  in  eight  less  than  two  decades  ago,  and 

less than one in ten across the OECD average. 

(52)  See  European  Commission  (2019a),  p.  7  and  p.  47  and 
European  Commission  (2016),  pp.  46-49,  European 
Commission  (2017b),  p.  30;  European  Commission 
(2018a), pp. 34-36 and p.39. 

(53)  For instance the number of high-skilled workers increased 
by  128 000  from  2017  to  2018,  of  which  more  than  80% 
received a permanent contract. (CPB 2019b) 

should  also  contribute  to  an  acceleration  in  real 
wage growth in 2020 (Graph 4.3.3). 

Graph 4.3.3:  Unit labour cost decomposition 

Source: European Commission 

for  permanent  employees 

The  high  level  of  labour  market  segmentation 
may  have  been  an  important  contributing 
factor in low wage growth over the last decade 
(50). In 2000-2017, the increase in the share of non-
standard employment correlates with wage growth. 
The  downward  pressure  on  wages  can  be  partly 
explained  by  the  fact  that  overall  wages  for 
temporary  employees  are  substantially  lower  than 
wages 
(European 
Commission, 2018a, Box 4.3.1; Smits et al., 2019) 
As a result, the increase in the share of temporary 
employees negatively affected wage growth across 
the wage distribution, with the largest impact at the 
bottom  (European  Commission,  2018b).  The  self-
employed without employees also pay lower taxes 
and  social  security  contributions  compared  to 
employees,  boosting  their  disposable  income.  The 
high level of self-employed without employees on 
the  labour  market  may  also  lead  to  downward 
pressure on wages and result in unfair competition, 
in particular for those at the bottom of the earnings 
distribution. 

(50)  Other 

factors 

include 

increasing 

automation 

and 
digitalisation, the globalisation of production processes and 
labour,  the  relatively  high  level  of  employers’  obligations 
and weakening bargaining power of workers (see Baarsma 
et  al.,  2018;  OECD,  2015;  De  Beer  et  al.,  2018;  DNB, 
2018b). 

44 

-4-3-2-1012345604050607080910111213141516171819*20*Rate of change y-o-y (%)Inflation (GDP deflator growth)Real Compensation per EmployeeProductivity Contribution (negative sign)Nominal unit labour costULC in EU28 
   
                                                           
                                                           
4.3. Labour market, education and social policies 

illness. 

which  entered  into  force  from  January  2020. 
Futhermore, the government intends to introduce a 
discount to sickness contributions of €450 million 
as of 2021 to compensate small and medium-sized 
enterprises  for  the  salary  costs  of  the  second  year 
(57)  Moreover,  a  committee  of 
of 
independent  experts  was  set  up  to  advise  the 
government  on  how  to  regulate  the  labour  market 
in  the  future,  taking  into  account  the  changing 
economy  and  society.  Its  report  was  presented  on 
23  January  2020  and  the  subsequent  government 
reaction  is  expected  in  the  first  quarter  of  2020. 
Some  of  the  measures  taken  have  the  potential  to 
tackle  major  differences  in  treatment  between 
permanent  and  temporary/flexible  contracts  and 
could  therefore  reduce  the  relatively  large  use  of 
flexible employment. However, their application in 
practice should be closely monitored. 

the 

and 

there 

control 

self-employed 

in  particular  when 

in  particular 
Important  challenges  remain, 
without 
the 
concerning 
employees.  As  far  as  self-employed  workers 
without  employees  are  concerned,  the  criterion 
‘under 
direction’ 
(‘gezagsverhouding’)  has  been  clarified  as  of  1 
January 2019. A draft questionnaire has also been 
developed  to  implement  a  web  module  that  will 
qualify  the  working  relationship  of  self-employed 
is  no 
workers, 
employment  relationship.  Further  information  on 
the state of play is expected in the first quarter of 
2020(58). Moreover, on 24 June 2019 in a letter to 
Parliament the government announced its intention 
to introduce a general minimum hourly rate of €16 
for  all  self-employed  without  employees  who 
provide  services  to  both  business  and  private 
clients,  in  combination  with  an  opt-out  of  payroll 
taxes  and  employee’s  insurances,  as  well  as  parts 
of  labour  law,  collective  agreements  and  pension 
obligations  for  those  self-employed  charging  an 
hourly  rate  of  €75  or  more.  A  public  consultation 
on  the  respective  draft  bills  to  implement  the 
intended proposals  was  launched  in October  2019 
in order to make them law by January 2021. 

The government also announced its intention to 
gradually  decrease  the  tax  deduction  and 
improve  social  security  coverage  for  self-

(57)  Letter to Parliament of 20 December 'Loondoorbetaling by 

ziekte' 

(58)  Letter  to  Parliament  Voortgang  uitwerking  maatregelen 

‘werken als zelfstandigen’, 22.11.2019 

Graph 4.3.4:  Transition rate from temporary to permanent 
employee by educational level 

Source: Statistics Netherlands 

Policy developments 

To  achieve  a  better  balance  on  the  labour 
market,  a  package  of  measures  taken  to  tackle 
the differences between permanent and flexible 
contracts will enter into force in 2020. Following 
a  previous  major  reform  (Wet  werk  en  zekerheid) 
in  2015(54),  a  package  of  measures (55)  was 
to  hire 
adopted  in  2019  to  make  it  easier 
employees  on  a  permanent  basis  and  to  make 
flexible  contracts  less  flexible,  more  secure  and 
their  use  more  expensive  (‘labour  market  in 
balance’ law — wet arbeidsmarkt in balans). The 
vast majority of those measures entered into force 
from  January  2020(56).  In  addition,  on 
the 
employer's obligation to continue to pay staff for 2 
years  in  case  if  they  fall  ill,  more  suitable 
insurances  will  be  offered  to  cover  the  risk  of 
(‘MKB  verzuim-ontzorg-verzekering’), 
sickness 

(54)  The  impact  of  this  reform  will  be  evaluated  in  2020  - 
preliminary  results  were  discussed  in  detail  in  previous 
European  Semester  country 
(see  European 
Commission  (2015),  p.  38/39,  European  Commission 
(2017b),  p.31  and  European  Commission  (2018a),  p. 
35/36) 

reports 

(55)  Including (1) the introduction of a new, additional ground 
for dismissal; (2) minimum labour conditions applicable to 
employees working on a payroll basis; (3) the introduction 
of  limits  to  the  use  of  zero-hours  contracts;  and  (4)  the 
possibility  to  differentiate  unemployment  contributions  by 
type of contract. See European Commission (2019a), p. 41, 
for further details. 

(56)  One  exception  being  the  requirement  to  provide  payroll 
workers  with  an  adequate  pension  which  will  enter  into 
force on 1.1.2021. 

45 

7%9%11%13%15%17%19%201120122013201420152016201720182019Low-educatedMedium-educatedHigh-educated 
  
                                                           
                                                           
4.3. Labour market, education and social policies 

(OECD, 

2019b).  Due 

employment gap in full-time equivalents is one of 
the highest in the EU (25.7 percentage points (pps) 
in 2018 against an EU average of 18 pps), despite 
the relatively small hourly gender wage gap in the 
Netherlands 
a 
combination  of  multiple  factors  and  institutional 
drivers,  part-time  employment  of  women  has 
always been high in the Netherlands (62). The part-
time share is particularly high among women with 
personal  and  family  care  responsibilities (63), 
although many women already start working part-
time shortly after leaving education, before having 
children (SCP, 2018). 

to 

Women  also  experience  a  ‘child  penalty’  and 
considerable  pay  gap.  In  In  recent  years,  the 
number of hours worked by women with children 
has  increased,  while  there  is  no  similar  trend  for 
women  without 
(see  European 
children 
(2019a),  p. 42,  Graph  4.3.7). 
Commission 
income  of  women 
the  average 
Nevertheless, 
decreases  considerably 
the  first  2  years 
in 
following the birth of the first child (while having 
a rather limited effect on the income of men). This 
effect  is  still  felt  8  years  later,  resulting  in  an 
average wage gap of 39% (Graph 4.3.5) (Adema et 
al., 2019). Differences in work intensity also result 
in  a  relatively  large  gender  pay  gap  (47.5%  in 
2017)  and  one  of  the  largest  gender  pension  gaps 
later  in  life  (43.4%  in  2017).  Recent  analysis  (64) 
shows  for  instance  that  incentivising  women  to 
work a few hours a week more could increase both 
their  economic  independence  and  gender  equality 
as well as help significantly reduce existing labour 
shortages  (McKinsey  Global  Institute,  2018)  and 
tackle  demographic  challenges  (OECD,  2019b), 
thus  helping 
towards  Sustainable 
Development Goal 5 (Gender equality). 

to  move 

(62)  For  further  details,  see  European  Commission  (2019a) 

p. 42; see also Portegijs et al. (2008). 

(63)  17.4% (2018) vs EU-28 5.4%; 17.1% (2017). 
(64)  See  Adema  et  al.  (2019)  and  McKinsey  Global  Institute 

(2018). 

employed workers. The tax deduction is set to be 
reduced  by  €250  per  year  until  2028  (when  the 
maximum  deductible  amount  will  be  €5 000)(59). 
Furthermore, on  possible social security coverage 
for  sickness/disability  for  the  self-employed,  the 
government and social partners in their agreement 
in  principle  on  reforming  the  pension  system  of 
5 June  2019  (see  subsection  4.2.5),  decided  to 
introduce  mandatory  disability  insurance  for  the 
self-employed.  In  consultation  with  organisations 
representing  the  self-employed,  discussions  are 
ongoing  in  the  ‘Stichting  van  de  Arbeid’  platform 
on  how  to  implement  this  agreement.  A  concrete 
proposal  [is  expected  in]  early  2020  and  the 
government plans to send a legislative proposal to 
Parliament  before  summer  2020  (SZW,  2019b). 
Possibilities  to  increase  the  pension  coverage  for 
the  self-employed  on  a  voluntary  basis  are  also 
being assessed, with results to be presented before 
summer  2020  (SZW,  2019b).  Moreover, 
the 
the  enforcement  of  measures 
suspension  of 
adopted to tackle bogus self-employment, initially 
planned  until  2020,  will  be  further  extended  until 
2021(60). 

an 

dialogue 

Social 
established 
is 
institutionalised  approach  and  an  essential 
feature  of  the  Dutch  poldermodel  and  has 
functioned  well  in  general  in  the  past.  Social 
partners  were  consulted  on  the  intention  and 
possible policy options to reform the second pillar 
of the pension system and the ambitious agenda to 
reform  the  labour  market.  They  also  play  an 
important role in implementing the pension reform 
agreement  and  issued  a  joint  (negative)  reaction 
via the ‘Stichting van de Arbeid’ on the draft bills 
containing  the  recent  plans  of  the  government  on 
self-employment. 

Female labour market participation 

Despite  the  tight  labour  market,  part-time 
employment  remains  particularly  high  for 
women.  While  the  employment  rate  of  women  is 
high and still on the rise (74.2% in 2018, compared 
to 71.6% in 2016), almost 3 out of 4 women work 
part-time  (73.8%  in  2018  compared  to  an  EU-28 
average  of  30.8%) (61).  As  a  result,  the  gender 

(59)  While compensating them fully in 2020, 2021 and 2022 by 

increasing the ‘arbeidskorting’. 

(60)  letter to Parliament 'Toezicht Arbeidsrelaties', 24.6.2019 
(61)  For  men,  the  share  of  part-time  employment  is  also  high 
and well above the EU average (23% vs 8% in 2018). 

46 

 
                                                           
                                                           
4.3. Labour market, education and social policies 

The labour market outcomes of the native-born 
with  a  migrant  background  also  remains 
unfavourable  (67)  (Graph  4.3.6).  Native-born 
people  with  foreign-born  parents  face  higher 
and  NEET(68) 
unemployment 
rates,  partly 
explained by their lower educational outcomes and 
on  average other  drivers (69).  In  addition, national 
data  confirm  large  differences  across  subgroups, 
depending on parents’ country of birth, for various 
indicators  including  the  unemployment  rate  (70). 
Moreover,  when 
in  employment,  native-born 
workers  with  a  migrant  background  are  more 
affected by a lack of recognition of qualifications, 
precarious  contracts  and  in-work  poverty  (71). 
Differences in labour market participation between 
people with a non-Dutch and a Dutch background 
are  smallest  among  those  with  a  high  level  of 
education (CBS, 2018). 

To  improve  the  labour  market  situation  of 
people  with  a  migrant  background  and  those 
granted  asylum  status,  a  multi-track  approach 
Further  Integration  on  the  Labour  Market  has 
been  adopted (72).  The  government’s  approach  to 
tackling  discrimination  was  set  out  in  detail  in 
April  2018 (73),  and  the  subsequently  adopted 
action  plan  on 
labour  market  discrimination 
focuses  on  monitoring  and  control,  research  and 
knowledge  gathering,  and  awareness-raising (74). 
The  Federation  of  Private  Employment  Agencies 
(Algemene  Bond  Uitzendondernemingen)  also 
published its action plan on diversity in the labour 
market  in  May  2018  to  address  discriminatory 

(67)  EU-OECD  Settling  In  2018:  the  native-born  with  foreign-
born  parents  (aged  15-34)  had  a  lower  employment  rate 
(67.1%)  by  20.8  pps  (second  largest  gap  along  EU 
countries  for which  data  is  available) than  the  native-born 
with  foreign-born  parents  (88.0%)  —  for  further  details, 
see  European  Commission  (2019a),  p.43/44  and  graph 
4.3.8. 

(68)  Not in employment, education or training. 
(69)  For  further  details,  see  European  Commission  (2019a), 

p. 43/44. 

(70)  CBS, 

Integration 

Dashboard, 

see 

https://public.tableau.com/profile/centraal.bureau.voor.de.s
tatistiek#!/vizhome/DashboardIntegratie/Welkom 

(71)  EU-OECD Settling In 2018 
(72)  ‘Verdere Integratie op de arbeidsmarkt: de economie heeft 
iedereen nodig’, Kamerstukken II 2017/18, 29544, nr. 821. 

(73)  Kamerstukken II 2017/18, 30 950, nr. 156. 
(74)  Letter 

to  Parliament  of  19 June  2018,  Hoofdlijnen 
Actieplan  Arbeidsdiscriminatie  2018-2021;  Kamerstukken 
II  2017/18,  29544-834.  See  also  the  implementation  plan 
on  labour  market  discrimination  sent  to  Parliament  on 
22 November 2018. 

Graph 4.3.5:  Relative ‘Child Penalty’ 

Source: Netherlands Bureau for Economic Policy Analysis 
(Adema et al., 2019) 

Labour  market  situation  of  people  with  a 
migrant background 

to 

face 

serious 

Despite  an  improvement  in  their  employment 
rate,  people  with  a  migrant  background 
continue 
employability 
challenges.  In  2018,  the  employment  rate  among 
the non-EU-born was on the rise (62.6% compared 
in  2017),  but  remains  19.3  pps 
to  59.9% 
(compared to 20.6 pps in 2017) below the level for 
natives, representing one of the largest gaps in the 
EU.  This  is  a  concern  as  the  non-EU-born 
represent  a  relatively  large  group,  amounting  to 
10.7% (65) of the working age population in 2018. 
The  gap  is  particularly  high  due  to  the  low 
employment  rate  among  non-EU-born  women 
(53.6%)  compared  with  native  women  (77.3%). 
This gap shows no signs of closing and remains, at 
23.7 pps, one of the largest in the EU. 

The  overall  unfavourable 
labour  market 
situation  of  the  non-EU-born  migrants  stems 
mostly  from  the  low  activity  rate  of  both 
migrant men and women. (66) In particular, only 
58.7% of non-EU-born women were economically 
active  in  2018,  and  the  gap  with  native-born 
women  was,  at  20.9  pps,  the  largest  among  EU 
countries  and  relatively  stable.  The  low  activity 
rate also has a strong impact on the social situation 
of non-EU-born people (see below).  

