COMMISSION STAFF WORKING DOCUMENT In-depth review for The Netherlands Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK 2023 European Semester – Spring Package
Date: 2023-05-24
Institutions: European Commission, Secretariat-General
Subjects: European Semester, Netherlands, economic policy, energy policy, housing policy, indebtedness, macroeconomics, property market, real estate credit, savings

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.5.2023  SWD(2023) 640 final  COMMISSION STAFF WORKING DOCUMENT In-depth review for The Netherlands Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK 2023 European Semester – Spring Package {COM(2023) 600 final} - {SWD(2023) 628 final} - {SWD(2023) 629 final} - {SWD(2023) 630 final} - {SWD(2023) 631 final} - {SWD(2023) 632 final} - {SWD(2023) 633 final} - {SWD(2023) 634 final} - {SWD(2023) 635 final} - {SWD(2023) 636 final} - {SWD(2023) 637 final} - {SWD(2023) 638 final} - {SWD(2023) 639 final} - {SWD(2023) 641 final} - {SWD(2023) 642 final} - {SWD(2023) 643 final} - {SWD(2023) 644 final}  
 
 
The Netherlands 

In-Depth Review 2023 

 
 
 
 
 
 
 
 
 
 
 
 
 
On  the  basis  of  this  in-depth  review  for  the  Netherlands  undertaken 
under Regulation (EU) No 1176/2011 on the prevention and correction of 
macroeconomic  imbalances,  the  Commission  has  considered  in  its 
Communication “European Semester – 2023 Spring Package” (COM(2023) 
600 final) that: 

The  Netherlands  continues  to  experience  imbalances.  Vulnerabilities  relating  to 
high  private  debt  levels  and  a  large  current  account  surplus,  which  have  cross-
border  relevance,  persist  despite  some  signs  of  reduction.  The  current  account 
surplus, despite recent data revisions, and private debt are large by international 
standards as well as above the fundamentals of the economy. The large current 
account  surplus  dropped  in  2022,  driven  by  worsening  terms  of  trade,  with  the 
current account in constant prices increasing, and by a widening of the  deficit in 
primary  incomes.  With  improving  terms  of  trade,  the  surplus  is  expected  to 
rebound markedly in 2023 and stabilise in 2024. Limited policy progress has been 
made but more needs to be done to reduce obstacles to investment. Non-financial 
corporation and household debt remains high: the latter is more of a concern as it 
makes households vulnerable to shocks, with those risks exacerbated by the high 
and  rising  overvaluation  of  house  prices.  Going  forward,  debt  is  expected  to 
continue  on  its  moderately  decreasing  path.  Despite  moderately  falling  house 
prices,  pressure  on  the  housing  market  remains,  notably  as  new  housing 
construction  remains  significantly  below  government  targets.  At  the  same  time, 
debt-financed homeownership continues to be subsidised by favourable taxation, 
while  policies  regarding  the  private  rental  market  risk  undermining 
its 
development. 

 
 
 
 
 
 
 
CONTENTS 

1.  Introduction 

2.  Assessment of macroeconomic vulnerabilities 

LIST OF TABLES 

Table 2.1: 
Table 2.2: 

Selected economic and financial indicators (Part 1), The Netherlands 
Selected economic and financial indicators (Part 2), The Netherlands 

LIST OF GRAPHS 

Graph 2.1:  Revisions to Dutch primary income balance (as % of GDP) 

Graph 2.2:  Net lending/net borrowing by sector (in % of GDP) 

Graph 2.3:  Selected graphs (Part 1), the Netherlands 

Graph 2.4:  Selected graphs (Part 2), the Netherlands 

Graph 2.5:  Components of gross fixed capital formation deflator growth and consumer price inflation 

Graph 2.6: 

Impact of Dutch value added inflations on EU partners’ consumer price inflation 

4 

5 

16 
17 

7 

8 

12 

13 

14 

15 

 
 
 
 
 
 
 
1. 

INTRODUCTION 

In  2022,  over  the  previous  annual  cycle  of  surveillance  under  the  Macroeconomic 
Imbalances  Procedure  (MIP),  the Commission  identified  “macroeconomic  imbalances”  in 
the  Netherlands. (1)  These  imbalances  were  related  to  high  private  debt  and  a  large  current 
account surplus, which carry cross-border relevance. The 2023 Alert Mechanism Report published in 
November 2022 concluded that an in-depth review (IDR) should be  undertaken also this year for 
the Netherlands with a view to assessing the persistence or unwinding of imbalances. (2) 

The  Dutch  economy  proved  to  be  resilient  in  2022  but  growth  is  expected  to  slow  in 
2023  as  high  inflation  and  tightening  financial  conditions  affect  consumption  and 
investment growth. (3) Real GDP in the Netherlands reached its pre-pandemic trend in Q2 2022, 
thereby showing a faster and more complete recovery than most other EU Member States. Despite 
inflation picking up significantly as a result of Russia’s invasion of Ukraine, consumer spending held 
up well throughout 2022, and overall real GDP growth came in at 4.5%. However, the high inflation 
rates  have  eroded  households’  purchasing  power,  which  is  expected  to  result  in  slower  private 
consumption growth in 2023. In addition, tightening financial conditions, labour shortages and high 
input prices are expected to weigh on business investment while external demand weakens. Overall, 
real GDP growth is forecast to slow to 1.8% in 2023. Growth is forecast to pick up to 1.2% in 2024 
as inflation rates are expected to come down, leading to a modest recovery in private consumption 
and business investment, while sizeable public investments also underpin growth. Russia’s  war of 
aggression  led  to  surging  energy  and  food  prices  in  2022,  with  annual  HICP  inflation  reaching 
11.6%. Energy prices have come down since the peak in Q3 2022, but core inflation continued to 
pick up until early 2023 as businesses pass higher input prices onto consumers. As core inflation 
starts to decrease gradually and energy prices drop further, inflation is forecast to come down to 
4.9%  in  2023  and  3.3%  in  2024.  The  main  uncertainty  with  regard  to  the  economic  outlook 
concerns  the development  of  energy  prices,  which  have been volatile  in  the  past  year.  In  a more 
adverse  scenario,  with  a  cold  winter  in  2023/2024  and  insufficient  supply  of  gas,  the  growth 
outlook would likely worsen while inflation would pick up again.  

