Netherlands 1986-1987.

89 Pages·1987·5.536 MB·English

by  OECD

OECD
ECONOMIC SURVEYS
1986/1987
3 3 3 J 3 ) 3 .V7 ) 3 3 ? 3 3 1 3 3 3 3 3 ] 3 BD = 3?13i7]DU .133 31 ^ 11333137
NETHERLANDS
3 3 3 J 3 ) 3 J 7 ) D 3 3 1 B 3 3 ? i 3 .1 7 ) D 3 17 3 1 3 3 V 1 1 D ? ? 1 11 1 3 7 13 3 3 3 3)3313
JULY 1987
nHTnnnnr
nrnTinnnrrmnl
OECD ECONOMIC SURVEYS
(cid:9),-^rw^
*
.._ w
C > T -,-*-= ,__r
W-*" """ . ...--'-
NETHElâbXfibs
JULY 1987
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
Pursuanttoarticle1 oftheConventionsignedinParison 14th December,
1960,andwhichcameintoforceon30thSeptember, 1961,theOrganisation
for Economic Co-operation and Development (OECD) shall promote
policiesdesigned:
- toachievethe highestsustainableeconomicgrowthandemployment
andarisingstandardoflivinginMembercountries,whilemaintaining
financial stability, and thus tocontribute to the development ofthe
worldeconomy;
- to contribute to sound economic expansion in Member as well as
non-membercountries in theprocessofeconomicdevelopment; and
- to contribute to the expansion of world trade on a multilateral,
non-discriminatory basis in accordance with international obliga¬
tions.
The original Member countries of the OECD are Austria, Belgium,
Canada, Denmark, France, the Federal Republic of Germany, Greece,
Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal,
Spain,Sweden,Switzerland,Turkey,theUnited Kingdomand the United
States. The following countries became Members subsequently through
accessionatthedatesindicatedhereafter:Japan(28thApril,1964),Finland
(28thJanuary, 1969), Australia (7thJune, 1971) and New Zealand
(29th May, 1973).
TheSocialist Federal RepublicofYugoslavia takes part in some ofthe
work ofthe OECD (agreement of28thOctober, 1961).
Publiéégalementen français.
©OECD, 1987
Application forpermission toreproduce ortranslate
all or part ofthis publicationshould be made to:
HeadofPublicationsService,OECD
2, rue André-Pascal, 75775 PARISCEDEX 16, France.
CONTENTS
Introduction 7
I. Economictrends,policiesandshort-termprospects 8
Developmentsin1986 8
Monetarypolicyandconditions 19
Fiscalpolicy 22
Outlookfor1987and1988 25
II. Medium-termimbalances 28
Originofpresentimbalances 28
The1982reorientationofpolicies 32
The1987-1990budgetaryprogramme 34
Thescopeforunwindingimbalances 37
III. Structuralpoliciestoimproveeconomicperformance 41
Thetransfersystemandtheminimumwage 41
Thetaxsystemanditsreform 44
Thehousingsector 47
Specificaspectsofindustrypolicy 48
IV. Conclusions 50
Notesandreferences 53
Annexes
I. Recentchangestothesocialsecuritysystem 59
II. ThetaxsystemintheNetherlands 62
III. ThehousingsectorintheNetherlands 65
IV. Calendarofmaineconomicevents 69
Statistical annex
TABLES
Text
1. Demandandoutput 8
2. Appropriationaccountforhouseholdsandprivatenon-profitinstitutions 10
3. Outputandproductivity 11
4. Thelabourmarket 12
5. Registeredunemployedandunemploymentbeneficiaries,January 1986 13
6. Wages,costsandprices 14
7. Profitsandsolvencyinthemarketsector 15
8. Merchandisetrade 18
9. Thecurrentaccount 18
10. Balanceofpayments 19
11. Monetaryconditions 20
12. Publicsectordeficits 23
13. Short-termprospects 26
14. Numberofbeneficiariesofsocialsecurityandsocialwelfare 30
15. Savingsandinvestment 33
16. GovernmentCoalitionAgreementandsupplementary1987budgetmeasures 35
17. ImpactoftheGovernmentCoalitionAgreementonemploymentandunemployment 36