(65)  Eurostat, LFS, table lfsa_pgacws. 
(66)  See European Commission (2019a), p. 43 

47 

-60%-50%-40%-30%-20%-10%0%10%20%-3-2-1012345678Income change  Distance to the first child's year of birth (years)FathersMothers 
  
                                                           
                                                           
4.3. Labour market, education and social policies 

for 

language 

demanding 

the  programme  with  a  loan).  There  will  also  be 
more 
proficiency 
requirements 
certification.  Furthermore, 
municipalities will also monitor course quality and 
determine  personal  integration  plans  with  each 
migrant.  This  will  focus  on  participation  and 
helping newcomers find work. 

Poverty and social exclusion  

The  Netherlands  has  one  of  the  lowest  rates  of 
at risk of poverty or social exclusion. The ‘share 
of  the  population  at  risk  of  poverty  or  social 
exclusion’  indicator  of  the  Social  Scoreboard 
decreased  from  17%  (2017)  to  16.7%  (2018),  i.e. 
by 31,000. The component related to poverty risks 
increased slightly from 13.2% in 2017 to 13.4% in 
2018,  while severe  material  deprivation decreased 
slightly from 2.6% in 2017 to 2.4% in 2018, with 
material  and  social  deprivation 
falling 
considerably  from  6.3%  in  2017  to  4.5%  in  2018 
(the  latter  two  being  at  very  low  levels  compared 
to  EU  average).  The  impact  of  social  transfers  on 
reducing  poverty 
(excluding  pensions)  has 
weakened  significantly,  falling  from  51%  in  2012 
to  39%  in  2018.  However,  compared  to  the 
previous period (2015-2016), the decrease in 2018 
(from  39.7%  in  2017)  flattened  considerably.  The 
adequacy  of  minimum  income  support  is  very 
high (78). 

(77) 

in 

living 

Non-EU-born residents face a much higher risk 
of  poverty  or  social  exclusion.   In  2018,  around 
37%  of  non-EU-born  people 
the 
Netherlands  were  at  risk  of  poverty  or  social 
exclusion,  22  pps  higher  than  among  the  native-
born,  and  the  gap  is  widening.    This  is  driven  by 
much  more  prevalent  monetary  poverty  than  for 
natives  (28.5%  vs  11.8%),  linked  partly  to  their 
more unfavourable employment situation, a higher 
rate  of  severe  material  deprivation  (10.7%  vs 
1.6%)  as  well  as  greater  prevalence  of  in-work 
poverty  (17.5%  vs  5.1%).  Moreover,  more  than  a 
quarter  (26.9%  in  2018)  of  children  with  foreign-
born parents are at risk of poverty, around 3 times 
higher than children with native-born parents.  

(77)  The  material  and  social  deprivation  indicator  takes  into 
account a broader concept of deprivation as it also includes 
items  related  to  social  activities,  whereas  the  indicator 
measured only material deprivation. 

(78)  According  to  the  benchmarking  exercise  on  minimum 
income  in  the  Social  Protection  Committee  —  see  draft 
Joint Employment Report 2020. 

practices(75).  To  devise  more  efficient  measures 
for the labour market integration of people with a 
migrant  background,  eight  experimental  actions 
were  launched  in  2019,  including:  combined 
learning  and  working,  intensive  coaching  for 
vulnerable groups, supporting work orientation for 
vocational 
students  and  measuring  cultural 
diversity  in  companies.  A  draft  bill  on  tackling 
discrimination on the labour market has also been 
prepared (76),  expanding 
the 
monitoring 
the 
system  of 
Netherlands. 

the 
integration 

scope  of 
in 

Graph 4.3.6:  Employment rates of the non-EU-born 
compared to natives (%) 

Source: Eurostat 

As  things  stand,  it  is  too  early  to  judge  the 
effectiveness  of  these  initiatives.  However,  they 
do  underscore  the  increased  awareness  of  the 
Dutch  authorities  of  the  need  to  further  invest  in 
integration and anti-discrimination policies.  

The  integration  system  for  recently  arrived 
third  country  nationals  is  in  the  process  of 
being  reformed.  The  new  act  on  integration 
should  enter  into  force  in  January  2021.  The 
planned  reform  involves  an  increased  role  for 
municipalities,  who  will  be 
for 
implementing 
integration  measures  based  on 
increased  funding  at  national  level  (the  newly 
arrived  will  no  longer  have  to  self-fund  access  to 

responsible 

(75)  https://www.abu.nl/actueel/persberichten/abu-gaat-

discriminatie-te-lijf-actieplan-diversiteit-arbeidsmarkt-
verstuurd-naar-tweede-kamer. 

(76)  Ongoing 

consultation: 
https://www.internetconsultatie.nl/wet_toezicht_discrimina
tievrije_werving_en_selectie. 

internet 

48 

30405060708090Total (20-64)Prime age (25-54)Older workers (55-64)Low skilled (20-64)Non-EU born (20-64)NLBEDEFREU 
  
                                                           
                                                           
4.3. Labour market, education and social policies 

Box 4.3.1: Monitoring performance in light of the European Pillar of Social Rights 

The European  Pillar of Social Rights is a compass for a renewed process of upward convergence towards 
better working and living conditions in the European Union. It sets out twenty essential principles and rights 
in  the  areas  of  equal  opportunities  and  access  to  the  labour  market;  fair  working  conditions;  and  social 
protection and inclusion.  

The  Social  Scoreboard,  which  supports  the 
European Pillar of Social Rights, shows that 
the  Netherlands  performed  very  well  on 
most  indicators.  It  has  an  overall  good 
standing on both labour market performance 
and the social situation. Per capita real gross 
disposable income of households continued 
to  rise,  with  income  inequality  below  the 
EU  average.  On  social  protection  and 
inclusion,  the  country  is  among  the  top 
performers, with a low level of poverty. The 
share  of  young  people  not  in  employment, 
education  or  training  (NEET  rate)  is  well 
below 
in 
the  general  decrease 
comparison 
observed 
the 
Netherlands  registered  a  slight  increase  in 
this rate in 2018.  

the  EU  average.  However, 

in  other  Member  States, 

to 

The  high  share  of  flexible  employment 
still requires further attention with regard 
to  equal  opportunities  in  the  labour  market 
and fair working conditions. The high level 
of  non-standard  employment  and  its  strong 
growth  remain  a  concern.  Both  temporary 
employment  and  self-employment  without 
employees increased considerably in the last 
decade,  making  the  Netherlands  stand  out 
compared to other Member States. 

The Dutch government presented a new 
strategy in October 2018 to create a 
genuine learning culture and give more 
ownership to individuals over their 
training. The key points of this strategy 
include: (1) promoting individual training 
budgets to reach a wider group via the 
‘Stimulus for labour market participation’ 
(STAP) initiative; (2) improving the 
portability of training budgets between 
sectors; (3) creating a portal that lists all 
training opportunities; (4) improving guidance; (5) helping small and medium-sized companies develop a 
learning culture; (6) organising behavioural experiments to ensure that individuals feel ownership; and (7) 
improving the flexibility of the training offer. With the STAP budget, anyone with a link to the Dutch labour 
market will be able to use training for their own development and employability.  

49 

 
 
4.3. Labour market, education and social policies 

in 

students’ 

segregation 

strengthens  the  effects  of  residential  separation 
(Inspectorate  of  Education,  2018).  The  strongest 
factor 
is  parents’ 
educational  attainment,  followed  by  their  income 
and  immigrant  status  (Inspectorate  of  Education, 
2018). The Education Council has warned against 
this increasing fragmentation in the school system 
as it may lead to greater segregation and narrowing 
of opportunities (Education Council, 2019).  

The Netherlands faces an increasing shortage of 
teachers.  Based  on  current  trends,  the  teacher 
shortage  at  primary  schools  is  projected  to  reach 
4,000 full-time equivalents by 2020 and 10,000 by 
2025 (OCW, 2018a). Low salaries are one factor: a 
primary teacher’s salary corresponds to 71% of the 
average  earnings  of  tertiary-educated  workers.  
Shortages  are  more  acute  in  schools  where  the 
majority 
non-Western 
background.  As  part  of  the  2018  ‘work  pressure 
agreement’, primary schools have been granted an 
additional  €237  million  for  tackling  excessive 
work  pressure  as  of  2018/2019.  In  the  2021-2022 
school year, this will be increased to €430 million.  

pupils 

have 

of 

a 

the  dropout  rate 

The rate of early school leaving from education 
and  training  (7.3%)  is  below  the  Europe  2020 
national  target,  but  has  slightly  increased  in 
in 
recent  years.  Although 
(general) secondary education is 0.5%, it rose from 
4.7% to 5.1% in vocational education and training 
(VET). General secondary schools including VET 
schools  receive  extra  money  if  they  can  reduce 
their  dropout  rate  to  below  the  national  rate.  An 
the  Act  on  Education  and 
amendment 
Vocational  Education 
June  2018  made 
cooperation between schools and municipalities to 
combat early school leaving compulsory (79). 

to 

in 

Overall, adult participation in life-long learning 
remains  significantly  higher  than  the  EU 
average,  although  it  may  be  a  challenge  for 
those  in  a  vulnerable  labour  market  situation. 
Recent adult learning participation (i.e. adults aged 
25-64 having had a learning experience in the last 
in  2018,  far 
4  weeks) 
exceeding  the  EU  average  of  11.1% (LFS  2018). 
Employment  rates  of  recent  VET  graduates 

to  19.1% 

increased 

(79)  Wet  educatie  en  beroepsonderwijs 

regionale 
samenwerking voortijdig schoolverlaten en jongeren in een 
kwetsbare 
— 
2018 
https://zoek.officielebekendmakingen.nl/stb-2018-
210.html. 

15 June 

positie, 

inzake 

rates 

social  exclusion  and 

Large cities face higher rates of unemployment, 
poverty  and 
lower 
employment 
(European  Commission, 
2019a).  In  2018,  the  at-risk-of-poverty  or  social 
exclusion  rate  stood  at  19.8%  in  cities,  while  it 
ranged from 12.4% to 12.8% in towns and suburbs 
and  rural  areas.  Furthermore,  cities  have  a  lower 
employment  rate  (77.6%)  than  both  towns  and 
suburbs  (81.2%)  and  rural  areas  (82.3%).  People 
with  a  non-EU  background  make  up  more  than 
30%  of  the  population  in  large  Dutch  cities 
(Amsterdam, Rotterdam and The Hague). 

4.3.2.  EDUCATION AND SKILLS 

in  performance 

Despite  performing  well  in  general,  there  has 
been a decline in basic skills, measured in PISA, 
and  the  differences 
levels 
between schools are increasing. The Netherlands' 
average  performance,  as  measured  by  the  OECD 
Programme  for  International  Student  Assessment 
(PISA),  declined  significantly  in  science  and 
reading  between  2009  and  2018.  While  average 
performance remains well above the EU average in 
mathematics  and  science,  it  is  below  the  EU 
average 
low 
achievers 
increased  by  10 
percentage  points  since  2009.  At  24.1%  it  is  now 
above  the  EU  average  and  especially  high  (56%) 
among  pupils  born  abroad.  The  share  of  top 
performers has decreased slightly in all three areas 
tested.  The  impact  of  socio-economic  background 
on  pupils'  performance  is  somewhat  smaller  than 
the  EU  average.  The  performance  gap  between 
non-immigrants  and  pupils  born  abroad  is  quite 
large,  and  native-born  pupils  with  a  migrant 
background only partially catch up.  

in  reading.  The  proportion  of 

reading  has 

in 

Children of less and more educated parents are 
increasingly being educated in different schools. 
Differences  between  schools  have  the  largest 
impact  on  pupils’  performance  of  all  OECD 
countries (OECD, 2019), and are closely linked to 
the  different 
tracks  offered  (Inspectorate  of 
Education,  2017).  The  gap  between  the  average 
performance of pupils at schools with a low versus 
high  concentration  of  pupils  with  a  migrant 
background  is  the  second  largest  in  the  EU.  This 
implies that the achievement of individual pupils is 
closely linked to their school choice. The parental 
choice  system  contributes 
to  creating  more 
segregated  schools  (Ladd  et  al.,  2011)  and 

50 

 
                                                           
4.3. Labour market, education and social policies 

offer, 

secondary  VET 

increased  somewhat  to  87.9%  in  2018  (compared 
to  86.9%  in  2017),  well  above  the  EU  average  of 
79.5%  (LFS,  2018).  Total  enrolment  in  upper 
secondary VET also increased slightly in 2017 (to 
68.2%)  compared  to  previous  years,  and  is  well 
above the EU average of 47.8% (UNESCO OECD 
Eurostat  joint  data  collection,  2017).  To  further 
strengthen the links between the labour market and 
the 
SBB 
(Samenwerkingsorganisatie  Beroepsopleiding  en 
Bedrijfsleven) developed a new working method to 
facilitate  quicker  adjustments  in  the  VET  offer  in 
response  to  labour  market  needs.  Despite  these 
positive  developments, 
that 
employers are far less willing to invest in training 
for  employees  with  temporary  contracts  than  for 
permanent  employees.  Often  they  restrict  training 
to  what  is  strictly  necessary  for  the  current  job 
instead  of  investing  to  enable  employees  in  a 
vulnerable 
to  follow 
labour  market  position 
training that may increase their employability. 

research 

shows 

the 

the  high 

The  demand  for  skilled  workers  is  expected  to 
grow  substantially,  pointing  to 
investment 
needs  in  training  and  skills.  There  is  growing 
evidence (80)  of  increasing  labour  shortages  in 
specific  sectors  and  shortages  of  people  with  the 
necessary  technical  or  advanced  digital  skills  (see 
tertiary 
subsection  4.3.1).  Despite 
attainment rate of 49.4%, demand for high-skilled 
workers is expected to grow by 2.4 million and for 
medium-skilled workers by 1.3 million until 2025, 
while supply is expected to grow by only 1 million 
for  high-skilled  workers  and  to  fall  for  medium-
skilled  workers  (OECD,  2018b).  Though  the  gap 
in educational attainment between the foreign-born 
and  native-born  population  has  been  closing  at 
secondary  level,  it  remains  significant  at  tertiary 
level.  This  suggests  there  is  still  scope  to  better 
align  the  education  and  skills  level  of  this  group 
with  expected  needs.  Overall,  technical  skills  and 
qualified  professionals  are  crucial  for  the  Dutch 
economy’s  innovation  capacity  and  productivity. 
Continued  investment  in  skills,  education  and 
training  is  thus  important  for  improving  labour 
market  access  and  employability,  while  fostering 
equal opportunities and active inclusion (81). 

(80)  Getting  Skills  Right:  Skills  for  Jobs  Indicators,  OECD 
2017;  ROA  Rapport  ‘De  arbeidsmarkt  naar  opleiding  en 
beroep tot 2022, ROA-R-2017/10, December 2017. 