This  in-depth  review  presents  the  main  findings  of  the  assessment  of  macroeconomic 
vulnerabilities  for  the  Netherlands.  Vulnerabilities  related  to  housing  in  the  Netherlands  are 
also  discussed  in  a  horizontal  thematic  note  that  was  already  published. (4)  The  MIP  assessment 
matrix is published in the 2023 Country Report for the Netherlands. (5) 

(1)  European Commission (2022), European Semester Spring Package 2022, COM(2022) 600 final. 

(2)  European Commission (2022), Alert Mechanism Report 2023, COM (2022) 381 final. 

(3)  European Commission (2023), European Economic Forecast: Spring 2023, Institutional Paper 200. 

(4)  European Commission (2023), Housing Market Developments: Thematic Note to Support In-Depth Reviews, European 

Economy: Institutional Papers, 197. 

(5)  European Commission (2023), Country Report the Netherlands 2023, SWD(2023) 619 final. 

4 

 
 
 
                                                 
 
2.  ASSESSMENT OF MACROECONOMIC 
VULNERABILITIES 

Gravity, evolution and prospects 

The current account surplus, after a rebound to 7.3% of GDP in 2021, decreased to 4.4% 
in 2022. It continues to be among the highest in the euro area as a share of GDP and well above 
levels justified by fundamentals (‘current account norm’, (6) estimated at 1.6% of GDP in 2022). A 
persistently  high  trade  surplus  in  goods  and  services  remains  the  main  contributor  to  the  Dutch 
current account surplus. The slight downward trend in the goods surplus over the past years has 
been compensated by upward trending surpluses in services trade, largely driven by increasing net 
exports by the ICT sector and increasing charges for the use of intellectual property. The primary 
incomes  balance  is  on  a  decreasing  path.  A  revision  to  balance  of  payments  statistics  for  the 
Netherlands has led to a reduction in the current account for all years since 2015; this is explained 
in Box 1.  

From a sectoral and savings perspective, all domestic sectors have been contributing to 
the net savings surplus over the past decade, but non-financial corporations (NFC) and 
households  are  the  main  drivers.  The  NFC  sector’s  contribution  can  be  explained  by  low 
domestic investment rates compared to EU averages. However, research by Statistics Netherlands 
that led to a downward revision of the Dutch current account balance (see box 1 for more details) 
showed that the contribution of NFCs to the total economy’s net lending had been overestimated 
for large parts of the last decade (7). More firms active in the Netherlands than previously assumed 
are  foreign  owned,  with  profits  flowing  to  parent  companies  in  the  rest  of  the  world,  thus  not 
leading  to  acquisition  of  assets  abroad.  Household  savings  are  an  important  constituent  of  the 
Dutch current account surplus. These are driven by deleveraging pressures after the global financial 
crisis and high compulsory second pillar pension savings. The government budget balance has also 
been in surplus for several years prior to the pandemic due to rising tax revenues and consolidation 
efforts  but  entered  net  borrowing  territory  in  2020.  In  four  quarters  up  to  Q3  2022,  the 
government became net lender again. 

On  5  April  2023  the  Commission  presented  a  horizontal  thematic  note  on  external 
balances  based  on  data  up  until  Q3  2022,  which  covered  the  Netherlands.  The  note 
showed that the main drivers behind the decrease in the surplus in 2022 are primary incomes and 
rising energy prices. The balance of primary incomes as a share of GDP dropped, sparked mainly by 
increasing earnings of non-residents on their Dutch investments. An additional contribution to the 
narrowing of the current account surplus came from the energy balance, due to strongly increased 

(6)  The ‘current account norm’ is the current account balance that can be explained by fundamentals. It is based on an 

empirical setup similar to IMF’s EBA (Phillips, S., Catão, L., Ricci, L., Bems, R., Das, M., Di Giovanni, J., Unsal, D.F., Castillo, M., 
Lee, J., Rodriguez, J., and Vargas, M. (2013), "The external balance assessment (EBA) methodology", International Monetary 
Fund Working Paper 13/272). Fundamentals are slow-moving variables including, e.g. natural resources, demographics, or 
relative income. For details see Coutinho, L., Turrini, A., Zeugner, S. (2018), "Methodologies for the assessment of current 
account benchmarks", European Economy, Discussion Paper 86/2018. 

(7)  Nelisse, R. (2021), Non-financial corporations split into subsectors, Statistics Netherlands Discussion Paper 

5 

 
                                                 
 
 
2. 

Assessment of macroeconomic vulnerabilities 

energy  prices.  As  a  result  of  rising  energy  prices  and  a  return  to  pre-pandemic  consumption 
patterns, net lending by households decreased substantially. The horizontal note also showed that 
domestic absorption outgrew GDP in the Netherlands in the first three quarters of 2022 in nominal 
terms,  while  in  real  terms,  GDP  growth  was  slightly higher  than  domestic  absorption  growth.  Net 
lending by non-financial corporations spiked to 11.3% of GDP in Q3 2022 due to a multinational’s 
one-off transfer of intellectual property rights (8). The government sector recorded a return to net 
lending territory as of Q3 2022 after consecutive deficits in 2020 and 2021.  