18. Medium-termbaselineof GovernmentCoalitionAgreement 38
19. Centralgovernmentdeficitanddebt 39
20. Incomedistributionofhouseholds 44
21. Distributionofsomegovernmentexpenditureitems,1983 45
22. Averagetaxwedges,1973and 1985 45
Annexes
Al. Durationoftheunemploymentbenefitbyworkingage,inyears 60
A2. Reductioninsocialsecurityoutlaysexpectedfromreforms 61
A3. Taxesandsocialsecuritycontributions 62
A4. Deductionsagainstincometax, 1981 63
A5. Socialsecuritycontributions,enterprisesector, 1986 64
A6. ThehousingsectorintheNetherlands,1986 65
A7. Budgetarycosts,housingsector 66
Statistical annex
A. Nationalproductandexpenditure(millionGld.,currentprices) 74
B. Nationalproductandexpenditure(millionGld.,1980constantprices) 75
C. Originofgrossdomesticproductatfactorcost 76
D. Incomeandexpenditureofhouseholdsandprivatenon-profitinstitutions 77
E. Industrialproductionandproductivity 78
F. Thelabourmarketandemployment 79
G. Theimportanceofthepublicsectorandpublicsectordeficits 80
H. Moneyandbanking 81
I. Merchandisetrade 82
DIAGRAMS
1. Domesticdemandandproduction 9
2. Contributionstotheprivateconsumptiondeflator 16
3. Competitivenessindicatorsandchangesinexportperformance,manufacturing 17
4. Interestratesandexchangerates 21
5. Governmentgasrevenues 24
6. Macroeconomicperformanceindicators 29
7. Energyproductionandtrade 31
8. Totalgovernmentoutlaysandsocialsecuritytransfers 32
9. Changeinunemploymentratebyincomelevel, 1977-1983 42
10. Effectivemarginaldirecttaxrateonlabour,1983 46
BASIC STATISTICS OF THE NETHERLANDS
THELAND
Area(thousandsq.km.in 1986) 41.8 Majorcities, 1stJanuary 1986(thousandinhabitants):
Agriculturalarea (asapercentageoftotal) 64.5 Amsterdam 679
Forest(asapercentageoftotal) 8.0 Rotterdam 571
TheHague 444
THEPEOPLE
Population, 1986(thousands) 14572 Employmentin 1985(thousandmanyears): 4561
Persq. km.oflandarea 403 Agriculture,fishing 271
Netincreaseinpopulation(average Industry 1 254
1980-1986,thousands) 73 Otheractivities 3036
THEPUBLICSECTOR
Governmentemployees(incl.military)inpercent Expenditureongoodsandservicesinpercentof
oftolalemploymentin 1985 16.1 grossdomesticproductin 1985 16.3
Contributiontonetnationalincomeatfactor Taxrevenue(incl.Soc.Sec.com.)inpercentofnet
costin 1985 (percent) 13.9 national incomein 1985 50.2
PRODUCTION
Grossdomesticproductin 1985(USdollarsbillion) 124.9 Growthofrealbusinessinvestment, 1983-1986
GrowthofrealGDP, 1983-1986(annualrate, (annualrate,percent) 7.7
percent) 1.9 Growthoftotallabourproductivityintheenterprise
Grossfixedinvestmentinpercentofgrossdomestic sector1, 1983-1986(annualrate,percent) 2.1
productin 1985 18.6 ofwhich:Manufacturing 4.0
FOREIGNTRADEANDPAYMENTSIN 1985
(million USdollars)
Commodityexports,fob 62028 Percentagedistributionofforeigntrade:
Commodityimports,fob 56709 Exports Imports
Services,net 910
Transfers,net -980 Byarea:
Currentbalance 5249 OECDcountries 87.0 76.4
Long-termcapital -3492 Otherdevelopedcountries 1.7 5.0
Basicbalance I 757 Developingcountries 11.3 18.6
ExportsofgoodsandservicesinpercentofGDP 64.1 BySITCgroups:
ImportsofgoodsandservicesinpercentofGDP 59.3 Food,drinks,tobacco(0, I) 18.0 12.2
Materials(2,3,4) 29.4 29.4
ofwhich:Petroleumandprod. (3) 23.1 22.3
Finishedmanufacturedgoods(5,6,7,
8,9) 52.6 58.4
THECURRENCY
Monetaryunit:Guilder CurrencyunitsperUSdollar,averageofdailyfigures:
Year 1986 2.45
December 1986 2.25
Note: Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.