(81)  For  further  details,  see  European  Commission  (2019a), 

pp. 46-47 and pp. 44-45. 

that 

individual 

individuals 

to  ensure 

To create a genuine learning culture, a new life-
long learning strategy, including the creation of 
an 
learning  budget,  has  been 
adopted.  In October  2018,  the Dutch government 
presented  a  new  strategy  to  create  a  genuine 
learning  culture  and  give  more  ownership  to 
individuals over  their  training (82).  The key  points 
of  this  strategy  include:  (1)  promoting  individual 
training  budgets  to  reach  a  wider  group  (e.g. 
people not covered in sectoral agreements) through 
the  ‘Stimulus  for  labour  market  participation’ 
(STAP  /  Stimulans  Arbeidsmarktpositie)  initiative 
(see  below);  (2)  improving  the  portability  of 
training  budgets  between  sectors;  (3)  creating  a 
portal  that  lists  all  training  opportunities;  (4) 
improving  guidance;  (5)  helping  SMEs  develop  a 
(6)  organising  behavioural 
learning  culture; 
experiments  to  analyse  how  measures  should  be 
developed 
feel 
ownership; and (7) improving the flexibility of the 
training  offer.  The  above-mentioned  STAP 
initiative replaces the tax deduction for educational 
expenses, with a budget of €200 million per year to 
be  allocated  to  it.  An  individual  will  be  able  to 
receive a subsidy of up to €1,000 to cover training 
costs.  With  the  STAP  budget,  anyone  with  a  link 
to  the  Dutch  labour  market  will  be  able  to  use 
training 
and 
employability.  It  is  expected  to  enter  into  force 
from  January  2022.  An  internet  consultation  was 
also  launched  in  November  2019  on  a  draft 
regulation to  stimulate  life-long  learning  in SMEs 
and  in  the  agricultural,  hospitality  and  recreation 
sectors  in  particular  (SLIM  regeling),  for  which 
€48  million  will  be  made  available  each  year.  In 
January  2020,  The  Netherlands  initiated  a  new 
inter-ministerial  basic  skills  programme  (2020-
2024). The programme aims to foster basic skills, 
improve  quality  assurance  in  adult  basic  skills 
education  and  training  and  strengthen  the  role  of 
local  and  regional  governments.  The  programme 
has  a  budget  of  €  25  million  a  year  and  is 
additional to the budget for the organisation of the 
adult  basic  skills  learning  offer  (€  60  million  a 
year).83 

their  own  development 

for 

(82)  Kamerbrief Leven Lang Ontwikkelen. 
83  https://epale.ec.europa.eu/en/content/letter-parliament-about-

low-literacy-approach-2020-2024 

51 

 
                                                           
 
 
                                                           
4.4. COMPETITIVENESS, REFORMS AND INVESTMENT 

4.4.1.  PRODUCTIVITY AND INVESTMENT TRENDS 

Productivity 

in 

Despite  a  structural  slowdown 
labour 
productivity  growth,  the  Netherlands  remains 
one of the most productive economies in the EU. 
Hourly labour productivity is some 29% above the 
EU  average.  However,  in  common  with  most 
mature 
labour 
industrialised  economies,  both 
productivity  and  total  factor  productivity  growth 
have  experienced  a  secular  slowdown.  Since  the 
1970s,  annual  labour  productivity  growth  has 
declined  from  an  average  of  5%  to  barely  1%  in 
recent  years.  Similarly,  while  annual  total  factor 
productivity  growth  averaged  some  1.4%  in  the 
last  decades  of  the  previous  century,  it  has  only 
grown by around 0.5% per year since the 2000s. 

The  causes  for  this  productivity  slowdown 
appear  to  involve  a  number  of  factors  and 
partly  reflect  trends  playing  out  at  a  global 
level.  As  most  other  developed  economies  have 
suffered  a  comparable  productivity  slowdown 
(Graph  4.4.1),  its  underlying  drivers  do  not  seem 
specific to the Netherlands but rather reflect wider 
developments  (Bauer  et  al., 2020;  Roelandt  et  al., 
2019).  These  include  (i)  a  gradual  shift  from  the 
production  of  industrial  goods  to  activities  within 
the  services  sector  with 
lower 
traditionally 
productivity  growth 
(European  Commission, 
2019a) (84); (ii) demographic developments such as 
transition  costs  of 
(iii) 
population  ageing; 
investments  in  information  and  communications 
technologies  (Roelandt  et  al.,  2019);  and  (iv)  the 
increasing  difficulty  of  achieving 
incremental 
productivity  gains  when  productivity  levels  are 
already  relatively  high.  In  addition,  ‘labour 
hoarding’  played  a  part  in  the  initial  post-crisis 
productivity  dip,  although  this  explanation  has 
become  less  relevant  as  the  labour  market  has 
tightened.  

In  terms  of  drivers  specific  to  the  Dutch 
economy, relatively low entry rates of new firms 
as well as a potentially suboptimal allocation of 
resources across firms may play a role. A lack of 
new  firms  has  a  long-term  detrimental  effect  on 

(84)  However,  for  the  Netherlands  this  sectoral  composition 
effect appears to explain only a relatively small part of the 
slowdown  —  many  sectors  experience  a  productivity 
slowdown (CPB, 2016). 

can 

constitute 

sector,  which 

business  dynamism,  innovation,  and  productivity. 
Entry rates of larger-than-micro firms decreased to 
below  the  average  EU  level  in  the  business 
an 
services 
impediment  to  productivity  growth  (Bauer  et  al., 
2020).  Misallocation  of  capital  and  labour  across 
Dutch  firms  —  implying  that  highly  productive 
firms  tend  to  be  too  small  compared  to  their 
optimal  size,  whereas  the  opposite  is  the  case  for 
less productive firms — could also play a role (de 
Winter  et  al.,  2019).  The  Bureau  for  Economic 
Policy  Analysis  (CPB),  in  its  capacity  as  the 
National  Productivity  Board  for  the  Netherlands, 
contributes  to  the  policy  debate  on  productivity 
developments  by  drawing  up  a  detailed  work 
programme  on  productivity  and  holding  annual 
policy dialogues on productivity developments. 

Graph 4.4.1:  Evolution of GDP per hour worked (1), NL 

versus peer countries 

(1)  Year-on-year growth at constant prices 
Source: European Commission (Ameco) 

Investment 

Investment  is  increasing,  but  remains  below 
pre-crisis  levels.  The  ratio  of  investment  over 
GDP reached around 21% in 2018, up from 17.6% 
in  2014.  Despite  the  increase,  private  business 
investment  remains  relatively  low,  in  particular 
compared  to  corporate  savings.  Public  investment 
remained  roughly  constant  in  2018  at  3.3%  of 
GDP.  While  this  is  significantly  above  the  euro 
area average at 2.7% of GDP (Graph 1.2 in Section 
1), it remains below pre-crisis levels. At the same 
time, 
implementing  an 
expansionary  fiscal  package,  including  higher 

the  government 

is 

52 

-4-20246870747882869094980206101418% y-o-yNLBEDEFREA-19 
 
                                                           
  
4.4. Competitiveness, reforms and investment 

companies engaged in innovation compared to the 
rest of the world (European Commission, 2019j). 

sectors, 

industrial 

Headline  R&D  investment  figures  understate 
actual  R&D  intensity  in  the  Netherlands.  The 
OECD  (2017b)  explains  different  sectors’  typical 
R&D  intensities  and  concludes  that  the  Dutch 
economy  is  more  R&D  intensive  than  could  be 
expected  given  its  sectoral  make-up  (i.e.  with 
many  services  and  comparatively  few  R&D 
intensive 
as 
pharmaceuticals).  Many  Dutch  multinational 
firms’  R&D  also  takes  place  in  other  countries 
(which  can  boost  their  productivity  both  in  the 
Netherlands  and  elsewhere),  while  there  is  less 
investment  by  foreign  multinationals  in  R&D 
taking  place  within  the  Netherlands  (Rathenau, 
2019).  Moreover,  Dutch  investments  in  intangible 
assets are relatively high. Such investments are not 
accounted  for  as  R&D,  but  in  practice  often  have 
similar objectives and impact, including improving 
productivity (Bauer et al., 2020).  

such 

lever 

innovatiebeleid) 

A  potential  policy 
to  boost  R&D 
investment  may  come  from  the  new  mission-
driven  innovation  policy.  The  ‘mission-driven 
top sectors and innovation policy’ (missiegedreven 
topsectoren-  en 
focuses  on 
maximising the economic performance of selected 
sectors,  which  is  viewed  as  a  key  priority  for 
strengthening  competitiveness  and  addressing 
societal challenges (EZK, 2018). Overall, this new 
policy  approach  aims  to  further  boost  investment 
in  R&D  in  order  to  achieve  the  long-term  targets 
on  key  societal  challenges  grouped  into  four 
‘missions’: (i) energy transition and sustainability; 
(ii)  agriculture,  water  and  food;  (iii)  health  and 
care; and (iv) security. 

More  generally,  the  Netherlands  is  aiming  to 
strengthen its R&I policy by ensuring adequate 
investment  in  R&D  to  support  productivity 
growth and address broader societal challenges. 
In the 2020 budget, the government announced an 
additional  €400 million  on  a  structural  basis  for 
fundamental  and  applied  research.  Moreover,  the 
new 
the  Dutch 
economy’s  long-run  earnings  capacity  (see  box 
4.4.1)  may  also  serve  as  a  platform  to  expand 
investment in key technologies.  

investment 

to  boost 

fund 

public  investment  in  housing  and  infrastructure 
(see  Section  4.1).  In  the  longer  run,  new  vehicles 
such  as  the  national  promotional  bank  Invest-NL 
and  the  planned  investment  fund  to  boost  the 
economy’s future growth potential (see Box 4.4.1) 
could help further expand investment. 

technologies 

in  R&D,  human  capital  and 
Investments 
climate  and  energy  can  help  boost  long-run 
productivity  growth  and  address  key  societal 
challenges.  Since  the  Netherlands  is  among  the 
most  productive  countries  in  the  world,  further 
productivity gains will likely require application of 
new 
innovations.  This 
and 
underscores  the  importance  of  further  expanding 
R&D investment (see below). Consistent with this, 
boosting  technical  skills  and  training  qualified 
professionals  are  crucial  for  the  Consistent  with 
this, boosting technical skills and training qualified 
professionals  is  crucial  for  the  Dutch  economy’s 
innovation  capacity  and  productivity  growth  (see 
Section  4.1).  Furthermore,  tackling  wider  societal 
challenges,  such  as  climate  change  and 
the 
renewable  energy  transition,  is  likely  to  require 
substantial investment (see Section 4.5). 

4.4.2.  SINGLE MARKET INTEGRATION AND 

SECTORAL POLICIES 

Investment in R&D and innovation 

Despite  relatively  low  R&D  expenditure,  the 
Netherlands  remains  one  of  the  world’s  most 
innovative  economies.  R&D  intensity  stood  at 
2.16%  in  2018  (85),  lower  than  the  national  target 
of  2.5%  in  2020  and  below  other  top  innovators. 
Of  this,  private  R&D  contributed  1.45%  of  GDP 
and  public  R&D  about  0.71%  of  GDP. 
Nevertheless, in terms of innovation performance, 
the Netherlands is among the world’s frontrunners. 
It  ranks  as  one  of  the  four  ‘innovation  leaders’  in 
the  European  Innovation  Scoreboard  (European 
Commission,  2019i),  scores  among  the  top  10 
countries  on  the  innovation  pillar  of  the  Global 
Competitiveness  Index  (World  Economic  Forum, 
2019),  and  Dutch  industry  has  a  high  share  of 

(85)  Dutch R&D figures have been revised upwards by around 
10%  due  to  a  methodological  revision  (see  CBS  (2019), 
chapter 6, heading ‘Revisie’) 

53 

 
                                                           
4.4. Competitiveness, reforms and investment 

Box 4.4.1: Investment challenges and reforms in the Netherlands 

Section 1. Macroeconomic perspective  

Total investment increased to 20.7% of GDP in 2018 and is slightly higher than the long-term average (and 
broadly in line with the euro area average). The increase is largely attributable to dynamics in construction 
investment:  while  residential  investment  fell  sharply  during  the  economic  recession,  it  has  seen  strong 
growth in recent years. As a result, it has now converged back to the euro area average. The ratio of business 
investment  to  GDP  stood  at  11.1%  of  GDP,  with  public  investment  still  relatively  stable  at  a  comparably 
high level of 3.3% of GDP. In 2019, business and household (residential) investments remained supportive 
of growth against the backdrop of a tight labour market and solid domestic demand, as well as low capital 
costs  and  high  profitability.  At  the  same  time,  increases  in  (trade-related)  uncertainty  as  well  as  weaker 
external demand over the summer have led to a weaker outlook for business investment growth. Over the 
course of 2019, a ruling by the Dutch Council of State became a source of uncertainty for infrastructure and 
housing investment as it stopped permits being issued for construction and infrastructure projects in case of 
incremental nitrate depositions near to Natura 2000 nature protection areas. The government has since taken 
short-term measures to mitigate the negative impact on infrastructure and housing projects. 

Section 2. Assessment of barriers to investment and ongoing reform 

The  Netherlands  benefits  from  an  investment-friendly  institutional  and  political  setting,  with  very  few 
genuine  regulatory  barriers  to  investment  (European  Commission,  2015).  It  qualifies  as  an  ‘innovation 
leader’  (European  Commission,  2019i),  benefiting  from  an  attractive  research  system  and  an  innovation-
friendly environment. According to the World Bank, some sectoral regulations, such as obtaining a building 
permit,  may  be  burdensome  and  hamper  construction  investments.  Some  small  businesses  signal  the 
availability of finance as a barrier to investment (EIB, 2019). The Netherlands performs reasonably well in 
terms of public R&D investment, and has pledged to invest an additional €400 million a year in fundamental 
and  applied  research  (€200  million  each).  However,  it  still  underperforms  on  private  R&D  investment 
compared to both the EU average and the top performers. As the government has reaffirmed the intention to 
increase  efforts  to  reach  an  R&D  intensity  of  2.5%  of  GDP,  this  will  require  extra  investments  from  the 
government and private sector. To boost investment, the government recently set up Invest-NL, a national 
promotional institution  with a mandate to support private-sector investment aimed at tackling key societal 
challenges and supporting access to finance for SMEs. The government is the sole shareholder, investing up 
to €1.7 billion in Invest-NL. Invest-NL has indicated that it wants to become an implementing partner for 
InvestEU.  Furthermore,  the  government  has  indicated  that  it  is  exploring  the  possibility  of  launching  an 
investment  fund  to  boost  the  long-term  growth  potential  of  the  economy,  although  details  on  its  financial 
firepower and target sectors are still to be decided upon.  

54 

Regulatory/ administrative burdenCSRTaxationPublic administrationAccess to financePublic procurement /PPPsCooperation btw academia, research and businessJudicial systemFinancing of R&D&ICSRInsolvency frameworkBusiness services / Regulated professionsCompetition and regulatory frameworkCSRRetailEPL & framework for labour contracts ConstructionWages & wage settingDigital Economy / TelecomEducation, skills, lifelong learning CSREnergyTransportLegend:No barrier to investment identifiedSome progressCSRInvestment barriers that are also subject to a CSRSubstantial progressNo progressFully addressedLimited progressPublic administration/ Business environmentFinancial Sector / TaxationR&D&ISector specific regulationLabour market/ Education 
 
 
4.4. Competitiveness, reforms and investment 

Economic 

the  World 
Forum’s  Global 
Competitiveness  Report  2019,  the  Netherlands 
scores very well on the quality and connectivity of 
its  transport  infrastructure,  both  in  absolute  terms 
and  by  international  comparison  (Graph  4.4.2). 
Overall, it ranks as the best-performing country in 
the  EU,  and  only  Singapore  scores  higher  in  a 
global comparison. 