Revisions of the surplus reduced the headline number, which was temporarily below the 
MIP threshold of 6% of GDP in 2022. However, closing the existing investment gaps between 
the  Netherlands  and  peer  economies  could  be  needed  for  the  current  account  surplus  to  remain 
below the threshold as improving terms of trade are expected to lead to a rebound of the surplus in 
2023 and 2024. Business investment in particular is lower than that of peer economies. Gross fixed 
capital formation by non-financial corporations as a share of their value added stood at 17% in the 
fourth quarter of 2022 in the Netherlands, compared to a Euro Area average of 23% (see graph 
2.4 d). Both private and public investments are held back by a tight labour market and restrictions 
related  to  environmental  regulations.  In  its  spring  budget,  the  government  reports  that  in  2022, 
spending  was  EUR  2.7  billion  lower  than  foreseen,  partially  due  to the  reasons  cited  above (9).  In 
addition  to  rising  interest  rates  these  factors  also  drive  lower  investments  in  construction  and 
dwellings. Building permits, an early indicator for construction activity, are around 22% lower than 
a year before in February 2023 and have been falling since July 2022 (see graph 2.3 f). Dwellings 
are  also  the  investment  category  in  which  the  gap  between  the  Netherlands  and  the  Euro  Area 
average  is  largest.  Removing  obstacles  that  are  currently  holding  back  these  investments  could 
boost housing supply and could therefore contribute to external rebalancing as well as the better 
functioning of the housing market. 

The current account surplus is forecast to increase to 5.9% in 2023 and 6.1% in 2024. 
Structural  drivers  underpinning  high  household  and  corporate  savings  over  time,  are  expected  to 
continue to contribute to the current account surplus with temporary factors relating to the energy 
prices abating. High mandatory pension savings are also expected to continue contributing to the 
surplus. The falling number of multinationals located in the Netherlands could have a dampening 
effect on the surplus over the coming years. Terms of trade are expected to be largely determined 
by the evolution of energy prices and are set to improve in 2023 relative to 2022. In 2024 they are 
expected to  remain  largely  constant.  This  is  forecast  to lead to  a  rebound  in the  current  account 
surplus over the next two years, reaching 6.1% in 2024. 

(8)  The transaction is recorded in the capital account and therefore does not contribute to the current account surplus. 

(9)  See Table 2.1.2 “Onderuitputting 2022” in Najaarsnota 2022 

6 

 
 
 
 
 
 
 
 
                                                 
2. 

Assessment of macroeconomic vulnerabilities 

Box 1: Data revision of Dutch current account 

The  Dutch  central  bank  has  revised  balance  of  payments  statistics  for  the  Netherlands.  These 
revisions  shift  the  Dutch  current  account  surplus  downwards  by  1-2  percentage  points  per  year 
since  2015.  The  revisions  are  the  results  of  an  improvement  of  statistics  on  the  ownership 
structure  of  foreign-controlled  non-financial  corporations  in  the  Netherlands  as  well  as  the 
recording of Dutch multinationals’ income from foreign subsidiaries (10). 

Large part of the adjustment is due to Statistics Netherlands’ efforts to make use of all available 
information on the parent companies of firms registered in the Netherlands (11). As a result, more 
firms  than  previously  assumed  are  now  known  to  be  controlled  by  foreign  entities.  These  firms’ 
retained  earnings  (i.e.  profits  used  to  strengthen  the  firms’  equity  or  to  finance  investments) 
therefore  need  to  be  attributed  to  the  parent  enterprise,  thus  counting  to  gross  national  income 
(GNI) of the foreign country in which the parent is based instead of Dutch GNI. Mechanically, this 
leads to downward revisions of the primary income balance of the Netherlands as more retained 
earnings  than  previously  assumed  are  transferred  to  the  rest  of  the  world.  A  second,  smaller, 
revision  is  due  to  corrections  to  the  recording  of  Dutch  multinationals’  income  from  foreign 
subsidiaries regarding the capitalisation of exploration expenses, R&D and software in the balance 
of payments. Taken together, between 2015 and 2020, the primary income balance as a share of 
GDP  has  been  revised  downwards  by  about  1.5  percentage  points  on  average.  The  size  of  the 
revision has grown over time reaching about 2 percentage points since 2020. Primary incomes are 
the  only  current  account  component  affected  by  the  revisions.  Revisions  to  the  overall  current 
account balance are therefore of equal size. As Graph 2.1 shows, the revision reinforces the trend 
of a widening deficit in primary incomes of the Dutch economy since 2019.   

Graph 2.1: Revisions to Dutch primary income balance (as % of GDP) 

Source: European Commission services 

Downward revisions of the current account balance imply that the Dutch economy has made less 
resources  available  to  the  rest  of  the  world.  Net  lending  statistics  show  which  sectors  are 
responsible  for  this  reduction.  The  majority  of  the  adjustment  comes  from  non-financial 
corporations  (NFC)  as  their  ownership  status  was  the  main  subject  of  the  analysis  by  Statistics 
Netherlands.  However,  the  analysis  showed  that  several  NFCs  located  in  the  Netherlands  have 
financial  institutions  as  local  parents  that  in  turn  are  owned  by  the  eventual  foreign  parent. 
Therefore,  comparably  small  revisions  were  also  made  to  financial  corporations’  net  lending 
statistics. The household and government sector’s contributions were not concerned. As a result of 
this  analysis,  statistics  on  net  lending  by  NFCs  between  2015  and  2020  can  now  be  split  up 

(10)  Current account surplus revised sharply downwards (dnb.nl) 

(11)  Nelisse, R. (2022). Non-financial corporations split into subsectors, CBS Discussion Papers  

7 

-3.5-3-2.5-2-1.5-1-0.500.511.520152016201720182019202020212022Primary incomes (old)Primary incomes (revised) 
  
                                                 
2. 

Assessment of macroeconomic vulnerabilities 

between different types of corporations. Graph 2.2 shows this breakdown as well as the net lending 
statistics  for  the  rest  of  the  economy.  Dutch  multinationals  are  the  main  contributor  to  the  NFC 
sector’s surplus. The combined domestically controlled NFC sector’s net lending is on a downward 
trend over the period for which the detailed data is available. As a result of the revision, the relative 
role of households and the general government for the total economy’s net lending has increased 
as these sectors were unaffected by the revisions.  

