The Dutch Economy

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The Dutch Economy

• FIABCI Trade Mission
• Amsterdam
• December 6, 2005

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The Dutch economy is dependent on international
trade and investment

• Exports Imports 125 GDP
• Cumulative FDI 145 GDP

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and is dominated by services
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The Netherlands is one ofthe richer EU
CountriesPer capita GDP 2003, US at PPP
5
although it has struggled recently, after strong
growth in the 90sGDP Growth, in
6
Private consumption has been particularly weak
Real private consumption growth, in
7
While cost pressures have hurt competitivenessBot
h through unit labor costs in manufacturing
8
As through wage costs per hour(Hourly
compensation costs in U.S. dollarsfor production
workers in manufacturing)
9
While the employment rate is higher than in much
of the EUPersons employed as of working-age
population, 2003
10
unemployment has risenUnemployment rate, in
11
and the disability system is a reservoir of
hidden unemploymentDisability recipients as of
working-age population
12
Breakdown of GDP differences compared to the
USPercentage gap to US per capita GDP
Effect of labour utilization Effect of labor
productivity
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Working hours are relatively lowAverage hours
worked per year per employed person, 2003
14
Reflecting the popularityof part-time workPT
employment as of total, 2003
15
Productivity is highGDP per hour worked, 2002
(US 100)
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But productivity growthhas been poorGDP per
hour worked, avg growth 1998-2003, in
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Dutch society is agingPopulation 65, as of
total
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What to do?Policy is constrained by

• Fiscal Policy
• EMU limits
• Demographic pressures
• Openness of economy

• Monetary Policy
• Eurozone
• one size fits all
• ECB
• price stability mandate

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Reforms

• Wage moderation to restore international
  competitiveness
• Stricter disability insurance
• Limited duration of unemployment reform
• Ending fiscal incentives for early retirement
• Cut administrative burden
• Stimulate RD, boost innovation

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Outlook for NL economy -Pros

• Skilled labor force
• Location gateway to Europe
• Infrastructure
• Legal, business environment
• Financial system
• Funded pensions
• EU market 450 million

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Outlook for NL economy Cons

• Labor, other costs
• Location next to Germany, not China
• Inflexibility of labor law
• Lack of entrepreneurial spirit

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Housing Market

• Dense population 16m people, 6.9m dwellings
  (all types)
• Only 15 single family rest row houses,
  duplexes, apartments
• 54 ownership rate

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Housing Market (contd)

• Avg sales price 226K euros Oct 05 (265K)
  5.2 over Oct 04
• Boom in 90s NL housing prices up from 67K euros
  to 171K 1991-2000 (11 annual rate)
• Equity extraction fueled 90s growth
• Market cooler since 2000 (5 growth)