Graph 4.4.2:  Quality score for transport infrastructure in the 

Netherlands 

strengthens 

cooperation 

Through the four regional innovation strategies 
on  ‘smart  specialisation’,  the  Netherlands  is 
strengthening  its  innovation  ecosystems  thanks 
to  concentrated  investments  based  on  regional 
needs.  This  regional  dimension  of  innovation 
policy 
between 
companies,  researchers  and  government  across 
sectors and triggers targeted additional investments 
based  on  particular  regional  strengths.  The  four 
regional  innovation  strategies  are  being  updated 
and  embedded  in  the  mission-driven  innovation 
policy  (see  above).  This  should  further  strengthen 
their  contribution  to  environmental  sustainability.  
In  each  of  the Dutch regions,  priorities have  been 
selected 
to  relevant  sustainability 
priorities, including bio-based economy, clean and 
technologies, 
efficient  energy,  environmental 
sustainable agriculture, clean water or reducing the 
use of raw materials. 

that  relate 

Investment in transport and infrastructure 

Source: World Economic Forum (2019) 

infrastructure  projects  currently 

The  Netherlands  invests  heavily  in  its  dense 
transport 
infrastructure  network  (European 
Commission, 2019k). The government has boosted 
investment  by  about  €2  billion  (about  0.25%  of 
GDP)  per  year  between  2018  and  2020.  The 
Netherlands’ long-term infrastructure and transport 
plan (Meerjarenprogramma Infrastructuur, Ruimte 
en  Transport,  MIRT)  details  investment  plans  for 
the  154 
in 
progress.  The  government  is  also  working  on 
turning  the  national  infrastructure  fund  into  a 
mobility  fund,  with  a  more  integrated  investment 
approach  across  different  modes  of  transport  (i.e. 
roads,  waterways,  public  transport  and  rail).  In 
addition 
the 
Netherlands also benefits from investment in wider 
European  transport  networks  as  these  link  Dutch 
seaports to European markets. The Trans-European 
Transport  Network (86) 
the  main 
connections  in  the  Netherlands,  including  key 
cross-border  rail  connections  and  many  MIRT 
projects. Moreover, its technical standards provide 
for cross-border interoperability. 

infrastructure, 

domestic 

covers 

to 

Delays  due  to  congestion  on  Dutch  roads  are 
somewhat  lower  than  the  European  average. 
The  average  peak-hour  delay  in  the  Netherlands 
was  32.1  hours  in  2017,  compared  to  an  EU 
average  of  32.4  hours.  Taking  only  urban  areas 
into account, the average delay in the Netherlands 
was 37.9 hours in 2017, below the EU average of 
39.7 hours (87).  

study  published  by 

Road congestion makes up a significant part of 
the  external  costs  of  transport  activities.  A 
recent 
the  European 
Commission  (Schroten  et  al.,  2019)  estimates  the 
total  external  costs  of  transport  for  road,  rail  and 
inland waterways in the Netherlands at €31 billion 
per year, which corresponds to 4% of GDP. They 
include  external  costs 
to  accidents, 
environment  (air  pollution,  climate  change,  costs 
related  to  energy  production,  i.e.  the  well-to-tank 
emissions,  noise,  habitat  damage)  and,  only  for 
road,  congestion  costs  of  around  €11  billion (88). 
Congestion costs therefore amount to around 35% 
of  total  external  costs (89),  compared  to  around 

related 

The  perceived  quality  of  the  infrastructure  for 
all  transport  modes  is  very  high.  According  to 

(86)  Regulation (EU) No 1315/2013 of the European Parliament 
and  of  the  Council  of  11 December  2013  on  Union 
guidelines  for  the  development  of  the  trans-European 
transport network and repealing Decision No 661/2010/EU, 
OJ L 348, 20.12.2013, p. 1. 

(87)  Source:  European  Commission  Joint  Research  Centre 

calculations based on TomTom data. 

(88)  A significant part of the total external cost of congestion is 
already internalised by the willingness of users to travel in 
congested situations. 

(89)  Infrastructure  costs  are  not  included  in  the  figures  on 

external costs. 

55 

22826862621428320102030405060708090100Roadsinfra-structureRoadsconnectivityRoadsqualityRailinfra-structureRaildensityRailefficiencyMaritimetotaltransportMaritimeconnectivityMaritimeportefficiencyAirtotaltransportAirconnectivityAirairportefficiencyTotaltransportinfra-structure Column = Score 2019 (1-100)Number = Rank in world 2019 
                                                           
  
                                                           
29%  for  accident  costs  and  around  a  third  of  the 
total  for  environmental  costs.  For  land  modes, 
annual infrastructure costs (90) amounted to almost 
€14 billion (including fixed infrastructure costs) in 
2016. According to other research (Panteia, 2019), 
costs associated with lorries getting stuck in traffic 
jams amounted to €1.4 billion in 2018. 

However, a large share of these external costs is 
recovered  from  road  users,  whereas  for  other 
transport  modes  pay-back  rates  are  much 
lower.  Internalising  external  and  infrastructure 
costs – for example through taxes and charges – is 
important  for  social  fairness  and  helps  reduce 
external  costs.  Although  the  road  sector  has  large 
external  costs,  in  part  due  to  congestion  (see 
above),  it  is  also  the  transport  mode  where  these 
costs are best recovered from end users, suggesting 
that  there  are  overall  appropriate  incentives  in 
place  to  discourage  overuse  of  road  transport. 
Excluding  fixed  infrastructure  costs,  Dutch  road 
users  pay  around  98%  (passenger)  and  26% 
(freight)  of 
total  external  and  variable 
infrastructure costs. In contrast, rail users pay 47% 
for  passenger  and  43%  for  freight  (91).  Inland 
waterway transport is the mode that pays the least 
– just 3%.  

their 

The  Netherlands  is  one  of  the  frontrunners  in 
the EU in decarbonising its transport sector by 
deploying  alternative  fuels.  In  the  road  sector, 
electric cars, and more recently hydrogen-powered 
vehicles,  are  gaining  ground.  For  instance,  of  the 
175,000  public  charging  points  in  the  EU,  almost 
45,000  are  in  the  Netherlands (92).  The  country  is 
also 
inland 
waterway  transport.  Furthermore,  KLM  Royal 
to  develop  and 
Dutch  Airlines  has  pledged 
purchase 75,000 tonnes of sustainable aviation fuel 
a  year  over  a  10-year  period.  It  claims  to  be  the 

leading  efforts 

to  decarbonise 

(90)  These  are  the  annualised  economic  costs  of  the  total 
infrastructure  network  on  the  basis  of  annual  depreciation 
and financing costs. As such, they are different from annual 
infrastructure  expenditure,  which  would  show  the  actual 
spending on infrastructure in a given year. 

(91)  The  cost  coverage  indicators  are  affected,  particularly  for 
road transport, by the choice of using transport activity data 
following  the  nationality  principle  (transport  activity  is 
allocated  to  countries  where  the  vehicle  is  registered) 
instead  of  the  territoriality  principle  (transport  activity  is 
allocated to the countries where the  activity actually takes 
place).  For  further  explanations,  please  see  the  study 
mentioned in footnote 3 above.  

(92)  Source: European Alternative Fuels Observatory. 

4.4. Competitiveness, reforms and investment 

first  airline  in  the  world  to  invest  in  sustainable 
aviation fuel on this scale (93). 

4.4.3.  INSTITUTIONAL QUALITY 

Business environment 

The  Netherlands  maintains  an  overall  high-
quality  business  environment.  The  country 
further improved its scores in the World Economic 
Forum  Global  Competitiveness  Index  (World 
Economic Forum, 2019) and now ranks 4th out of 
140 countries. The country scores particularly well 
on  business  dynamism  and  infrastructure  quality. 
The  Netherlands  performs  very  well  on  measures 
reflecting  entrepreneurship  and  the  conditions  for 
the  growth  of  enterprises  (European  Commission, 
2019l; Flachenecker et al., 2020). 

Internal market surveillance and enforcement 

Market  surveillance  of  the  single  market  for 
goods  is  essential  to  protect  consumers  and  to 
ensure  a  level  playing  field  for  businesses. 
Controls  at  external  borders  are  a  unique 
opportunity  to  stop  unsafe  and  non-compliant 
products before distribution on the EU market. As 
the  EU’s  largest  port,  the  port  of  Rotterdam 
accounts for  10%  of  goods  imported  into  the  EU, 
implying 
the  Netherlands  bears  a  key 
that 
responsibility in this area. 

in 

The  Netherlands  reveals  a  worsening  level  of 
overall enforcement of internal market rules. In 
2019,  delays 
transposing  directives  and 
complying  with  Court  of  Justice  judgments  both 
full 
increased.  Additional  efforts 
transposition  of  these  rules  and  the  elimination  of 
infringement proceedings would help increase both 
cross-border trade and real incomes (94). 

to  ensure 

(93)  Source: 

KLM 

corporate 

website: 

https://news.klm.com/klm-skynrg-and-shv-energy-
announce-project-first-european-plant-for-sustainable-
aviation-fuel/ (retrieved on 22.11.2019). 

(94)  A  full  transposition  of  single  market  rules  and  the 
elimination  of 
infringement  proceedings  have  been 
estimated  to  increase  real  incomes  by  three  quarters  of  a 
percentage  point,  while  intra-EU  trade  could  increase  by 
more than 11% (WIFO, 2019). 

56 

 
                                                           
                                                           
4.4. Competitiveness, reforms and investment 

2.5%  of  GDP  (vs  1.9%  of  GDP  in  2015), 
compared  to  an  EU  average  of  4.1%.  The  quality 
of  data  published  is  generally  not  very  high.  For 
instance,  contracting  authorities  are  reluctant  to 
include  the  value  of  contracts  in  contract  award 
notices.  The  contract  register  includes  currently 
available 
(contract  notices  and 
contract  award  notices).  Its  expansion  to  cover 
other  aspects  (e.g.  contract  completion,  payment 
register)  would  greatly  contribute 
to  helping 
improve  the  transparency  and  accountability  of 
public procurement.  

information 

Businesses  consider  the  legal  protection  in 
public procurement not to work effectively. The 
majority  of  businesses  do  not  resort  to  legal 
remedies, because the procedures are perceived to 
be  extensive  and  do  not  produce  desired  results 
(EZK,  2019b;  VHG,  2019).  The  Netherlands  has 
conducted an investigation into the system of legal 
protection  (van  Schelven  et  al.,  2019).  The  issues 
that  were  raised  as  problematic  concern  limited 
standard  of  review,  limited  possibility  to  lodge 
complaints  at  different  stages  of  procurement 
procedures  and  the  need  for  a  clearer  role  of  the 
Commission of Procurement Experts. Based on the 
investigation,  the  Ministry  of  Economic  Affairs 
announced  a  plan  for  the  reform  of  the  remedies 
system (EZK, 2019b). 

Cooperation  between  public  buyers  may 
improve  expertise  in  public  procurement.  In 
February  2018,  the  Ministry  of  Economic  Affairs 
released an 'Agenda for Better Public Procurement' 
(Actieagenda  Beter  Aanbesteden),  which  aims  to 
boost  the  procurement  expertise  of  municipalities 
and  government  entities,  including  by  improved 
cooperation  between  public  buyers.  In  2018,  only 
4%  of  procedures  involved  more  than  one  buyer, 
one of the lowest levels in the EU.  

strategy 

for 
An  ambitious  digitalisation 
procurement  could  simplify  procedures  for  the 
benefit  of  buyers  and  suppliers.  The  e-
procurement  services 
the  Netherlands  are 
in 
provided  to  contracting  authorities  by  the  market 
together  with 
the  government-run  TenderNed 
system.  However,  there  is  no  plan  yet  to  connect 
the national databases to facilitate implementation 
of  the  ‘once-only’  principle.  In  particular,  the 
European  Single  Procurement  Document  –  a  self-
declaration form standardised across EU countries 
– is not linked to the national databases. The Dutch 

Services regulation 

The  city  of  Amsterdam  has  introduced  tight 
restrictions 
for  short-term  accommodation 
rentals.    These  severely  limit  the  possibilities  for 
residents to rent out their homes on an occasional 
basis  via  collaborative  economy  platforms. 
Without  measures  to  manage  large  numbers  of 
tourists  using  other  forms  of  accommodation,  the 
restrictions  on  the  collaborative  economy  are 
unlikely  to  be  suitable  to  address  challenges 
stemming  from  the  rapid  growth  of  the  tourism 
sector  (Barron  et  al.,  2019;  Garcia-López  et  al., 
2019;  Bivens  et  al.,  2019;  Cocola-Gant  et  al.,. 
2019). 

The  Netherlands  plans  to  organise  the  auction 
for  the  3.6  GHz  band,  the  primary  5G  pioneer 
band  in  the  EU,  with  a  substantial  delay. (95) 
This  will  slow  down  5G  roll-out, 
the  next 
generation standard for mobile communications. It 
will mean that Dutch end users have to wait longer 
for  reliable  Gigabit  speeds  on  their  tablets  and 
smartphones.  In  addition,  economic  progress  of 
industry  will  be  slowed  down  as  services  like 
industry 
automated 
automatisation  may  not  be  launched  to  the  same 
extent as in other Member States. 

driving, 

eHealth 

or 

Public procurement 

The  public  procurement  system  generally 
works  well,  but  authorities  could  improve 
transparency  and  accountability.  A  more 
competitive 
tendering  of  public  procurement 
contracts,  which  add  up  to  some  14%  of  GDP, 
could  lead  to  lower  prices,  higher  quality,  more 
participation  by  smaller  companies  and/or  more 
foreign  competition  in  tenders.  The  publication 
tenders (96)  has 
rate  of  public 
increased  but 
remains below the EU average. In 2017, it stood at 

informed 

the  Dutch  Authorities  have 

(95)  Concerning  Decision  (EU)  2019/235  on  the  3.4-3.8  GHz 
band, 
the 
Commission  of  the  following  timeline. The  auction  of  the 
3450-3750 MHz band will take place by the end of 2021 or 
beginning  of  2022.  The  band  3500-3700  MHz  will  be 
available  for  use  from  September  2022.  There  is  no 
deadline 
and 
3700-3750 MHz,  due  to  remaining  discussions  on  a 
national 
Spectrum 
3400-3450 MHz  and  3750-3800 MHz  will  be  made 
available from 2026 for local licensed use. 

3450-3500  MHz 

(interception). 

security 

bands 

issue 

for 

set 

(96)  The  publication  rate  refers  to  the  value  of  procurement 
advertised  on  the EU  Tenders  Electronic  Daily  (TED) 
platform as a proportion of national GDP. 

57 

 
                                                           
4.4. Competitiveness, reforms and investment 

authorities  state  that national  rules  do  not provide 
room for this. 

The  Netherlands  is  one  of  the  frontrunners  in 
the  EU  on  green  public  procurement.  It  has  a 
national  target  to  reduce  annual  CO2  emissions 
from  public  procurement  projects  by  over  1 
million  tonnes  by  2021.  Circular  procurement  is 
also part of the Green Deal ‘Sustainable health for 
a  sustainable  future’,  signed  by  132  stakeholders 
and  aiming,  among  other 
to  reduce 
greenhouse gas emissions and resource usage. 

things, 

58 

 
 
4.5.  ENVIRONMENTAL SUSTAINABILITY 

transport were in fact higher in 2018 than in 1990 
(99). Contributions from the built environment and 
agriculture  are  closer  to  their  targets  and  are 
already substantially lower than in 1990.  

Graph 4.5.1:  Greenhouse gas emissions by sector 

Tackling climate change  

In  2019,  the  Netherlands  adopted  a  national 
climate  agreement 
(‘Klimaatakkoord’)  and 
climate  act  (‘Klimaatwet’)  targeting  emission 
reductions that exceed EU goals (97). The climate 
act  creates  a  governance  framework  for  reducing 
domestic    greenhouse  gas  (GHG)    emissions  by 
to  1990,  with  an 
95%  by  2050  compared 
intermediate  reduction  target  of  49%  by  2030  –
exceeding  current  EU  goals  (see  Box  4.5.1).  The 
Netherlands  Environmental  Assessment  Agency 
will  monitor  progress  (Schoots  and  Hammingh, 
2019).  The  climate  act  is  a  further  step  forward 
towards achieving SDG 13 on climate action. 

energy 

climate 

describes 

sustainable 

all 
agreement 
The 
measures and  sectoral  targets  to  achieve  the 
GHG  objective  in  a  cost-effective  way  that  is 
acceptable  to  society (EZK,  2019c).  Short-term 
measures  include  (i)  a  shift  in  energy  taxes  from 
electricity 
to  natural  gas;  (ii)  a  shift  from 
households to businesses for financing investments 
in 
(‘Opslag  Duurzame 
Energie’);  (iii)  the  introduction  of  a  planned 
carbon  tax  and  subsidy  scheme  for  industry  by 
2021;  and  (iv)  various  changes  in  taxes  and 
subsidies  in  the  automotive  sector.  The  size  and 
scope  of  the  main  subsidy  for  the  rollout  of 
sustainable  energy  initiatives  is  being  broadened 
('stimulerings-regeling  duurzame  energietransitie' 
and 
'investeringssubsidie  duurzame  energie'). 
Longer-term measures include the shutdown of all 
coal-fired  power  plants  before  2030;  making  1.5 
million  buildings  gas-free  by  2030; 
and 
requirements  for  new  cars  to  be  zero  emission  by 
2030. Assessments (98) show that the energy sector 
and  manufacturing  are  the  largest  producers  of 
GHG  emissions  (Graph  4.5.1),  with  the  most 
potential  for  reducing  emissions  (Schoots  and 
Hemming,  2019).  GHG  emissions  in  energy  and 

(97)  Under the Paris climate agreement, the EU and its Member 
States have set a target to reduce greenhouse gas emissions 
of  at  least  40%  by  2030  (compared  to  1990)  and  80-95% 
by 2050. There are currently two main instruments in place 
to  achieve  these  goals:  European-wide  carbon  pricing  for 
industry  through  the  EU  emissions  trading  system  which 
applies  to  power  and  heat  generation,  energy  intensive 
industry  and  commercial  aviation  sectors,  and  binding 
emission reduction targets for individual Member States. 
(98)  Different  sectors  produce  different  kinds  of  greenhouse 
gases.  For  example,  carbon  emissions  originate  from  the 
combustion  of  fossil  fuels  and  changes  in  land  use,  soil 
erosion  and  agriculture.  Methane  emissions  come  mainly 
from livestock. 