Graph 2.2: Net lending/net borrowing by sector (in % of GDP) 

Source: European Commission services 

Private  debt  in  the  Netherlands  stood  at  215%  of  GDP  in  2022  but is  on  a  decreasing 
path.  This  value  is  composed  of  household  debt,  which  accounts  for  94%  of  GDP,  as  well  as 
corporate debt, standing at 121% of GDP in 2022. In both sectors, debt levels are above prudential 
thresholds  and  significantly  higher  than  EU  and  euro  area  averages.  Despite  positive  growth  of 
credit flows to the private sector since 2021, the private debt-to-GDP ratio has decreased on the 
back of real GDP growth and high inflation. Since its peak in 2015, private debt as a share of GDP 
has  fallen  by  46  pp.  Private  debt  is  expected  to  continue  declining  moderately  while  remaining 
significantly above the prudential threshold of 157% of GDP and EU as well as euro area averages 
(graph 2.3 a). 

Household debt is largely composed of mortgage debt and its high level can be explained 
by  features  of  the  Dutch  housing  market  and  tax  system  that  continue  to  incentivise 
debt-financed homeownership. These distortions include mortgage interest deductibility, which 
remains  generous  despite  a  recent  reduction  in  the  deductibility  rate.  In  combination  with  high 
maximum borrowing limits, this is an important factor explaining the large household debt position 
in the Netherlands and the relatively high levels of illiquid assets and low levels of liquid assets. (12) 
This combination may put households in a vulnerable position. High mortgage debt also reinforces 
the  procyclicality  of  household  finances  as  house  price  corrections  can  lead  to  an  erosion  of  net 
assets and result in reduced consumption by households. The majority of the stock of mortgages 
has interest rates fixed for more than ten years, limiting the direct impact of interest rate increases 
over 2022 on the financial situation of households. Among new mortgages, the share of those with 
variable  interest  rates  has  grown  but  the  impact  on  the  stock  is  limited  due  to  rapidly  falling 
transaction volumes on the housing market in 2022. Drivers of the downward trend in household 
debt of the past decade are stricter loan-to-value ratios after the financial crisis, complemented by 

(12)  Ciurila, N., Van Heuvelen, H., Luginbuhl, R., & Smid, B. (2020). Are the savings of Dutch households optimal. CPB Notitie. 

8 

-8-6-4-2024681012201520162017201820192020Domestic multinationalsOther domestically controlled NFCsForeign-controlled NFCsHouseholdsGeneral governmentFinancial corporationsTotal NFC (revised) 
  
 
 
                                                 
2. 

Assessment of macroeconomic vulnerabilities 

tighter capital-based macroprudential measures in 2021, imposing minimum average risk weights 
for the calculation of capital requirements applicable to mortgages on residential property.   

The  high  level  of  corporate  indebtedness  is  largely  composed  of  intra-group  debt  of 
multinationals  and  hence  represents  a  lower  risk  than  the  headline  number  suggests. 
According  to  data  by  Statistics  Netherlands,  multinationals  accounted  for  about  70%  of  total 
corporate debt in the Netherlands in 2021. Financial stability risks stemming from corporate debt 
are therefore more limited than the high level suggests. The non-financial sector’s debt as a share 
of GDP has fallen by 25 pp since 2015. Decreasing NFC debt is driven by tax measures taken by 
the  government  that  limit  incentives  for  corporations  to  accumulate  debt  as  well  as  the 
attractiveness  of  the  country  as  a  seat  for  their  headquarters.    Additionally,  bankruptcies  in  the 
Netherlands are below levels recorded prior to the pandemic despite the end of pandemic support 
measures.  Gross  non-performing  loans  (as  a  share  of  total  loans)  have  also  decreased  further, 
reaching 1.2% in Q3 2022, down from 1.9% at the end of 2020. 

On  5  April  2023  the  Commission  presented  a  horizontal  thematic  note  on  housing 
markets, which covered the Netherlands. It showed that strong house price growth in the past 
years has resulted in an overvalued housing market. Housing prices almost doubled in the last ten 
years,  which  has  led  to  houses  being  approximately  26%  overvalued  in  2022  according  to  the 
Commission’s model-based estimations (graph 2.3 d). Especially in the last two years house prices 
surged,  by  15%  in  2021  and  13.4%  in  2022.  Multiple  factors  contributed  to  the  surging  house 
prices and rising mortgage debt levels in the Netherlands, these included notably the low mortgage 
interest rates, the favourable tax treatment of debt-financed homeownership (13), insufficient and 
inelastic  housing supply, the relatively lenient borrower limits (14)  and the relatively high share of 
interest-only  mortgages.  In  addition  to  this,  the  private  rental  market  is  relatively  small  and  less 
attractive for households as it does not benefit from the same  degree of subsidisation as owner-
occupied  housing.  The  overvaluation  of  housing  has  worsened  affordability,  with  price  to  income 
and  price  to  rent  ratios  standing  significantly  above  historical  averages.  At  the  same  time,  the 
worsened affordability has resulted in the number of housing transactions coming down gradually 
in the past few years.  

Tightening  financial  conditions  are  leading  to  a  turning  point  in  the  housing  market. 
Surging inflation rates have prompted the ECB and central banks outside of the euro area to raise 
their policy rates. As a result, interest rates of new mortgages have picked up considerably in the 
Netherlands, increasing from 1.6% (average of all maturities) in December 2021 to 3.83% in March 
2023. (15) With households’ borrowing capacity shrinking as a result of the higher mortgage rates, 
house prices have decreased by around 5.1% between the peak in July 2022 and March 2023. The 
drop  in  prices  so  far  has  been  relatively  limited,  in  part  due  to  supply  effects  as  the  number  of 
houses  for  sale  has  come  down,  likely due to  prospective  sellers intending  to  wait  out  the  dip  in 
prices. House prices are expected to fall further as the market adjusts to the much higher mortgage 
rates (graph 2.3 b and 2.3 e). External estimates of house price decreases in 2023 and 2024 range 
between around 6% (16)  and 10% (17) and cumulatively. 