1. Excludingnaturalgasextraction.
ThisSurveyisbasedontheSecretariat'sstudypreparedfor
the annual review of the Netherlands by the Economic and
DevelopmentReviewCommitteeon25thMay1987.
Afterrevisionsin thelightofdicussions during thereview,
final approval ofthe Surveyforpublication was given by the
Committeeon10thJune1987.
The previous Survey of the Netherlands was issued in
March1986.
INTRODUCTION
Final domestic demand strengthened substantially in 1986, and, for the first time since
1983, contributed more to economicgrowth than exports. Business fixed investment was the
major element of strength, but private consumption growth also accelerated, influenced by
higher real disposable income. As stronger domestic demand was offset by a turnaround in
stockbuilding and weaker net exports, real GDP growth was of the same order as in 1985
(2 per cent). Output in the non-gas business sector rose by nearly 3 per cent. Total
employment increased, for the second year running, and unemployment fell. Price
performance was again one of the best among OECD countries. In spite of a significant
reduction, the current external surplus remained large, ofthe order of2% per cent ofGDP.
The formulation of monetary policy has remained influenced by the twin objectives of
preventing an excessive growth in domestic liquidity and maintaining the guilder in line with
the Deutschemark. In the year to March 1987, the exchange rate of the guilder against the
Deutschemarkwasunchanged. However, reflectingchangesintheinternationalconfiguration
of exchange rates and two EMS realignments, the effective exchange rate of the guilder
appreciated by around 6 per cent over the same period. On the fiscal side, further progress
was achieved in reducing the Central Government budget deficit, allowing it to meet the
medium-term targetsset bythe authoritiesin 1982. Prospectsuptotheend of1988pointto a
weakening of activity. Under such circumstances, further progress in reducing the large
budget deficit and bringing unemployment down to more acceptable levels may prove more
difficult than envisaged by the authorities in their 1987-1990 budgetary programme.
Recent economic trends, policy measures and the short-term outlook are presented in
Part I ofthe present Survey. The scope for unwinding imbalances over the medium term is
assessed in Part II. Part III reviews a number of areas where improved incentives, together
with more flexible and efficient markets might improve macroeconomic performance in a
context of fiscal retrenchment. Four major areas which affect public finances, the labour
market and resource allocation are reviewedin thiscontext, namely: the transfersystem and
theminimum wage; the taxsystem and itsproposed reform; the housingsector; and specific
aspects of industry policy. Finally, policy conclusions are presented in Part IV.
I. ECONOMIC TRENDS, POLICIES AND SHORT-TERM PROSPECTS
Developments in 1986
Major sectors of aggregate demand
Private business fixed investment grew by more than 10 per cent in 1986 (Table 1).