Source: Statistics Netherlands 

Based  on  current  policies,  the  Netherlands 
Environmental  Assessment  Agency  expects 
GHG  emissions  to  fall  by  43-48%  by  2030 
(Hekkenberg and Notenboom, 2019). This exceeds 
the  current  EU  2030  target  of  40%,  but  remains 
somewhat  below  the  national  goal  of  49%.  Some 
additional  policy  measures  would  therefore  be 
needed to meet this 2030 target. 

The  budgetary  implications  of  policy  plans 
under the  climate  agreement appear modest as 
a  whole.  According  to  an  analysis  by  the  Bureau 
for  Economic  Policy  Analysis  (CPB),  public 
expenditure  on  climate  and  energy  policy  will 
increase by €3.9 bn (around 0.5% of current GDP) 
by  2030,  whereas  the  tax  burden  will  increase  by 
around €4.5 bn (also around 0.5% of GDP) (CPB, 
2019d). Around 60% of this added tax burden will 
be  borne  by  businesses,  with  the  remaining  40% 
borne  by  households.  The  cumulative  drag  from 
the  climate  agreement  on  household  disposable 
income  is  projected  to  remain  limited,  amounting 
to 1% by 2030. (100)  

(99)  However,  a  substantial  reduction  of  emissions  is  expected 
from  energy  in  the  lead-up  to  2030,  with  renewable 
electricity (see below). 

(100) The impact on income growth stems from (i) a (small) net 
negative contribution of revenue and expenditure measures, 
combined  with  (ii)  somewhat  weaker  labour  productivity 
developments  due  to  adjustments  to  production  processes 
required under the climate agreement; this is expected to be 
relatively  larger  for  households  with  limited  income  than 
for households with large incomes. 

59 

020406080100ManufacturingEnergy sectorTraffic andTransportAgricultureBuiltenvironmentmegaton  CO2 equivalents1990200420182030 target 
 
                                                           
  
                                                           
4.5. Environmental sustainability 

the 

Although  there  will  be  transition  effects,  the 
overall  longer-term  impact  on  employment  is 
likewise  expected  to  be  marginal  (CPB,  2019d). 
The  transition  will  affect  certain  business  models 
and 
through 
labour  market,  mainly 
employment  shifts  to  upcoming  sectors  such  as 
renewable  energy.  In  such  sectors,  demand  for 
technical  skills  is  high  and  specific,  which  will 
require reskilling and upskilling efforts (European 
Commission,  2019h;  Eurofound,  2019).  While 
macroeconomic  projections  over  longer  periods 
must  be  interpreted  with  care,  the  CPB’s  analysis 
that  significant  GHG  emission 
does  suggest 
reductions can be achieved with limited downside 
risk to overall economic growth.  

through 

Climate change will amplify already substantial 
water  management  issues,  requiring  continued 
investment in adapting infrastructure to climate 
change.  26%  of  the  Netherlands  land  area  lies 
below  sea  level,  and  59%  is  highly  flood-prone. 
Due to climate change, this will gradually worsen 
and  is  linked  to  rising  sea  levels,  higher  seasonal 
discharge 
the  river  delta  and  more 
frequent  extreme  weather  events.  Although  the 
Netherlands  already  has  highly  sophisticated 
adaptation  infrastructure  against  flood  risks,  this 
anticipated  impact  from  climate  change  calls  for 
continued investment in e.g. water retention, water 
discharge capacity as well as dike protection (101). 
The  Dutch  Delta  programme  and  Delta  Fund 
address  these  issues.  For  example,  the  recent 
‘room for the river’ plan (with investments of €2.3 
bn)  enables  higher  water  levels  and  discharge 
volumes  along  major  rivers  to  be  managed.  The 
major  Afsluitdijk-dam  is  currently  reconstructed 
and  modernised,  with  funding  from  the  European 
Investment  Bank.  Overall,  €17.9  bn  will  be 
available in the Delta Fund for 2020-2033, creating 
an annual budget of €1.3 bn (0.2% of GDP) (IenW, 
2019).    

(101) Some  of  the  investment  requirements  in  these  areas  are 
already  enshrined 
the  Water  Act 
(‘Waterwet’).  This  specifies  minimum  standards  for  all 
dyke  sections,  with  mandated  upkeep  if  requirements  are 
not met.  

law,  under 

in 

and 

sustainable 

To achieve climate aspirations and to support a 
more 
resource-efficient 
economy,  substantial  investment,  including  in 
R&D  and  innovation,  is  needed.  In  addition  to 
significant  energy  sector  investments  (see  below), 
the  climate  agreement  envisages  forward-looking 
research  and  innovation  as  a  necessary  driver  to 
achieve  long-run  emission  reduction  targets.  The 
new mission-driven innovation policy (see Section 
4.4.2)  will  support  an  agenda  for  climate  and 
energy 
research  using  both  public  R&D 
investments  and  private  resources.  The  aim  is  to 
emerging 
leverage 
technologies  to  lower  the  cost  of  environmental 
improvements  and 
facilitate  competitive  yet 
sustainable business development.  

eco-innovation 

and 

economic 
the  chemical 

activity. 
industry  and 

The  clustered  character  of  energy-intensive 
industries  offers  specific  potential  for  reducing 
carbon  emissions  and  developing  alternative 
Energy 
sustainable 
production, 
the 
manufacturing  of  basic  metals  are  clustered  in 
regional  value-chains,  mainly  in  five  areas  (102) 
the  most  carbon-intensive 
that  coincide  with 
regions. Synergies between sectors and companies 
in 
these  clusters  offer  decent  prospects  for 
innovation  to  reduce  CO2  emissions  and  to 
develop  alternative  sustainable  economic  activity 
such  as  the  production  of  clean  hydrogen  or  the 
recycling  and  reuse  of  materials.  A  regional 
approach 
shared 
knowledge development and coordination can help 
exploit  this  potential  and  adapt  the  labour  market 
accordingly (Weterings et al., 2018). 

ownership, 

ensures 

that 

Rotterdam/West-Noord-Brabant, 

(102) These  five  cluster  areas  with  energy-intensive  industries 
are 
Zuid-Limburg, 
Zeeuws-Vlaanderen/Zeeland,  the  North-Sea  channel  area 
the 
(Amsterdam/Ijmond)  and  Delfzijl/Eemshaven 
province of  Groningen. 

in 

60 

 
                                                           
  
                                                           
4.5. Environmental sustainability 

Box 4.5.1: Climate policy: towards carbon neutrality 

The Dutch climate act involves a long-term planning process aimed at achieving a very low-
carbon economy in 2050. The Netherlands adopted its national climate act in July 2019. It creates 
a  governance  framework  for  reducing  domestic  greenhouse  gas  emissions  by  95%  by  2050 
compared  to  1990, with  an  intermediate  political objective  of  a  49% reduction  by  2030.  To  this 
end, the act mandates that a national climate plan is to be drafted every 5 years, with the first plan 
published  in  2019  focusing  on  2021-2030.  The  Environmental  Assessment  Agency  will  present 
annual  forecasts  for  reducing  carbon  emissions  to  assess  whether  the  government  is  on  track  to 
reach its target. The first of these was published in autumn 2019, with the Agency concluding that 
while  the  current  policy  mix  is  ambitious,  it  falls  slightly  short  of  the  49%  target,  with  an 
estimated reduction of 43-48% by 2030(1). 

The  Netherlands  organised  a  thorough  stakeholder  process  to  develop  its  future  climate 
policy  in  the  national  Climate  Agreement.  In  October  2017,  the  Rutte  III  Coalition  set  a 
unilateral objective of reducing greenhouse gas emissions by 49% by 2030 compared to 1990. In 
2018, over 150 stakeholders and governmental organisations worked together to formulate a draft 
climate agreement that is cost-effective and acceptable to society. The purpose of the discussions 
was to create a way to achieve the political objective. Indicative reduction objectives were set per 
sector, based on calculations by the Agency of the most cost-effective transition pathways in all 
sectors.  Sectoral  working  groups  discussed  possible  measures  for  the  construction,  transport, 
power,  industry  and  land  sectors,  including  agriculture  and  forestry.  Sizeable  reductions  are 
expected by 2030 thanks to the shift from coal to renewable electricity, as well as a combination of 
a national CO2-levy and subsidies to promote emission reduction projects in industry. In addition, 
various policies support the electrification of transport, energy-efficiency in housing and the deep 
renovation of neighbourhoods with the aim of phasing out the use of natural gas by 2050 in the 
built  environment.  A  key  aspect  of  the  climate  agreement  is  linked  to  the  regional  energy 
strategies.  These  strategies  will  be  developed  by  local  governments  and  interest  groups  and  will 
contain  projects  with  local  support  in  the  areas  of  renewable  electricity,  heating  for  the  built 
environment, and local infrastructure needs.   

The national climate agreement comprises a cohesive set of policy measures to reduce carbon 
emissions,  with  wide  support  from  stakeholders  across  Dutch  society.  Given  the  level  of 
ambition,  the  draft  agreement  of  2018  and  its  impact  assessment  by  Environmental  Assessment 
Agency  led  to  a  lively  and  contentious  public  debate  in  early  2019.  The  debate  focused  in 
particular on the distribution of costs between households and industry, as well as the impact on 
the  daily  lives  of  citizens  in  terms  of  their  homes  or  cars.  The  final  climate  agreement(2)  was 
presented  in  June  2019,  with  a  preliminary  assessment(3)  accompanying  the  Dutch  climate  and 
energy outlook(4) published in early November 2019. The Climate Agreement forms the basis for 
the national climate plan that is mandated by the Climate Act and the National Energy and Climate 
Plan. Following a public consultation and a consultation with neighbouring countries, both these 
plans were sent for approval to Parliament on the 25th November. The Dutch government was the 
first  EU  Member  State  to  submit  its  national  energy  and  climate  plan  to  the  European 
Commission103  

103  The  Commission  will  assess,  in  the  course  of  2020,  the  final  National  Energy  and  Climate  Plan  submitted  by  the 

Netherlands on  18 December 2019 

(1)  https://www.pbl.nl/publicaties/het-klimaatakkoord-effecten-en-aandachtspunten  
(2)  https://www.rijksoverheid.nl/onderwerpen/klimaatverandering/documenten/kamerstukken/2019/06/28/kamerbrief-

voorstel-voor-een-klimaatakkoord  

(3)  https://www.pbl.nl/publicaties/het-klimaatakkoord-effecten-en-aandachtspunten  
(4)  https://www.pbl.nl/publicaties/klimaat-en-energieverkenning-2019  

61 

 
 
 
                                                           
 
4.5. Environmental sustainability 

Energy efficiency & renewable energy 

The Netherlands will likely achieve its required 
end-use  energy  savings  obligation  for  2014-
2020.  The  Netherlands  Environmental  Agency 
(Schoots  and  Hemming,  2019)  estimates  that  by 
2020, final energy consumption will be 49.9 Mtoe, 
outperforming  the  target  of  52.2  Mtoe.  The 
primary energy consumption target of 60.7 Mtoe in 
2020 will most likely not be reached (the agency’s 
estimate  for  2020  is  62.1  Mtoe).  In  its  national 
energy  and  climate  plan,  the  Netherlands  aims  to 
achieve  an  additional  12%  saving  in  final  energy 
consumption  (to  43.9  Mtoe  in  2030,  excluding 
non-energy  use)  and  a  25%  saving  in  primary 
energy consumption (to 46.6 Mtoe in 2030) (EZK, 
2019c).  Without  further  action  the  2030  target 
level  for  primary  energy  consumption  will  not  be 
reached, according to the agency. 

Additional  measures  are  also  needed  to  meet 
the national 2020 renewable energy target. The 
energy  act  (2013)  included  the  EU  target  of  14% 
of  all  energy  consumption  from  renewables  by 
2020.  In  2018,  only  7.4%  of  energy  consumption 
was  renewable  and  the  2020  target  is  expected  to 
be  missed.  The  government  has  announced 
additional measures, including an increased budget 
for  its  two  main  support  schemes  (SDE+  and 
ISDE)  and  an  analysis  of  the  use  of  statistical 
transfers  to  address  the  remaining  gap.  Beyond 
2020,  the  share  of  renewable  energy  consumption 
should  rise  to  16%  in  2023  and  to  least  25%  in 
2030 according to the climate act (as of 2019, this 
incorporates all measures from the energy act). 

Biomass remains the main source of renewable 
energy,  although  the  share  of  wind  energy  is 
increasing. The largest share of renewable energy 
originates from biomass. Using biomass, however, 
only  contributes  to  GHG  savings  when  produced, 
processed  and  used  in  a  sustainable  and  efficient 
way.  Other  types  of  renewable  energy,  based  on 
water,  wind  and  sun,  are  becoming  increasingly 
important  (Graph  4.5.2)  and  should  provide  an 
additional 35TWh by 2030. Continued government 
support and declining costs of offshore wind farms 
will increase renewable energy production, with up 
to  49  TWh  of  wind  farms  being  planned  before 
2030 in the North Sea..  