Risks related to high mortgage debt levels in combination with falling house prices have 
increased but appear to be contained thus far. The average loan-to-value ratio has decreased 
since  the  financial  crisis,  mostly  due  to  regulatory  changes  limiting  the  maximum  loan-to-value 

(13)  This notably includes the possibility to deduct mortgage interest payments from taxable income.  

(14)  The maximum loan-to-value (LTV) ratio stands at 100%, significantly higher than most other EU countries.  

(15)  https://www.dnb.nl/statistieken/dashboards/woninghypotheken/hypotheekrentes-banken/  

(16)  DNB, Economische vooruitzichten en ontwikkelingen, December 2022. 

(17)  ABN AMRO, Woningmarkt Monitor 2023, January 2023.  

9 

                                                 
2. 

Assessment of macroeconomic vulnerabilities 

ratio and making interest-only mortgages less attractive. Nominal mortgage debt has increased by 
around 20% in the past ten years but debt relative to GDP has fallen from 100% in 2012 to 87% 
in mid-2022. According to the ESRB (February 2022), macroprudential policies and regulations were 
appropriate  and  partially  sufficient  with  the  stock  and  flow  risks  assessed  as  being  high.  Risks 
related to the commercial real estate sector have also increased with around 50% of loans backed 
by  commercial  real  estate  needing  to  be  refinanced  in  the  next  three  years.  This  increases 
refinancing and credit risks in this segment of the market. In more adverse scenarios, with a steep 
drop  in  house  prices  and  a  sharp  slowdown  in  economic  growth,  the  large  debt  position  of 
households in combination with negative equity effects could act pro-cyclically and further worsen 
an economic downturn. The Dutch central bank estimates that a house price decrease of 20% could 
lead to 8% of owner-occupied houses being in negative equity, i.e. with mortgage debt higher than 
the value of the underlying collateral, while a price decrease of 30% would lead to close to 20% of 
houses being in negative equity. (18)  

Assessment of MIP relevant policies 

The  impact  of  recent  policy  steps  on  the  structural  drivers  of  the  savings  surplus  is 
likely to remain limited. High mandatory savings imposed by the second-pillar pension system 
remain  unaffected  by  the  pension  reform  to  be  fully  implemented  by  2027.  With  regard  to  the 
corporate sector, a tax reform by which debt owned by controlling shareholders to their companies 
is partially taxed has been in force since January 2023. While the reform would help to limit the 
incentives for small and medium-sized businesses to retain earnings within their own company and 
increase incentives for investments, in practice it may only lead to a statistical effect, shifting part 
of  small  companies’  savings  surplus  to  the  household  sector.  The  impact  on  the  overall  savings 
surplus therefore remains uncertain. Increasing private investments would be an important step to 
reduce the country’s current account surplus.   

The  authorities  have  focused  their  policy  efforts  on  the  supply  side  of  the  housing 
market, while steps to reduce the debt bias in the housing market remain insufficient. On 
the  supply  side,  the  authorities  strive  to  build  900  000  new  dwellings  by  2030  in  an  effort  to 
improve  affordability  and  availability  of  housing.  To  achieve  this,  the  authorities  are  aiming  to 
speed up planning procedures and processes, take control of planning new construction at a central 
level and investing in removing bottlenecks to new construction projects, a measure that is part of 
the Dutch recovery and resilience plan (RRP). However, high inflation, labour shortages and a failure 
to  meet  environmental  requirements  related  to  nitrogen  drive  up  the  cost  of  new  construction 
projects  and  could  in  practice  lead  to  delays  in  delivering  new  dwellings.  On  the  demand  side, 
mortgage  interest  deductibility  is  gradually  being  reduced  but  remains  generous.  A  substantial 
subsidy on debt-financed homeownership therefore remains, especially as the reduction in interest 
deductibility  is coupled with a reduction in the imputed rent tax that is levied on owner-occupied 
houses. Furthermore, new policies announced by the authorities risk undermining the development 
of  the  private  rental  market  further. Notably,  the  expansion  of  rent  controls in  the  private  sector 
could  decrease  the  attractiveness  of  the  sector  for  investors  and  lead  to  lower  supply  in  this 
segment  of  the  housing  market.  This  risks 
increasing  the  bias  toward  debt-financed 
homeownership further. Tighter capital-based macroprudential measures introduced in 2021 were 
extended  in  2022.  These  measures  set  a  floor  for  risk  weights  on  mortgages  for  banks  and  are 
expected to continue to discourage mortgage lending by banks to some degree. 

The  Netherlands  has  taken  some  measures  to  reduce  tax  incentives  that  led 
multinational firms to locate their headquarters in the Netherlands, which contributed to 

(18)  DNB, Financial Stability Report, October 2022. 

10 

                                                 
2. 

Assessment of macroeconomic vulnerabilities 

the  high  private  debt  levels  as  well  as  the  current  account  surplus.  Interest  deductibility 
has  been  gradually  reduced  to  20%  of  the  firm’s  earnings  before  interest,  tax,  depreciation,  and 
amortisation (EBITDA).  Additionally,  a  conditional  withholding  tax  is levied  on interest  and  royalty 
payments  to  affiliated  companies  in  certain  low-tax  jurisdictions.  This  tax  will  be  expanded  to 
dividend  payments  as  of  2024.  These  reforms  are  also  part  of  the  Dutch  RRP.  These  measures 
have  contributed  to  the  relocation  of  multinationals’  headquarters  away  from  the  Netherlands  in 
recent years and are expected to continue contributing to decreasing private debt levels. 

