ECONOMY
After a strong performance in the 1990s, which brought unemployment to below 3%, the Dutch economy struggled through 2002 and 2003, plagued by relatively high costs and weak domestic demand. Real GDP growth recovered to 2.0% in 2004, but fell back slightly in 2005 to 1.5% largely due to lagging corporate investment and decreased government consumption. The economy grew by 2.9% in 2006. The 2007 growth rate of 3.5% was the highest since 2000. In 2007, the volume of imports increased 6% and exports 8%. In 2006 both grew by 10%.
Private consumption decreased by 1.2% in 2006--primarily due to reforms in the health care system which shifted health care spending from private to public consumption--but grew by 2.1% in 2007. The unemployment rate dropped further from 5.5% in 2006 to 4.5% in 2007, but has stabilized in 2008. After a drop in the early 2000s, investment staged a recovery in 2005-2006. This upward trend in investment continued with an increase of 10% in 2007. Investment growth is expected to slow to 7.25% in 2008 and then decrease in 2009.
In recent years, many firms in the Netherlands cited a loss of competitiveness as a major impediment to growth as unit labor costs outpaced those of their major competitors, including within the euro area. Low wage rises enabled firms to regain some lost ground as collective wage agreements were signed before growth accelerated in 2006. However, the increasing labor shortage was reflected in higher wage demands in the second half of 2007. Inflation ranged from 1.1% to 1.7% between 2004 and 2007. The inflation rate increased quickly in 2008 to 3.2% in August, and it is feared that this trend will continue. However, the Dutch inflation rate is still among the lowest in the eurozone.
The Netherlands was one of the first EU member states to qualify for the Economic and Monetary Union (EMU). Its fiscal policy has sought to strike a balance between further reductions in public spending and lower taxes and social security contributions. After an unexpected sharp economic downturn in 2003 caused the nominal deficit to breach the 3% GDP limit set by the EMU's Growth and Stability Pact, the center-right coalition government agreed to a package of spending cuts, which helped to lower the budget deficit in 2004 and 2005. The government achieved a budget surplus of 0.6% in 2006 and 0.7% in 2007.
Government
Role
Although the private sector is the cornerstone of the economy, the Netherlands has an important and vibrant public sector. The government plays a significant role through permit requirements and regulations pertaining to almost every aspect of economic activity. The government combines a rigorous and stable microeconomic policy with wide-ranging structural and regulatory reforms. The government has gradually reduced its role in the economy since the 1980s. Unabated privatization came to a halt in December 2007 when the government approved a policy that "the State will not pursue selling its interest in approximately 30 companies of 'vital interest' in which it is a shareholder including energy companies, financial services, and Schiphol airport."
Trade
and Investment
The Netherlands, which derives more than two-thirds of GDP from merchandise and services trade, had a record trade surplus totaling 41 billion euros in 2007 (about $56 billion). Since there are no significant trade or investment barriers, the Netherlands remains a receptive market for U.S. exports and an important investment partner. The Netherlands is the eighth-largest destination for U.S. exports, as well as the fourth-largest direct investor in the United States. Dutch accumulated direct investment in the United States in 2006 was $189 billion. The United States is the third-largest investor in the Netherlands with direct investment of $216 billion as of 2006. There are more than 1,600 U.S. companies with subsidiaries or offices in the Netherlands. The Dutch are strong proponents of free trade and staunch allies of the U.S. in international fora such as the World Trade Organization (WTO) and the Organization for Economic Cooperation and Development (OECD).
Sectors
of the Economy
Services account for almost three-quarters of the national income and are primarily in transportation, distribution, logistics, and financial areas, such as banking and insurance. Industrial activity generates about a fourth of the national product and is dominated by the metalworking, oil refining, chemical, and food processing industries. The agriculture and fisheries sector and traditional Dutch activities account for some 2% of GDP.
Although Dutch crude oil production is small, the Netherlands is a relatively large producer and distributor of natural gas. The Slochteren gas fields in Groningen Province in the north are among the world's larger producing natural gas fields. Total proven reserves of natural gas situated on the mainland currently amount to about 2 trillion cubic meters. Roughly 80% is accounted for by reserves on the mainland, the remaining 20% accounted for by relatively small deposits on the North Sea continental shelf. Current gas production is running at an annual average of around 75 billion cubic meters, roughly half of which is exported to EU member countries.
Environmental
Policy
The Netherlands is a small and densely populated country. Its
economy depends on industry, particularly chemicals and metal
processing, intensive agriculture and horticulture, and on its
infrastructure, which takes advantage of the country's geographical
position at the heart of Europe's transportation network. These
factors have led to major pressure on the environment.
The National Environmental Policy Plan (NMP) sets out Dutch environmental policy. Under NMP-4, published in 2001, the government seeks to cut back on all forms of pollution by 80%-90% within one generation, meaning that by 2030, the present generation should be able to pass on a clean environment to the next one.
Although the environmental quality in the Netherlands has improved significantly, some important targets, particularly with respect to nitrogen oxide and ammonia emissions, climate change, and noise reduction, will be difficult to reach.
The Dutch Government works closely with industry and nongovernmental organizations to reach environmental targets. In order to meet the Kyoto target of reducing greenhouse gas emissions by 6% in the 2008-2012 period from 1990 levels, the government reached an agreement with industry and the energy sector on emission rights trading. The current government's policy is to achieve a 30% reduction in greenhouse gas emissions by 2020 from 1990 levels.
GDP (2007 est.): $792 billion.
GDP real growth rate (2007): 3.5%.
GDP per capita (2007 est.): $45,600.
Natural resources: Natural gas, petroleum, fertile soil.
Agriculture (2% of GDP): Products--dairy, poultry, meat, flower bulbs, cut flowers, vegetables and fruits, sugar beets, potatoes, wheat, barley.
Industry (24% of GDP): Types--agro-industries, steel and aluminum, metal and engineering products, electric machinery and equipment, bulk chemicals, natural gas, petroleum products, transport equipment, microelectronics.
Services (74% of GDP): Types--trade, hotels, restaurants, transport, storage and communication, financial (banking and insurance) and business services, care and other.
Trade (2007): Exports--$489.9 billion (f.o.b.): mineral fuels, chemicals, machinery and transport equipment, processed food and tobacco, agricultural products. Imports--$433.1 billion (f.o.b.): mineral fuels and crude petroleum, machinery, transportation equipment, consumer goods, foodstuffs. Major trading partners in 2007 (exports/imports)--EU (66%/47%), Germany (20%/17%), Belgium (9%/9%), China (1%/8%), United Kingdom (6%/8%), and U.S. (5%/8%).