The  government  aims  to  increase  the  share  of 
renewable  energy  consumption  in  electricity, 

is  expected 

heating  and  transport.  The  share  of  renewable 
energy for heating is expected to double from 6% 
in  2017  to  13%  in  2030,  partly  thanks  to  an 
increase  of  renewable  energy  in  district  heating 
systems.  Natural  gas  currently  heats  95%  of  all 
buildings. The climate agreement plans to make at 
least  1.5  million  buildings  gas-free  by  2030  by 
in  all  new  buildings. 
banning  natural  gas 
Renewable  electricity’s  share 
to 
increase  from  15%  in  2018  to  more  than  67%  in 
2030. The Netherlands is one of the frontrunners in 
the  EU  in  decarbonizing  its  transport  sector  (see 
Section  4.4.2).  It  significantly  increased  its  share 
of  renewable  energy  in  the  transport  sector  from 
6%  in 2017 to 9.6% in 2018, above the European 
average  of  8%.  The  growth  is  accomplished  by 
increasing  the  national  blending  obligation  to 
8.5%, by increasing the scope of the obligation to 
agricultural  and  forestry  vehicles,  and  by  a  sub-
target 
advanced  biofuels.  The  Dutch 
government  has  not  set  a  sectoral  target  for 
renewable  energy in  transport  yet,  but  its  national 
mission-oriented  innovation  programme  has  set  a 
target of 33% of renewables by 2030.104105 .  

for 

Graph 4.5.2:  Renewable energy usage by source 

Source: Statistics Netherlands 

The transition to renewable energy will further 
reduce  the  use  of  natural  gas  and  coal  for 
energy and heat production. The five remaining 
coal-fired  power  plants 
(producing  26%  of 
electricity in 2017) will be gradually phased out by 
2030.  They  employ  just  over  900  people  with 
almost  4,000  indirect  jobs.  Natural  gas  extraction 
in  Groningen  the  main  extraction  area will  end  in 
2022. In 2017, the gas extraction sector employed 

104https://ec.europa.eu/energy/sites/ener/files/documents/nl_fina

l_necp_main_nl.pdf 

105https://www.rijksoverheid.nl/documenten/rapporten/2019/07/
04/rapportage-energie-voor-vervoer-in-nederland-2018 

62 

02468199019921994199619982000200220042006200820102012201420162018% of total energy usageWaterWindSunEarth and soilAir thermal energyBiomassTotal renewable 
  
                                                           
4.5. Environmental sustainability 

The  network  operators  are  conducting  work 
(Gasunie  and  Tenet,  2019)  in  order  to  design  a 
network  optimised  for  energy  carriers  and  able  to 
respond  to  the  needs  of  a  decarbonised  economy. 
In this context, the Netherlands is looking to build 
a dedicated hydrogen network to connect industrial 
clusters.  However,  how  such  plans  translate  into 
in  heat, 
specific 
electricity, hydrogen or CO2 networks , which still 
need clarification. 

infrastructure 

investments 

Circular economy  

The  Netherlands  has  the  highest  resource 
productivity in the EU (107). Circular (secondary) 
use  of  materials  stood  at  29 %  in  2016,  a 
the  EU-28 
remarkable  share  compared  with 
average  of  11.7% (108).  There  is  clear  support  for 
circular  economy  initiatives  and  environmental 
protection in both society and government.   

a 

in 

3,250  people,  of  which  1,660  in  the  extraction 
areas  in  North  Netherlands.  The  energy  transition 
particularly  affects  the  province  of  Groningen 
where  the  decline  of  the  gas  industry  is  coupled 
with  emission  reduction  challenges  in  industry, 
including  the  phasing-out  of  coal-based  energy 
for 
production.  The  National  Programme 
Groningen(106), 
for 
framework 
offering 
development, 
investment 
employment,  environment, 
sustainability  and 
climate  change,  embraces  energy  transition  as  a 
focus. As a starting capital, the Dutch Government 
made  €1.15  bn  available  to  the  programme.  The 
Just Transition Fund is designed to ensure that the 
transition towards EU climate neutrality is fair by 
helping  the  most  affected  regions  to  address  the 
social  and  economic  consequences  and  therefore 
can contribute to dealing with the challenge in this 
province. 

economic 

these, 

investments 

Investments in renewable energy and networks 
are  expected  to  increase  substantially  over  the 
coming  decade.  Investments  in  the  energy  sector 
as  a  whole  are  projected  to  rise  from  around 
€11.6 bn in 2017 to €15.6 bn in 2030 (Schoots and 
Hemming,  2019).  Of 
in 
conventional  energy  sources  will  stabilise  at 
around  €2  bn  a  year.  Investments  in  energy 
efficiency rose from €2.5 bn in 2010 to €4.1 bn in 
2017,  and  will  rise  further  to  €5  bn  in  2030. 
Investments in renewable energy and networks are 
expected  to  increase  from  €5.5  bn  in  2017  to 
€9.5 bn by 2030. The most recent measures in the 
climate  agreement  will  lead  to  an  additional  €19-
31 bn of investments between 2019 and 2030. 

some 

challenges 

Nevertheless, 
remain, 
particularly  on  tackling  waste.  The  amount  of 
municipal  waste  generated  per  person  in  the 
Netherlands is 511 kg, higher than the EU average 
of  489  kg  (2017),  although  there  is  a  downward 
trend.  There  is  scope  to  improve  compliance  with 
recycling  targets  for  the  post-2020  period,  in 
particular on the continued high level of municipal 
waste  incineration  (44%  in  2017).  Generation  of 
total  waste,  excluding  major  mineral  waste,  was 
40% above the EU average in 2016.  Generation of 
hazardous  waste  is  increasing  in  the  Netherlands 
and has doubled since 2004, ranking 7th in the EU.  

However,  further  substantial  investments  are 
needed in energy infrastructure, which were not 
clearly  specified  in  the  climate  agreement.  In 
some  instances,  infrastructure  gaps  are  already 
causing 
implementation  delays  for  renewable 
energy  projects,  as  some  projects  could  not  be 
connected to the grid due to capacity constraints in 
2019.  Capacity  constraints  are  also  holding  back 
further investment in data centres with a number of 
cities deciding not to grant further licences for the 
time being. Proposals for district heating and gas-
free  buildings  likewise  require  new  infrastructure. 

(106) The  National  Programme  for  Groningen  (2019)  is  an 
initiative  by  the  Dutch  Government,  the  province  of 
Groningen  and 
the 
province.  

the  concerned  municipalities 

in 

Sector-specific synergies and trade-offs 

is  pushing  all 
Environmental  sustainability 
sectors  in  the  economy  to  take  appropriate 
action.  Public  finance  measures  aim  to  support  a 
green tax mix in the Netherlands (see Section 4.1). 
The  farming, housing,  infrastructure  and  transport 
sectors  will  need  to  adapt  to  the  reassessment  of 
the country’s nitrogen policy, by making improved 
choices on environmentally harmful emissions (see 
Box  1.1).  The  banking  sector  is  increasingly 
factoring environmental sustainability aspects into 

(107) Resource productivity is how efficiently the economy uses 
material  resources  to  produce  wealth;  the  Netherlands 
scored €4.2/kg in 2017 (EU: €2.04/kg) (EEA, 2016). 
(108) European  Commission,  circular  material  use  rate.  This 
indicator measures the share of material recovered and fed 
back into the economy. 

63 

 
                                                           
                                                           
4.5. Environmental sustainability 

its 
risk  management  and  capital  allocation 
decisions  (see  Section  4.2).    Furthermore,  even 
though additional infrastructure works aim to ease 
is  a 
traffic  congestion  and 
frontrunner  in  decarbonising  its  transport  sector, 
sustainable  mobility  remains  a  challenge,  with 
significant  economic,  social  and  environmental 
costs (see subsection 4.4.2). 

the  Netherlands 

64 

 
ANNEX A 

Overview table 

Commitments  

Summary assessment  (109)  

2019 country-specific recommendations (CSRs)  

in 

The  Netherlands  has  made  some  progress 
addressing CSR 1  

CSR 1: Reduce the debt bias for households and the 
distortions  in  the  housing  market,  including  by 
supporting  the  development  of  the  private  rental 
sector.  Ensure  that  the  second  pillar  of  the  pension 
system is more transparent, inter-generationally fairer 
and  more  resilient  to  shocks.  Implement  policies  to 
increase  household  disposable  income,  including  by 
that  support  wage 
strengthening 
growth,  while  respecting  the  role  of  social  partners. 
Address features of the tax system that may facilitate 
aggressive  tax  planning,  in  particular  by  means  of 
outbound  payments,  notably  by  implementing  the 
announced measures.  

the  conditions 

Reduce  the  debt  bias  for  households  and  the 
distortions  in  the  housing  market,  including  by 
supporting  the  development  of  the  private  rental 
sector.  

Some  progress.  The  accelerated  reduction  of  the 
applicable rate for mortgage interest tax deductibility 
is being implemented from 2020, with the rate being 
reduced by 3 pps per year to 37% in 2023. While this 
helps  to  address  the  debt  bias  for  households,  a 
substantial 
home-
on 
ownership remains. The Dutch authorities announced 
a package of housing market measures in September 
2019,  aimed  primarily  at  boosting  construction, 
including in the private rental sector. However, their 
impact remains uncertain.  

debt-financed 

subsidy 

(109) The  following  categories  are  used  to  assess  progress  in  implementing  the  country-specific  recommendations  (CSRs):  

• 

No progress: The Member State has not credibly announced nor adopted any measures to address the CSR. This category covers a 
number  of  typical  situations  to  be  interpreted  on  a  case  by  case  basis  taking  into  account  country-specific  conditions.  They 
include the following:  
no legal, administrative, or budgetary measures have been announced in the national reform programme, in any other official 
communication to the national Parliament/relevant parliamentary committees or the European Commission, publicly (e.g. in a 
press statement or on the government's website); 
no non-legislative acts have been presented by the governing or legislative body; 
the Member State has taken initial steps in addressing the CSR, such as commissioning a study or setting up a study group to 
analyse possible measures to be taken (unless the CSR explicitly asks for orientations or exploratory actions). However, it has 
not proposed any clearly-specified measure(s) to address the CSR. 

• 
• 

Limited progress: The Member State has:  
• 
• 

announced certain measures but these address the CSR only to a limited extent; and/or 
presented legislative acts in the governing or legislative body but these have not been adopted yet and substantial further, non-
legislative work is needed before the CSR is implemented; 
presented non-legislative acts, but has not followed these up with the implementation needed to address the CSR. 

• 
Some progress: The Member State has adopted measures  
• 
• 

that partly address the CSR; and/or  
that address the CSR, but a fair amount of work is still needed to fully address the CSR fully as only a few of the measures have 
been implemented. For instance, a measure or measures have been adopted by the national Parliament or by ministerial decision 
but no implementing decisions are in place.  

Substantial progress: The Member State has adopted measures that go a long way towards addressing the CSR and most of them 

have been implemented.  

Full implementation: The Member State has implemented all measures needed to address the CSR appropriately.  

65 

 
 
                                                           
 
 
 
A. Overview table 

Ensure that the second pillar of the pension system is 
more 
inter-generationally  fairer  and 
transparent, 
more resilient to shocks.  

its 

(due 

fairness 

strengths: 

intergenerational 

Some progress. The social partners and government 
reached  a  framework  agreement  on  pension  reform 
in June 2019. Overall, the agreement aims to address 
the  vulnerabilities  in  the  pension  system  (such  as 
weak 
to 
'doorsneesystematiek')  and  lack  of  transparency) 
while  maintaining 
compulsory 
participation,  collective  implementation,  collective 
risk sharing and supportive tax rules. The agreement 
holds  significant  promise  and  addresses  key 
distortions in the second pillar system (i.e. it removes 
the  structural 
transfers  present 
under the doorsneesystematiek approach and reduces 
the  procyclical  impact  of  the  system  (as  market 
shocks should no longer impact premiums), while at 
the same time it will be better equipped to deal with 
flexible  career  paths).  However,  the  implementation 
of  some  important  elements  is  still  ongoing.  Some 
legislative measures have already been taken, but the 
overall  legislative  process  is  expected  to  take  until 
early 2021, with the new framework gradually being 
phased in from 2022.  

intergenerational 

Implement policies to increase household disposable 
income,  including  by  strengthening  the  conditions 
that  support  wage  growth,  while  respecting  the  role 
of social partners.  

Some  progress.  Wage  growth  is  increasing  but  has 
remained  subdued  in  real  terms  in  recent  years. 
However,  it  is  expected  to  pick  up  in  2020  with  a 
further tightening of the labour market. Wage growth 
in  collective  agreements  increased  on  average  by 
2.6%    in  2019  –  the  fastest  pace  in  10  years.  In 
addition, the government has taken tax measures for 
2020,  including  raising  the  working  tax  credit 
(arbeidskorting) and the general tax credit (algemene 
heffingskorting),  to  stimulate  disposable  household 
income.  

Address features of the tax system that may facilitate 
aggressive  tax  planning,  in  particular  by  means  of 
outbound  payments,  notably  by  implementing  the 
announced measures.  

Some  progress.  There  was  some  progress 
in 
addressing  the  country-specific  recommendation  on 
addressing aggressive tax planning. The Netherlands 
introduced  a  conditional  withholding  tax  on  royalty 
and interest payments, which will enter into force in 
January  2021.  However, 
in 
addressing  the  issue  of  aggressive  tax  planning 
remains to be seen.  

its  effectiveness 

CSR 2: Reduce the incentives for the self-employed 
without employees, while promoting adequate social 
protection  for  the  self-employed,  and  tackle  bogus 
self-employment.  Strengthen  comprehensive 
life-
long  learning  and  upgrade  skills  notably  of  those  at 
the margins of the labour market and the inactive.  

The  Netherlands  has  made  limited  progress.  in 
addressing CSR 2  

Reduce the incentives for the self-employed without Limited  progress.  In  order  to  reduce  incentives  for 

66 

 
A. Overview table 

employees,  while  promoting 
protection for the self-employed,  

adequate 

and tackle bogus self-employment.  

social 

draft 

on 
the 

respective 

the use of self-employed, the government announced 
its  intention  to  introduce  a  general  minimum  hourly 
rate  of  EUR  16  for  all  self-employed  without 
employees  providing  services  to  both  business  and 
private  clients,  in  combination  with  an  opt-out  of 
payroll  taxes  and  employee's  insurances,  as  well  as 
parts  of  labour  law,  collective  agreements  and 
pension obligations for those self-employed applying 
an  hourly  rate  of  EUR  75  or  more.  A  public 
the 
consultation 
bills 
implementing 
intended  proposals  has  been 
launched  on  28  October  2019  in  view  of  them 
becoming law by 1 January 2021. The government is 
expected to send the final draft bills to Parliament in 
2020.  The  government  also  announced  its  intention 
to gradually decrease the tax deduction and improve 
social  security  coverage  for  self-employed  workers. 
The deduction is set to be reduced by EUR 250 per 
year  until  2028  (when  the  maximum  deductible 
amount  will  be  EUR 5  000.  With  respect  to  a 
for 
security 
social 
possible 
sickness/disability 
the 
for 
government and social partners decided to introduce 
mandatory disability insurance for the self-employed 
as part of their agreement in principle on the reform 
of the pension system of 5 June 2019. In consultation 
with  organisations  representing  the  self-employed, 
discussions  are  ongoing  in  the  'Stichting  van  de 
this 
Arbeid'  platform  on  how 
agreement. A concrete proposal [is expected in] early 
2020  and  it  is  the  government’s  intention  to  send  a 
legislative  proposal  to  Parliament  before  summer 
2020.  Possibilities  to  increase  the  pension  coverage 
for  the  self-employed  on  a  voluntary  basis  are 
currently  equally  being  assessed  and  results  are 
expected to be presented before summer 2020.  

coverage 
self-employed, 

implement 

to 

the 

and 

'under 

control 

suspension  of 

the 
Limited  progress.  The 
enforcement  of  measures  adopted  to  tackle  bogus 
self-employment,  initially  foreseen  until  2020,  has 
been  further  extended  until  2021.  Nevertheless,  the 
direction' 
criterion 
('gezagsverhouding')  has  been  clarified  as  of  1 
January 2019, while in addition, a draft questionnaire 
has  been  developed  in  view  of  implementing  a  web 
module  to  qualify  the  working  relationship  of  self-
employed  workers,  in  particular  when  there  is  no 
employment relationship. Further information on the 
state  of  play  with  respect  to  the  development  of  the 
web  module  itself  is  expected  to  be  provided  in  1st 
quarter 2020.  

67 

 
A. Overview table 

Strengthen  comprehensive  life-long  learning  and 
upgrade skills notably of those at the margins of the 
labour market and the inactive.  

the 

the 

STAP 

so-called 

initiative  which  replaces 

Some progress. The Dutch government presented in 
October  2018  a  new  strategy  to  create  a  genuine 
learning  culture  and  give  more  ownership 
to 
individuals  for  their  training.  An  important  element 
of  it  is  to  promote  individual  training  budgets 
through 
(Stimulans 
Arbeidsmarktpositie,  Stimulus  for  labour  market 
tax 
participation) 
deduction  for  educational  expenses.  A  budget  of 
EUR 200 million per year will be allocated to it. An 
individual  would  be  able  to  receive  a  subsidy  of 
maximum  EUR  1  000  to  cover  training  costs.  With 
the  STAP  budget,  anyone  with  a  link  to  the  Dutch 
labour  market  could  be  enabled  to  use  training  for 
their  own  development  and  employability.  It  is 
scheduled to enter into force scheduled from January 
2022.  In  addition,  an  internet  consultation  has  been 
launched  in  November  2019  with  respect  to  a  draft 
regulation to stimulate life-long learning in small and 
medium  sized  enterprises  and 
the  agricultural, 
hospitality and recreation sectors specifically (SLIM 
regeling),  for  which  EUR  48  million  will  be  made 
available annually.  

the  medium-term 
respecting 
CSR  3:  While 
budgetary objective, use fiscal and structural policies 
to  support  an  upward  trend  in  investment.  Focus 
investment-related  economic  policy  on  research  and 
development  in  particular  in  the  private  sector,  on 
renewable energy, energy efficiency and greenhouse 
gas emissions reduction strategies and on addressing 
transport bottlenecks.  