Conclusion 

The Netherlands is facing vulnerabilities relating to high private debt levels and a large 
current account surplus. These vulnerabilities have cross-border relevance. The Netherlands has 
persistently  recorded  current  account  surpluses  and  private  debt  levels  that  are  large  both  by 
international  standards  and  above  the  fundamentals  of  the  Dutch  economy.  The  current  account 
surplus stems from a large trade surplus. The drop in the surplus in 2022 can largely be explained 
by  worsening terms  of trade  and  a  widening  deficit in  primary  incomes.  Revisions  to  current  and 
historical current account series by the Dutch central bank have shifted the surplus downwards by 
about  2  pp.  Private  debt  levels  remain  high  due  to  both  high  NFC  and  household  debt,  with  the 
latter  being  especially  problematic  as  it  makes  households  vulnerable  to  economic  shocks,  given 
that house prices seem to be overvalued. Going forward, the current account surplus is expected to 
rebound  driven  by  improving  terms  of  trade,    while  private  debt  is  expected  to  continue  on  its 
moderately decreasing path. Despite moderately falling prices, risks on the housing market remain 
as policy changes by the government risk further increasing the homeownership bias.   

Policy  progress  has  been  limited.  In  particular,  debt-financed  homeownership  continues to  be 
subsidised  while  policies  regarding  the  private  rental  market  risk  being  counterproductive.  The 
efforts by the authorities to increase supply could have beneficial effects in the housing market in 
terms of improving affordability of housing but will only exercise their impact on house prices with 
a  time  lag.  In  addition,  the  authorities  have  not  yet  adequately  addressed  a  ruling  by  the  Dutch 
Council  of  State  on  nitrogen  deposition,  which  could  lead  to  large  delays  in  current  and  future 
housing construction projects. The intentions of the authorities to regulate private rents could make 
the  sector  less  attractive  to  investors  and  thereby  affect  rental  supply.  Regarding  the  elevated 
current account surplus, incentives for firms to retain earnings have only been partially addressed 
and high mandatory household savings through the pension system will remain in place despite the 
second pillar pension reform that will enter into force in 2027. Good progress has been made on 
reducing the incentives for firms to accumulate debt and to limit the possibilities for firms to use 
the Netherlands as a conduit country for tax purposes.  

Based on the findings in this in-depth review, the Communication “European Semester – 
2023  Spring  Package” sets  out  the  Commission’s  assessment  as  to  the  existence  of 
imbalances  or  excessive  imbalances  in  the  Netherlands,  in  line  with  Regulation 
1176/2011. (19) 

(19)  European Commission (2023), European Semester Spring Package 2022, COM(2023) 600 final. 

11 

 
 
                                                 
Graph 2.3: Selected graphs (Part 1), the Netherlands 

2. 

Assessment of macroeconomic vulnerabilities 

4-quarters moving sums for all quarterly data unless stated differently; graph b: National Accounts data 
Source: Eurostat, Ameco, De Nederlandsche Bank (DNB) and European Commission calculations 

12 

-30-20-100102030400204060810121416182022% deviation of current priced) House price overvaluationModel-based valuations gapPrice to income vs. hist. avg.Price to rent vs. hist. avg.Overall valuation gap4060801001201401601802002202400506070809101112131415161718192021222013=100e) Nominal house price indexDEELESFRIESIPTCYITNL5657585960616263640246810121416182018Q419Q420Q421Q422Q4% GDPb) Bank loans to household for house purchasePure new loansRenegotiationTotalOutstanding amount (rhs)0501001502002503003504000910111213141516171819202122% of GDPa) Decomposition of debt, consolidatedNon financial corporationsHouseholdGovernmentPrivate sector3008001300180023002800234567891011121220222023Number of permitsf) Building permitsTotalResidentialBusiness020406080100-1000-5000500100020152016201720182019202020212022bn nat. curr.c) Decomposition of import/export growthM, const prices, inversedX, constant pricesM, price impact, inversedX, price impactX-M, current prices, rhsX-M, constant prices, rhs   
 
Graph 2.4: Selected graphs (Part 2), the Netherlands 

2. 

Assessment of macroeconomic vulnerabilities 

Source: European Commission services and Statistics Netherlands 

13 

-8-6-4-202468101214060708091011121314151617181920212223*24*% of GDPb) Net lending borrowing positionCorporationsGeneral governmentHouseholds and NPISHTotal economy0246810120204060801002015201620172018201920202021c) Current account revision% Previous current account balance compared to GDP (right axis)% Revised current account balance compared to GDP (right axis)Previous current account balanceRevised current account balance10121416182022242628302018-Q12018-Q22018-Q32018-Q42019-Q12019-Q22019-Q32019-Q42020-Q12020-Q22020-Q32020-Q42021-Q12021-Q22021-Q32021-Q42022-Q12022-Q22022-Q32022-Q4d) Gross investment rate of non-financial corporationsEA19Netherlands-100102015161718192021222223*24*% of GDPa) Decomposition of external positionGoods, fcastServices, fcastGoods excl energyEnergy balanceServices excl travelTravel balancePrimary inc. bal.Second. inc. bal.Current accountNet lending/borrowing   
 
 
 
2. 

Assessment of macroeconomic vulnerabilities 

 Box 2: Inflation exposures and cross-border pass-through 

This  box  sheds  light  on  the  sources  of  inflation  in  the  Netherlands  and  its  spill-overs 
with  EU  partners.  The  period  since  2021  has  been  characterized  by  pandemic  aftershocks  and 
global  supply  chain  disruptions  compounding  global  inflationary  pressures  and  a  surge  in 
commodity prices triggered by Russia’s war of aggression against Ukraine. As a result, inflation in 
the  Netherlands  surged  to  unprecedented  levels.  In  response,  wages  and  profits  also  picked  up 
across the EU. With input-output data, domestic inflation can be decomposed into the contribution 
from  key  cost  factors.  Taking  into  account  some  data  limitations,  the  framework  can  be  used  to 
attribute consumer and investment price changes to i) extra-EU import price changes, which include 
both  directly  imported  inflation  and  inflation  passed  through  from  EU  partners  import  costs  ii) 
domestic  unit  labour  cost  changes  iii)  domestic  unit  profit  changes,  including  indirect  taxation 
changes and iv) rest-of-EU value added price changes. (20) 

Graph 2.5: Components of gross fixed capital formation deflator growth and consumer price 
inflation 