Investment in machinery and equipment remained buoyant, and construction outlays picked
up substantially suggesting a shift from capital deepening to capital widening. Improved
profitability, strengthened balance sheets and high capacity utilisation were the main factors
behind the upsurge in investment; lessgenerousinvestment subsidies asfrom May 1986 may
also have brought some projects forward1. Although net businessinvestmentrecovered from
the cyclical low of around 2 per cent of NNI in 1981-1982 to 5'4 per cent in 1986, its level
Table 1. Demandmodoutput
Levelin 1980prices,percentchanges
bill,
guilder»
1983 1982 1983 1984 1985 1986
Privateconsumption 244.8 -1.2 0.8 -0.4 1.6 3.1
Governmentconsumption 67.5 0.7 1.2 -0.6 1.1 0.9
Grossfixed investment 77.4 -4.0 2.2 4.3 3.9 8.0
Public 10.9 -7.1 -A6 7.5 -4.3 -0.9
Private 66.5 -3.4 3.5 3.7 5.4 9.4
Dwellings 19.0 -5.6 -0.3 3.1 -4.4 5.8
Equipment 37.0 1.0 11.5 5.2 13.5 9.0
Others 10.5 -9.0 -8.2 -0.5 -0.3 18.4
Finaldomesticdemand 389.6 -1.4 1.2 0.5 2.0 3.7
Stockbuilding1 5.1 0.5 0.4 1.0 0.3 -0.8
Totaldomesticdemand 394.7 -0.9 1.5 1.4 2.3 2.8
Exportsofgoodsand services 266.3 0.0 3.5 7.0 4.6 2.6
Importsofgoodsandservices 246.0 1.1 3.9 5.5 5.7 4.2
Foreign balance1 20.3 -0.6 -0.1 1.0 -0.4 -0.8
Grossdomesticproduct 415.1 -1.4 1.4 2.4 1.7 1.9
Memorandumitems:
Netfactor income' 1.1 0.0 0.1 0.1 0.0 -0.5
Depreciation 42.8 1.4 1.9 2.7 2.2 2.0
Net national product 373.4 -1.8 1.5 2.3 1.7 1.3
Terms-of-tradecorrection1 1.8 -0.4 0.4 0.4 0.5
Net national income 0.0 1.1 2.7 2.1 1.8
1. ChangemeasuredaspercentageofpreviousperiodGDP.
Sources: CBS,NationaleRekeiingenI9SS,1986;CPB.CentrantEcorwmischFlan1987.1987;OECDSecretariatestimates.
Diagram1. Domesticdemandandproduction
1979= 100
% %
110 110
108 / 108
/
106 S 106
REALGOP .-«a»*"
104 EXCLUDINGGAS S/ 104
V
102 f 102
"""""" S'*"*''' REALGDP
100 **x ' 100
96 96
REALFINAL
DOMESTICDEMAND
96 96
94 94
1979 80 81 82 83 84 85 86
Source: CPBsubmission.
remained below that ofthe early 1970s. Higher outlays on tangible assets were accompanied
by increased expenditure on information technology and research and development. These
developments suggest that the underlyingposition ofthe business sectorhasbeen improving.
The fall in oil prices led to a 10 per cent drop in investment in the mining sector (which
includes gas and oil). For the manufacturing sector as a whole, investment continued to be
lessthan cash flow except forcertain sub-sectors like the electro-technical industrywhere the
introduction of new technology has kept the pace of investment high. Investment in the
petro-chemical industry fell, because of the completion of some large investment projects.
The rate of capital formation accelerated in the service sector.
Residential investmentrose by6 percent. Housingstartsincreased by 15 percent as the
price of existing houses recovered and interest rates fell. There also appears to be a shift
towardshigherqualitydwellingswhile therenovationofexistinghouseshasbeen encouraged
by government programmes allowing the use of unemployment insurance funds for this
purpose. Public investment declined slightly with the completion of the Oosterschelde
project2.
Private consumption expenditure rose by 3 per cent in 1986, in line with real disposable
income (Table 2). Consumer confidence strengthened further, at least in the first halfofthe
year, and the cost of consumer credit fell. These factors, together with the stepping up of
residential construction and the compulsory inspection ofoldercars (which was reflected in a
15 per cent rise in auto sales) led to a marked increase in purchases of consumer durables.
Government consumption is estimated to have risen by 1 per cent, essentially reflecting
higher non-wage expenditure, particularly on road maintenance and military equipment.
StockbuildingmadeanegativecontributiontoGDPgrowthof\ ofapercent,despitean
increase in output. Deliveries of transport equipment reduced work in progress, while the
replenishment ofinventories was probably delayed by expectations offurtherprice declines.