The  Netherlands  has  made  some  progress.  in 
addressing CSR 3  

respecting 

While 
the  medium-term  budgetary 
objective, use fiscal and structural policies to support 
an upward trend in investment.  

authorities 

Some  progress.  The  Dutch 
are 
implementing  a  fiscal  expansion  for  2020  and  have 
passed  legislation  to  set-up  Invest-NL,  a  national 
promotional  institution  with  a  mandate  to  support 
private-sector  investment.  However,  there  remains 
scope  to  boost  public  investment  further  as  the 
Netherlands has some remaining fiscal space.  

investment-related  economic  policy  on 
Focus 
research and development in particular in the private 
sector,  

Limited progress. Revised R&D figures show slow 
progress  regarding  the  private  R&D  intensity  and  a 
slight decline in the public R&D intensity. The total 
R&D intensity stabilizes, but lags behind the national 
target of 2.5% in 2020 and the R&D intensity of co-
leaders in innovation. Although new policy measures 
have  been  announced,  their  impact  remains  to  be 
seen. 

on 

renewable  energy,  energy  efficiency  and Some progress. The Netherlands adopted a Climate 
Change Act setting  greenhouse gas reduction targets 

68 

 
A. Overview table 

greenhouse gas emissions reduction strategies  

for 2030 and 2050, as well as a Climate  Agreement 
with  a  set  of  adopted  and  proposed  policies  for 
meeting  the  2030  target,  including  an  analysis  on 
investment needs. However, some work still needs to 
be  done  to  define  an  overarching  and  coherent 
climate  investment  agenda  addressing  both  public 
and private sectors.  

and on addressing transport bottlenecks.  

Some progress. The Government agreement set out 
a clear path with measures to address the increasing 
traffic  on  the  road,  rail,  water  and  in  the  air. 
However, 
further 
improvement. 

remains 

room 

there 

for 

Europe 2020 (national targets and progress)  

Employment rate target set in the 2016 NRP: 80%.   The employment rate is on an upward trend, reaching 
about  80.3%  in  Q3-2019.  The  Netherlands  has  thus 
achieved its target.  

R&D target set in the NRP: 2.5% of GDP  

At  2.16%  of  GDP  in  2018,  the  Netherlands  appears 
unlikely to reach its 2020 R&D intensity target.  

National  greenhouse  gas  (GHG)  emissions  target:  
-16%  in  2020  compared  with  2005  (in  sectors  not 
included in the EU emissions trading scheme)  

According to national projections, the Netherlands is 
expected  to  achieve  a  greenhouse  gas  reduction  of 
26% in 2020 compared to 2005, well beyond its 16% 
target under the Effort Sharing Regulation. 

2020 renewable energy target: 14%  

Energy efficiency, 2020 energy consumption targets: 

- 60.7 Mtoe in primary energy consumption  

- 52.2 Mtoe in final energy consumption 

Early school/training leaving target:  <8.0%.  

Despite  a  strong  increase  in  renewable  energy  from 
offshore wind farms, the target of 14% for renewable 
energy consumption in 2020 will not be met, with an 
expected  share  of  11.4%  according  to  the  national 
outlook.  

With  an  estimated  absolute  level  of  final  energy 
consumption  of  49.9  Mtoe  in  2020,  the  Netherlands 
has  exceeded  its  final  energy  consumption  target. 
However, with an estimated level of primary energy 
consumption of 62.1 Mtoe in 2020, it will overshoot 
its primary energy consumption target. 

After achieving the target in 2016, the percentage of 
early  school  leavers  has  been  further  reduced.  In 
2018, the percentage stood at 7.3%. 

Tertiary  education  target:  >40%  of  population  aged 
30-34.  

The rate was 49.4% in 2018, which is well above the 
national target and the EU average.  

Target  for  reducing  the  number  of  people  at  risk  of 
poverty  or  social  exclusion:  100 000  less  people 

The  number  of  people  in  jobless  households  was 
1 516 000  in  2017.  This  is  97 000  less  than  in  2008 

69 

 
 
 
A. Overview table 

living in jobless household (compared to 2008) 

(1 613 000). Thus the target has almost been reached. 

70 

 
ANNEX B: COMMISSION DEBT SUSTAINABILITY ANALYSIS AND 

FISCAL RISKS 

71 

General government debt projections under baseline, alternative scenarios and sensitivity tests2018201920202021202220232024202520262027202820292030Gross debt ratio52.448.947.145.644.142.641.039.337.736.134.833.532.4Changes in the ratio (-1+2+3)-4.5-3.5-1.8-1.5-1.5-1.5-1.6-1.6-1.7-1.5-1.4-1.2-1.1of which(1) Primary balance (1.1+1.2+1.3)2.42.21.21.01.00.90.90.90.90.80.70.60.4(1.1) Structural primary balance (1.1.1-1.1.2+1.1.3)1.81.50.80.80.80.80.90.90.90.80.70.60.4(1.1.1) Structural primary balance (bef. CoA)1.81.50.80.80.80.80.80.80.80.80.80.80.8(1.1.2) Cost of ageing0.10.10.20.30.30.50.71.01.2(1.1.3) Others (taxes and property incomes)0.10.20.30.40.40.50.70.70.8(1.2) Cyclical component0.60.60.30.30.20.10.00.00.00.00.00.00.0(1.3) One-off and other temporary measures0.00.20.00.00.00.00.00.00.00.00.00.00.0(2) Snowball effect (2.1+2.2+2.3)-1.7-1.3-0.6-0.5-0.5-0.6-0.7-0.8-0.8-0.7-0.7-0.7-0.7(2.1) Interest expenditure0.90.80.70.60.50.50.40.40.30.30.30.20.2(2.2) Growth effect-1.4-0.9-0.6-0.6-0.4-0.3-0.3-0.3-0.3-0.3-0.2-0.2-0.3(2.3) Inflation effect-1.2-1.3-0.7-0.6-0.7-0.8-0.8-0.8-0.8-0.7-0.7-0.7-0.7(3) Stock-flow adjustments-0.40.10.00.00.00.00.00.00.00.00.00.00.0Note: For further information, see the European Commission Debt Sustainability Monitor (DSM) 2019. b. For the medium term, the risk category (low/medium/high) is based on the joint use of the S1 indicator and of the DSA results. The S1 indicator measures the fiscal adjustment required (cumulated over the 5 years following the forecast horizon and sustained after that) to bring the debt-to-GDP ratio to 60 % by 2034. The critical values used are 0 and 2.5 pps of GDP. The DSA classification is based on the results of five deterministic scenarios (baseline, historical SPB, higher interest rate, lower GDP growth and negative shock on the SPB scenarios) and the stochastic projections. Different criteria are used such as the projected debt level, the debt path, the realism of fiscal assumptions, the probability of debt stabilisation, and the size of uncertainties. c. For the long term, the risk category (low/medium/high) is based on the joint use of the S2 indicator and the DSA results. The S2 indicator measures the upfront and permanent fiscal adjustment required to stabilise the debt-to-GDP ratio over the infinite horizon, including the costs of ageing. The critical values used are 2 and 6 pps of GDP. The DSA results are used to further qualify the long term risk classification, in particular in cases when debt vulnerabilities are identified (a medium / high DSA risk category). [2]Thechartspresentaseriesofsensitivitytestsaroundthebaselinescenario,aswellasalternativepolicyscenarios,inparticular:thehistoricalstructuralprimarybalance(SPB)scenario(wheretheSPBissetatitshistoricalaverage),theStabilityandGrowthPact(SGP)scenario(wherefiscalpolicyisassumedtoevolveinlinewiththemainprovisionsoftheSGP),ahigherinterestratescenario(+1pp.comparedtothebaseline),alowerGDPgrowthscenario(-0.5pp.comparedtothebaseline)andanegativeshockontheSPB(calibratedonthebasisoftheforecastedchange).Anadversecombinedscenarioandenhancedsensitivitytests(ontheinterestrateandgrowth)arealsoincluded,aswellasstochasticprojections. Detailed information on the design of these projections can be found in the FSR 2018 and the DSM 2019.NL - Debt projections baseline scenario[1]Thefirsttablepresentsthebaselineno-fiscalpolicychangescenarioprojections.Itshowstheprojectedgovernmentdebtdynamicsanditsdecompositionbetweentheprimarybalance,snowballeffectsandstock-flowadjustments.Snowballeffectsmeasurethenetimpactofthecounteractingeffectsofinterestrates,inflation,realGDPgrowth(andexchangerates in some countries). Stock-flow adjustments include differences in cash and accrual accounting, net accumulation of assets, as well as valuation and other residual effects.[3] The second table presents the overall fiscal risk classification over the short, medium and long term. a. For the short-term, the risk category (low/high) is based on the S0 indicator. S0 is an early-detection indicator of fiscal stress in the upcoming year, based on 25 fiscal and financial-competitiveness variables that have proven in the past to be leading indicators of fiscal stress. The critical threshold beyond which fiscal distress is signalled is 0.46. 202530354045505560657020172018201920202021202220232024202520262027202820292030Debt as % of GDP -NLBaselineEnhanced lower GDP growth scenarioAdverse combined scenarioEnhanced higher interest rate scenario20304050607020172018201920202021202220232024(% of GDP)Stochastic debt projections 2020-2024 -NLp10_p20p20_p40p40_p60p60_p80p80_p90p50Baseline202530354045505560657020172018201920202021202220232024202520262027202820292030Debt as % of GDP -NLBaselineHistorical SPB scenarioSGP scenario202530354045505560657020172018201920202021202220232024202520262027202820292030Debt as % of GDP -NLBaselineHigher interest rate scenarioNegative shock on the SPBLower GDP growth scenarioBaselineHistorical SPBLower GDP growthHigher interest rateNegative shock on SPBStochastic projectionsRisk categoryLOWLOWLOWLOWLOWLOWDebt level (2030)32.433.934.534.235.4Debt peak year20192019201920192019Percentile rank43.0%46.0%Probability debt higher10.8%Dif. between percentiles14.8MEDIUMLong termMEDIUM(S2 = 2.8)S1S2Short termLOW(S0 = 0.2)DSALOWDebt sustainability analysis (detail)Medium termLOWLOW(S1 = -3.2) 
 
ANNEX C: STANDARD TABLES 

Table C.1: 

Financial market indicators 

(1) Latest data Q3 - 2019. Includes not only banks but all monetary financial institutions excluding central banks. 
(2) Latest data Q2 - 2019. 
(3) Quarterly values are annualised. 
* Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators). 

72 

201420152016201720182019Total assets of the banking sector (% of GDP)(1)359.4352.3353.5322.0299.9315.0Share of assets of the five largest banks (% of total assets)85.084.684.783.884.7-Foreign ownership of banking system (% of total assets)(2)6.77.26.97.46.76.2Financial soundness indicators:(2)              - non-performing loans (% of total loans)3.42.72.42.11.91.8              - capital adequacy ratio (%)18.420.622.422.122.422.6              - return on equity (%)(3)3.37.07.38.88.18.7Bank loans to the private sector (year-on-year % change)(1)1.1-1.90.5-2.0-3.21.0Lending for house purchase (year-on-year % change)(1)1.35.43.53.3-1.81.4Loan-to-deposit ratio(2)127.0122.2119.6117.7117.6118.7Central bank liquidity as % of liabilities(1)0.60.70.81.51.41.3Private debt (% of GDP)267.2262.8259.3249.1241.6-Gross external debt (% of GDP)(2) - public43.237.532.225.323.723.6    - private346.6349.8338.6326.1314.2300.4Long-term interest rate spread versus Bund (basis points)*29.219.420.320.417.918.5Credit default swap spreads for sovereign securities (5-year)*28.216.123.417.99.610.1 
 
 
  
 
 
C. Standard tables 

Table C.2: 

Headline social scoreboard indicators 

(1) People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) and/or suffering from 
severe material deprivation and/or living in households with zero or very low work intensity. 
(2) Unemployed persons are all those who were not employed but had actively sought work and were ready to begin 
working immediately or within two weeks. 
(3) Gross disposable household income is defined in unadjusted terms, according to the draft 2019 joint employment report. 
(4) Reduction in percentage of the risk-of-poverty rate, due to social transfers (calculated comparing at-risk-of-poverty rates 
before social transfers with those after transfers; pensions are not considered as social transfers in the calculation). 
(5) Average of first three quarters of 2019 for the employment rate, unemployment rate and gender employment gap.  
Source: Eurostat 

73 

201420152016201720182019 5Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)8.78.28.07.17.3:Gender employment gap (pps)11.411.111.010.510.19.4Income inequality, measured as quintile share ratio (S80/S20)3.83.83.94.04.1:At-risk-of-poverty or social exclusion rate(1) (AROPE)16.516.416.717.016.7:Young people neither in employment nor in education and training (% of population aged 15-24)5.54.74.64.04.2:Dynamic labour markets and fair working conditionsEmployment rate (20-64 years)75.476.477.178.079.280.1Unemployment rate(2) (15-74 years)7.46.96.04.93.83.4Long-term unemployment rate (as % of active population)2.93.02.51.91.41.1Gross disposable income of households in real terms per capita(3) (Index 2008=100) 98.9100.1101.9102.4104.1:Annual net earnings of a full-time single worker without children earning an average wage (levels in PPS, three-year average)278002857028768:::Annual net earnings of a full-time single worker without children earning an average wage (percentage change, real terms, three-year average)0.901.391.18:::Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction(4)45.548.042.539.739.0:Children aged less than 3 years in formal childcare44.646.453.061.656.8:Self-reported unmet need for medical care0.50.10.20.10.2:Individuals who have basic or above basic overall digital skills (% of population aged 16-74):72.077.079.0:: 
 
  
 
 
C. Standard tables 

Table C.3: 

Labour market and education indicators 

* Non-scoreboard indicator 
(1) Long-term unemployed are people who have been unemployed for at least 12 months. 
(2) Difference between the average gross hourly earnings of male paid employees and of female paid employees as a 
percentage of average gross hourly earnings of male paid employees. It is defined as "unadjusted", as it does not correct for 
the distribution of individual characteristics (and thus gives an overall picture of gender inequalities in terms of pay). All 
employees working in firms with 10 or more employees, without restrictions for age and hours worked, are included. 
(3) PISA (OECD) results for low achievement in mathematics for 15 year-olds. 
(4) Impact of socio-economic and cultural status on PISA (OECD) scores. 
(5) Average of first three quarters of 2019. Data for youth unemployment rate is seasonally adjusted. 
Source: Eurostat, OECD 

74 

Labour market indicators201420152016201720182019 5Activity rate (15-64)79.079.679.779.780.380.8Employment in current job by durationFrom 0 to 11 months11.913.013.914.615.2:From 12 to 23 months7.67.78.49.29.6:From 24 to 59 months15.614.814.414.715.9:60 months or over63.663.061.860.057.8:Employment growth* (% change from previous year)-0.11.01.52.22.51.8Employment rate of women(% of female population aged 20-64)69.770.871.672.874.275.3Employment rate of men (% of male population aged 20-64)81.181.982.683.384.384.8Employment rate of older workers* (% of population aged 55-64)59.961.763.565.767.769.4Part-time employment* (% of total employment, aged 15-64)49.650.049.749.850.150.2Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)21.120.020.621.721.420.5Transition rate from temporary to permanent employment(3-year average)16.222.530.936.938.8:Youth unemployment rate (% active population aged 15-24)12.711.310.88.97.26.6Gender gap in part-time employment53.052.952.751.550.850.3Gender pay gap(2) (in undadjusted form)16.216.115.615.2::Education and training indicators201420152016201720182019Adult participation in learning(% of people aged 25-64 participating in education and  training)18.318.918.819.119.1:Underachievement in education(3):16.7::::Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)44.846.345.747.949.4:Variation in performance explained by students' socio-economic status(4):12.5:::: 
 
  
 
 
C. Standard tables 

Table C.4: 