Source: European Commission services 

Data  suggests  that  much  of  inflation  in  the  Netherlands  in  2022  reflected  surging 
import prices, while the importance of domestic sources is expected to increase over the 
forecast horizon. In 2022, as shown in Graph 2.5, energy imports contributed substantially to the 
acceleration  in  consumption  and  investment  inflation.  The  direct  impact  of  non-energy  imports 
from  outside  the  EU  was  also  significant,  particularly  for  investment  inflation.  Spill-overs  from 
other EU countries remained limited. Namely, import cost pass-through from EU partners increased 
domestic inflation somewhat, whereas value added inflation in other EU countries had a negligible 
impact.  A  relatively  small  part  of  consumer  and  investment  inflation  can  be  explained  by  the 
domestic  value-added  deflator,  which  covers  wages  and  profits.  This  mainly  reflects  unit  profits. 
Going  forward,  energy  prices  are  set  to  lower  inflation  this  year.  The  impulse  from  non-energy 

(20)  The graphs below are based on national accounts data and  the Commission’s Spring 2023 forecast, which are combined 
through a ‘Ghosh’ matrix based on Eurostat’s Figaro input-output available for 2015-2020. HICP is taken as the measure of 
the price of private consumption, including non-residents. Energy import prices from extra-EU reflect realised median prices 
until  2022,  and  energy  price  assumptions  underlying  the  Spring  forecast  thereafter.  Other  goods  prices  reflect  median 
European  prices  per  industry  until  2022,  and  forecast  non-energy  goods  and  service  trade  prices  for  2023-2024.  Value 
added  deflators are assumed to  affect  all industries within a country to the same degree. Changes  in import prices and 
value  added  deflators  are  assumed  to  affect  demand  prices  with  a  delay  of  1  month  for  consumption  and  investment 
inflation.  For  a  similar  analysis  using  an  input-output-based  methodology,  see  “Inflation  Differentials  in  Europe  and 
Implications  for  Competitiveness:  Thematic  Note  to  Support  In-Depth  Reviews”  European  Commission  2023,  Institutional 
paper 198. 

14 

-202468161718192021222324% change (year-on-year)NL: contribution to domestic GFCF deflator growth-4-202468101214161718192021222324% change (year-on-year)NL: contribution to domestic CPI deflator growthDomestic ULCUnit profits (&taxes)RoEU value added deflatorEnergy imports from Extra-EUOther imports from Extra-EURoEU import cost passthr.ResidualDeflator growth YoY  
 
 
 
                                                 
2. 

Assessment of macroeconomic vulnerabilities 

import  prices  is  expected  to  subside  but  to  remain  positive.  However,  the  contribution  from  both 
unit  profits  and  unit  labour  costs  is  expected  to  increase  in  2023.  Spill-overs  from  inflation, 
including value added inflation, in other EU countries is set to remain marginal. 

The  impact  of  wages  and  profits  in  the  Netherlands  on  other  Members  States  remains 
limited, as domestic factors contributed only little to consumer and investment inflation. 
Although value added created in the Netherlands has a non-negligible impact on domestic demand 
in  other  Member  States,  Dutch  value-added  inflation  remains  contained  vis-à-vis  the  significant 
impact  from  import  prices  in  most  cases.  Overall,  Dutch  valued  added  inflation  has  contributed 
little to consumer inflation in the rest of the EU so far. Most exposed countries to inflation  in the 
Netherlands are Belgium and Malta with the impact of up to 0.3 pps. p.a. over the forecast horizon 
(see Graph 2.6). 

Graph 2.6: Impact of Dutch value added inflations on EU partners’ consumer price inflation 

Source: European Commission services 

15 

00.050.10.150.20.250.30.350.40.4519-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-24 .BEMTFISEIEDELVFRCYROHRGRLTDKBGHUEECZPTPLLUATITSKESSIRoEApp contribution to average annual change of CPINL contribution to average annual change of CPI in other MSPassthrough of NL unit labour costPassthrough of NL unit profits (& ind. taxes)Passthrough from NL energy import costPassthrough from other NL G&S imports 
 
   
  
 
 
 
 
 
Table 2.1: Selected economic and financial indicators (Part 1), The Netherlands 

2. 

Assessment of macroeconomic vulnerabilities 

(e) estimate based on ECB quarterly data 
(1) Potential output is the highest level of production that an economy can reach without generating inflationary 
pressures. The methodology to compute the potential output is based on K. Havik, K. Mc Morrow, F. Orlandi, C. Planas, R. 
Raciborski, W. Roeger, A. Rossi, A. Thum-Thysen, V. Vandermeulen, The Production Function Methodology for Calculating 
Potential Growth Rates & Output Gaps, COM, European Economy, Economic Papers 535, November 2014. 
(2) Deviation of actual output from potential output as % of potential GDP. 
(3) Current accounts in line with fundamentals ("current account norms") are derived from reduced-form regressions 
capturing the main determinants of the saving-investment balance, including fundamental determinants, policy factors 
and global financial conditions. See L. Coutinho et al. (2018), "Methodologies for the assessment of current account 
benchmarks", European Economy, Discussion Paper 86/2018, for details.  
(4) This benchmark is defined as the average current account required to halve the gap between the NIIP and the 
indicative MIP benchmark of -35% of GDP over the next ten years, or to stabilise the NIIP at the current level if it is 
already above the indicative MIP benchmark. Calculations make use of Commission’s T+10 projections.  
(5) NENDI is a subset of the NIIP that abstracts from its pure equity-related components, i.e. foreign direct investment 
(FDI) equity and equity shares, and from intracompany cross-border FDI debt, and represents the NIIP excluding 
instruments that cannot be subject to default. 
(6) 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 threshold beyond which the 
probability of a banking crisis is relatively high, minimising the probability of missed crisis and that of false alerts. 
Methodology to compute the fundamentals-based and the prudential benchmarks based on Bricongne, J. C., Coutinho, L., 
Turrini, A., Zeugner, S. (2019), “Is Private Debt Excessive?”, Open Economies Review, 1- 42. 
Source: Eurostat and ECB as of 2023-04-28, where available; European Commission for forecast figures (Spring forecast 
2023) 

16 

all variables y-o-y % change, unless otherwise stated2003-072008-122013-18201920202021202220232024Real GDP 2.30.01.82.0-3.94.94.51.81.2Potential growth  (1)1.80.91.11.81.51.72.21.91.9Contribution to GDP growth:Domestic demand 1.9-0.71.42.3-2.93.63.71.81.1Inventories 0.00.00.10.3-0.8-0.10.0-0.10.0Net exports 0.30.80.2-0.7-0.11.40.90.00.0Contribution to potential GDP growth (1):Total Labour (hours) 0.40.20.71.10.91.01.31.11.0Capital accumulation 0.70.50.40.70.50.60.60.60.6Total factor productivity 0.80.30.00.00.10.20.20.20.3Output gap (2)-0.9-1.2-1.01.4-4.0-1.01.21.10.4Unemployment rate5.75.87.14.44.94.23.53.83.9Harmonised index of consumer prices (HICP)1.71.91.02.71.12.811.64.93.3GDP deflator 2.01.01.53.01.92.45.36.12.6External positionCurrent account balance (% of GDP), balance of payments7.77.28.16.95.17.34.45.96.1Trade balance (% of GDP), balance of payments8.58.410.09.810.110.39.4..Primary income balance (% of GDP)1.00.4-0.7-2.0-3.3-2.2-4.1..Secondary income balance (% of GDP)-1.8-1.6-1.2-0.9-1.7-0.8-1.0..Current account explained by fundamentals (CA norm, % of GDP) (3)2.12.62.12.01.91.71.61.61.4Required current account to stabilise NIIP above -35% of GDP over 20Y (% of GDP) (4)-0.10.42.43.75.23.92.62.32.4Capital account balance (% of GDP)-0.4-0.3-0.10.00.00.110.6..Net international investment position (% of GDP)-5.210.354.389.6113.093.275.1..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (5)-67.4-73.2-39.3-0.312.926.122.9..Net FDI flows (% of GDP)4.65.86.0-0.8-10.19.98.5..CompetitivenessUnit labour costs (ULC, whole economy)0.82.31.13.28.5-0.63.34.74.3Nominal compensation per employee 2.32.21.32.84.82.23.95.54.8Labour productivity (real, hours worked)1.60.20.4-0.7-1.11.50.40.40.1Real effective exchange rate (ULC)-0.20.3-0.40.94.5-1.1-0.3-1.00.7Real effective exchange rate (HICP)0.6-0.50.70.51.40.21.9..Export performance vs. advanced countries (% change over 5 years)6.10.4-3.5-2.07.45.7...Private sector debtPrivate sector debt, consolidated (% of GDP)228.5243.3255.1229.9233.1229.5215.3..Household debt, consolidated (% of GDP)106.6116.6109.999.7103.8100.594.0..Household  debt, fundamental benchmark (% of GDP) (6)49.151.057.860.265.566.867.9..Household  debt, prudential threshold (% of GDP) (6)40.245.050.147.351.148.647.3..Non-financial corporate debt, consolidated (% of GDP)121.9126.7145.2130.2129.3129.1121.3..Corporate debt, fundamental benchmark (% of GDP) (6)106.796.094.393.6101.0102.6104.2..Corporate debt, prudential threshold (% of GDP) (6)62.368.076.373.881.876.174.1..Private credit flow, consolidated (% of GDP) 11.87.64.4-0.3-0.711.76.7e..Corporations, net lending (+) or net borrowing (-) (% of GDP)7.96.95.02.12.04.03.86.25.9Households, net lending (+) or net borrowing (-) (% of GDP)-2.11.43.32.96.85.70.71.92.0Net savings rate of households (% of net disposable income)3.46.910.012.018.817.5...forecast 
    
 
 
 
 
 
Table 2.2: Selected economic and financial indicators (Part 2), The Netherlands 

2. 

Assessment of macroeconomic vulnerabilities 

(7) Unweighted average of price-to-income, price-to-rent and model valuation gaps. The model valuation gap is 
estimated in a cointegration framework using a system of five fundamental variables; total population, real housing 
stock, real disposable income per capita, real long-term interest rate and price deflator of final consumption expenditure, 
based on Philiponnet, N., Turrini, A. (2017), "Assessing House Price Developments in the EU," European Economy - 
Discussion Papers 2015 - 048, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission. 
Price-to-income and price-to-rent gaps are measured as the deviation to the long term average (from 1995 to the latest 
available year). 
(8) Price-to-income overvaluation gap measured as the deviation to the long term average (from 1995 to the latest 
available year). 
(9) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches. 
Source: Eurostat and ECB as of 2023-04-28, where available; European Commission for forecast figures (Spring forecast 
2023) 

17 

all variables y-o-y % change, unless otherwise stated2003-072008-122013-18201920202021202220232024Housing marketHouse price index, nominal4.1-2.63.37.37.615.013.4..House price index, deflated2.0-3.72.04.66.211.25.6..Overvaluation gap (%) (7)12.98.7-8.22.68.617.624.4..Price-to-income overvaluation gap  (%) (8)11.65.1-7.44.38.619.132.4..Residential investment (% of GDP)5.94.83.95.15.45.55.4..Government debtGeneral government balance (% of GDP)-1.1-3.8-0.71.8-3.7-2.40.0-2.1-1.7General government gross debt (% of GDP)47.759.761.948.554.752.551.049.348.8Banking sectorReturn on equity (%).1.46.97.53.28.6...Common Equity Tier 1 ratio.11.516.418.919.319.3...Gross non-performing debt (% of total debt instruments and total loans and advances) (9).2.42.31.71.71.3...Gross non-performing loans (% of gross loans) (9)..2.51.81.91.41.2..Cost of borrowing for corporations (%)4.33.11.71.21.30.83.0..Cost of borrowing for households for house purchase (%)4.44.62.82.01.81.73.4..forecast