Social inclusion and health indicators 

* Non-scoreboard indicator 
(1) At-risk-of-poverty rate (AROP): proportion of people with an equivalised disposable income below 60 % of the national 
equivalised median income. 
(2) Proportion of people who experience at least four of the following forms of deprivation: not being able to afford to i) pay 
their rent or utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have a washing 
machine, viii) have a colour TV, or ix) have a telephone. 
(3) Percentage of total population living in overcrowded dwellings and exhibiting housing deprivation. 
(4) People living in households with very low work intensity: proportion of people aged 0-59 living in households where the 
adults (excluding dependent children) worked less than 20 % of their total work-time potential in the previous 12 months.       
(5) Ratio of the median individual gross pensions of people aged 65-74 relative to the median individual gross earnings of 
people aged 50-59. 
(6) Fixed broadband take up (33%), mobile broadband take up (22%), speed (33%) and affordability (11%), from the Digital 
Scoreboard. 
Source: Eurostat, OECD 

75 

201320142015201620172018Expenditure on social protection benefits* (% of GDP)Sickness/healthcare10.19.99.39.29.3:Disability2.32.22.72.62.5:Old age and survivors12.112.211.911.911.6:Family/children0.90.91.11.11.2:Unemployment1.61.61.51.31.1:Housing0.40.40.40.50.5:Social exclusion n.e.c.1.51.41.21.31.4:Total28.828.628.128.027.6:of which: means-tested benefits3.93.74.14.14.1:General government expenditure by function (% of GDP)Social protection17.117.016.516.415.915.5Health8.18.08.07.57.67.6Education5.35.35.25.25.15.1Out-of-pocket expenditure on healthcare11.511.611.311.311.1:Children at risk of poverty or social exclusion (% of people aged 0-17)*17.017.116.817.616.615.2At-risk-of-poverty  rate(1) (% of total population)10.411.611.612.713.213.3In-work at-risk-of-poverty rate (% of persons employed)4.55.35.05.66.16.1Severe material deprivation rate(2)  (% of total population)2.53.22.62.62.62.4Severe housing deprivation rate(3), by tenure statusOwner, with mortgage or loan0.20.10.40.50.50.3Tenant, rent at market price2.11.62.43.32.23.2Proportion of people living in low work intensity households(4) (% of people aged 0-59)9.310.210.29.79.58.6Poverty thresholds, expressed in national currency at constant prices*112151096211136118651228412362Healthy life yearsFemales9.210.29.49.99.6:Males9.510.710.510.310.1:Aggregate replacement ratio for pensions(5)0.50.50.50.50.50.5Connectivity dimension of the Digital Economy and Society Index (DESI)(6):71.673.780.181.7:GINI coefficient before taxes and transfers*46.448.049.048.848.6:GINI coefficient after taxes and transfers*25.126.226.726.927.1: 
 
  
 
 
C. Standard tables 

Table C.5: 

Product market performance and policy indicators 

* While the indicator values from 2003 to 2013 are comparable, the methodology has considerably changed in 2018. As a 
result, past vintages cannot be compared with the 2018 PMR indicators. 
1 Value added in constant prices divided by the number of persons employed. 
2 Compensation of employees in current prices divided by value added in constant prices. 
3 The methodologies, including the assumptions, for this indicator are shown in detail here: 
http://www.doingbusiness.org/methodology. 
4 Average of the answer to question Q7B_a.- "[Bank loan]: If you applied and tried to negotiate for this type of financing over 
the past 6 months, what was the outcome?". Answers were codified as follows: zero if received everything, one if received 
75% and above, two if received below 75%, three if refused or rejected and treated as missing values if the application is still 
pending or don't know. 
5 Percentage of population aged 15-64 having completed tertiary education. 
6 Percentage of population aged 20-24 having attained at least upper secondary education. 
7 Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are 
shown in detail here: http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm       
Please be aware that the indicator values from 2003 to 2013 are comparable, however the methodology changed 
considerably in 2018 and therefore past vintages cannot be compared with the 2018 PMR indicators. 
8 Simple average of the indicators of regulation for lawyers, accountants, architects and engineers. 
9 Aggregate OECD indicators of regulation in energy, transport and communications. 
Source: European Commission; World Bank — Doing Business (for enforcing contracts and time to start a business); OECD (for 
the product market regulation 
indicators); SAFE (for outcome of SMEs' applications for bank loans) 

76 

Performance indicators201320142015201620172018Labour productivity per person1 growth (t/t-1) in %Labour productivity growth in industry2.98-0.49-1.690.382.960.85Labour productivity growth in construction0.426.147.887.915.184.79Labour productivity growth in market services1.331.500.49-0.040.230.07Unit Labour Cost (ULC) index2 growth (t/t-1) in %ULC growth in industry-0.603.990.891.82-1.691.24ULC growth in construction-1.97-6.46-8.70-6.41-3.34-1.83ULC growth in market services0.16-1.05-1.271.280.962.07Business environment201320142015201620172018Time needed to enforce contracts3 (days)514514514514514514Time needed to start a business3 (days)4.03.53.53.53.53.5Outcome of applications by SMEs for bank loans41.581.641.300.900.720.17Research and innovation201320142015201620172018R&D intensity1.931.981.982.001.982.16General government expenditure on education as % of GDP5.305.305.205.205.105.10Employed people with tertiary education and/or people employed in S&T as % of total employment474748484849Population having completed tertiary education5293031313233Young people with upper secondary education6787980818283Trade balance of high technology products as % of GDP2.232.711.601.611.481.98Product and service markets and competition2003200820132018*OECD product market regulation (PMR)7, overall1.490.960.921.10OECD PMR7, retail1.470.910.910.97OECD PMR7, professional services81.571.281.231.08OECD PMR7, network industries92.061.711.570.97 
 
  
 
 
C. Standard tables 

Table C.6:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2010 prices) 
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR) 
          Carbon intensity: greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR) 
          Resource intensity: domestic material consumption (in kg) divided by GDP (in EUR) 
          Waste intensity: waste (in kg) divided by GDP (in EUR)  
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP. 
Weighting of energy in HICP: the proportion of 'energy' items in the consumption basket used for the construction of the HICP. 
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual % 
change). 
Real unit energy cost: real energy costs as % of total value added for the economy. 
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2010 
EUR). 
Real unit energy costs for manufacturing industry excluding refining: real costs as % of value added for manufacturing sectors. 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP.  
Electricity and gas prices for medium-sized industrial users: consumption band 500–20 00MWh and 10 000 -100 000 GJ; figures 
excl. VAT. 
Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste. 
Public R&D for energy or for the environment: government spending on R&D for these categories as % of GDP. 
Proportion of GHG emissions covered by EU emissions trading system (ETS) (excluding aviation): based on GHG emissions. 
(excl. land use, land use change and forestry) as reported by Membeinvestr States to the European Environment Agency. 
Transport energy intensity: final energy consumption of transport activity including international aviation (kgoe) divided by 
gross value added in transportation and storage sector (in 2010 EUR). 
Transport carbon intensity: GHG emissions in transportation and storage sector divided by gross value added in transportation 
and storage sector (in 2010 EUR). 
Energy import dependency: net energy imports divided by gross inland energy consumption incl. consumption of 
international bunker fuels. 
Aggregated supplier concentration index: Herfindahl index covering oil, gas and coal. Smaller values indicate larger 
diversification and hence lower risk. 
Diversification of the energy mix: Herfindahl index covering natural gas, total petrol products, nuclear heat, renewable 
energies and solid fuels. Smaller values indicate larger diversification. 
* European Commission and European Environment Agency - 2018 provisional data. 
Source: European Commission and European Environment Agency (Share of GHG emissions covered by ETS); European 
Commission (Environmental taxes over labour taxes and GDP); Eurostat (all other indicators) 

77 

Green growth performance201320142015201620172018MacroeconomicEnergy intensity kgoe / €0.120.120.110.110.11-Carbon intensity kg / €0.300.290.290.290.28-Resource intensity (reciprocal of resource productivity)kg / €0.260.270.280.250.230.24Waste intensity kg / €-0.20-0.21--Energy balance of trade % GDP-1.4-1.6-1.1-0.6-0.7-1.4Weighting of energy in HICP%11.6611.699.779.368.678.16Difference between energy price change and inflation p.p.0.0-1.5-2.9-5.60.48.8Real unit of energy cost% of value added10.59.29.610.1--Ratio of environmental taxes to labour taxesratio0.130.140.140.130.13-Environmental taxes% GDP3.33.33.33.43.33.3Sectoral Industry energy intensity kgoe / € 0.110.110.110.110.10-Real unit energy cost for manufacturing industry excl. refining% of value added19.416.117.218.3--Share of energy-intensive industries in the economy% GDP8.578.157.657.597.317.08Electricity prices for medium-sized industrial users€ / kWh0.090.090.090.080.080.08Gas prices for medium-sized industrial users€ / kWh0.040.040.040.030.030.03Public R&D for energy % GDP0.020.010.020.010.020.04Public R&D for environmental protection% GDP0.010.000.000.000.000.00Municipal waste recycling rate%49.850.951.853.554.655.9Share of GHG emissions covered by ETS*%44.547.648.248.147.246.2Transport energy intensitykgoe / €0.540.510.520.530.52-Transport carbon intensitykg / €0.960.950.970.970.930.89Security of energy supplyEnergy import dependency%23.730.948.445.951.8-Aggregated supplier concentration indexHHI6.56.88.913.611.0-Diversification of energy mixHHI34.533.132.433.334.0- 
 
  
 
ANNEX D: INVESTMENT GUIDANCE ON JUST TRANSITION FUND 

2021-2027 FOR THE NETHERLANDS 

Building  on  the  Commission  proposal,  this  Annex (110)  presents  the  preliminary  Commission  services’ 
views on priority investment areas and framework conditions for effective delivery for the 2021-2027 Just 
Transition  Fund  investments  in  the  Netherlands.  These  priority  investment  areas  are  derived  from  the 
broader  analysis  of  territories  facing  serious  socio-economic  challenges  deriving  from  the  transition 
process  towards  a  climate-neutral  economy  of  the  Union  by  2050  in  the  Netherlands,  assessed  in  the 
report.  This  Annex  provides  the  basis  for  a  dialogue  between  the  Netherlands  and  the  Commission 
services as well as the relevant guidance for the Member States in preparing their territorial just transition 
plans,  which  will  form  the  basis  for  programming  the  Just  Transition  Fund.  The  Just  Transition  Fund 
investments complement those under Cohesion Policy funding for which guidance was given in Annex D 
of the 2019 Country Report for the Netherlands. (111) 

The  main  areas  of  emission-intensive  industries  in  the  Netherlands  are  Delfzijl/Eemshaven  in  the 
province  of  Groningen,  the  North-Sea  channel  area  (Amsterdam/Ijmond),  Rotterdam  and  West-North-
Brabant,  Zeeuws-Vlaanderen  and  other  zones  in  Zeeland,  and  South-Limburg..  These  areas  face 
important challenges to reduce greenhouse gas emissions in view of the national 2030 and 2050 emission 
reduction  targets,  including  the  shift  to  energy  from  renewable  sources.  Synergies  between  sectors  and 
companies in these clusters offer, however, good perspectives for innovation to reduce CO2 emissions and 
for the development of alternative sustainable economic activities. Transition effects will affect the labour 
market,  notably  through  employment  shifts  to  upcoming  sectors,  inducing  needs  for  re-  and 
upskilling.The province of Groningen (comprising the regions East-Groningen, Delfzijl and surroundings 
and  rest of Groningen)  include  a  large  carbon-intensive cluster  and  is likely  to  be  most affected by the 
climate and energy transition due to the combined effects of the depletion of natural gas extraction and 
the emission reduction challenges in industry. The energy transition could lead to the loss of 20 000 jobs 
in the province. This comes on top of the overall social and economic transition challenges that already 
affect  Groningen.  For  these  reasons,  the  province  could  be  considered  as  a  target  area  for  investments 
from  the  Just  Transition  Fund  in  the  Netherlands.  Based  on  this  preliminary  assessment,  it  appears 
warranted that the Just Transition Fund concentrates its intervention on these regions. 
 In Groningen, the smart specialisation strategy of the Northern Netherlands (112) provides an important 
framework to set priorities for innovation in support of economic transformation. 
In  order  to  tackle  the  above  transition  challenges,  investment  needs  have  been  identified  to  support 
innovation for reducing greenhouse gas emissions, the development of alternative economic sectors and 
related employment shifts. Key actions of the Just Transition Fund could target in particular: 

• 

• 

Investments  in  research  and  innovation  activities  and  fostering  the  transfer  of  advanced 
technologies; 
Investments in the deployment of technology and infrastructures for affordable clean energy, in 
greenhouse gas emission reduction, energy efficiency and renewable energy; 

•  Upskilling and reskilling of workers. 

Emission-intensive  industrial  sites,  performing  activities  listed  in  Annex  I  to  Directive  2003/87/EC, 
employ  a  substantial  number  of  workers  and  their  activity  is  at  risk  due  to  its  their  greenhouse  gas 
emissions.  Support  to  investments  to  reduce  the  emissions  could  be  considered,  provided  that  they 
achieve a substantial reduction of emissions (going substantially below the relevant benchmarks used for 
free  allocation  under  Directive  2003/87/EC)  and  on  the  condition  that  the  investments  are  compatible 
with the European Green Deal. 

(110) This Annex is to be considered in conjunction with the EC proposal for a Regulation of the European Parliament and of the 
Council  on  the  Just  Transition  Fund  2021-2027  (COM(2020)22)  and  the  EC  proposal  for  a  Regulation  of  the  European 
Parliament  and  of the  Council  laying  down  common  provisions  on  the  European  Regional Development  Fund,  the  European 
Social Fund Plus, the Cohesion Fund, and the European Maritime and Fisheries Fund and financial rules for those and for the 
Asylum and Migration Fund, the Internal Security Fund and the Border Management and Visa Instrument (COM(2020)23) 

(111) SWD(2019) 1018 
(112) As defined in Article 2(3) of Regulation (EU) No 1303/2013 (CPR) 

78 

 
 
 
                                                           
ANNEX E: PROGRESS TOWARDS THE SUSTAINABLE 

DEVELOPMENT GOALS (SDGs) 

Assessment of the Netherlands’s short-term progress towards the SDGs (113) 

Table E.1 shows the data for the Netherlands and the EU-28 for the indicators included in the EU SDG 
indicator set used by Eurostat for  monitoring progress towards the SDGs in an EU context (114). As the 
short-term trend at EU-level is assessed over a 5-year period, both the value at the beginning of the period 
and  the  latest  available  value  is  presented.  The  indicators  are  regularly  updated  on  the  SDI  dedicated 
section of the Eurostat website. 

Table E.1: 

Indicators measuring the Netherlands’s progress towards the SDGs 

(113) Data  extracted  on  9  February  2020 

from 

the  Eurostat  database 

(official  EU  SDG 

indicator 

set; 

see 

https://ec.europa.eu/eurostat/web/sdi/main-tables).  

(114) The EU SDG indicator set is aligned as far as appropriate with the UN list of global indicators, noting that the UN indicators are 
selected for global level reporting and are therefore not always relevant in an EU context. The EU SDG indicators have strong 
links with EU policy initiatives. 

(Continued on the next page) 

79 

 
 
 
                                                           
 
  
 
E. Progress towards the Sustainable Development Goals (SDGs) 

Table (continued) 

(Continued on the next page) 

80 

 
 
 
 
   
 
E. Progress towards the Sustainable Development Goals (SDGs) 

Table (continued) 

(Continued on the next page) 

81 

 
 
 
 
   
 
E. Progress towards the Sustainable Development Goals (SDGs) 

Table (continued) 

(Continued on the next page) 

82 

 
 
 
 
   
 
E. Progress towards the Sustainable Development Goals (SDGs) 

Table (continued) 

Source: Eurostat 

83 

 
 
 
 
   
 
REFERENCES 

Adema, Y., Folmer, K., Rabaté, S., Visser, D. and Vlekke, M. (2019), Arbeidsparticipatie, gewerkte uren 
en  economische  zelfstandigheid  van  vrouwen,  CPB  Notitie,  CPB  (Netherlands  Bureau  for  Economic 
Policy Analysis), The Hague. 

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