OECD Economic Surveys : Netherlands 1974.

68 Pages·4.392 MB·English

by  OECD

OECD
ECONOMIC SURVEYS
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NETHERLANDS
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JUNE 1974
BASIC STATISTICS OF THE NETHERLANDS
THE LAND
Area (thousand sq. km. in 1972) 41.2 Major cities. 1st Jan. 1973 (thousand
Agricultural area (thousand sq. km. in inhabitants):
1972).. , 22.0 Amsterdam 792
Tillage and temporary grassland (thou¬ Rotterdam 654
sand sq. km. in 1972) 8.8 The Hague 510
Forest (thousand sq. km. in 1972) 3.0
THE PEOPLE
Population end Dec. 1973 (thou¬ Emplovment in 1972 (thousand man
sands) 13490 years) 4581
Number of persons per sq. km. 399 Agriculture, fishing 316
Net increase in population (average Industry 1 686
1971-1973. thousands) 124 Other activities 2579
THE PUBLIC SECTOR
Government employees (inch military) Expenditure on goods and services in
in per cent of total employment in per cent of gross domestic product
1972 ' 12.5 in 1972 21.0
Contribution to net national income Tax revenue (incl. Soc. Sec. com.) in
at factor cost in 1972 (per cent) 15.4 per cent of net national income
in 1972 52.6
PRODUCTION
Gross domestic product in 1972 Growth of real fixed investment,
(US dollars billion) 45.4 1970-1972 (annual rate, per cent) 0.1
Growth of real GDP. 1970-1972 (an¬ Growth of total labour productivity
nual rate, per cent) 4.2 in the enterprise sector, 1971-1973
Gross fixed investment in per cent of (annual rate, per cent)
Kross domestic product in 1972 23.8 of which: Manufacturing
FOREIGN TRADE AND PAYMENTS1
(million US dollars)
Commodity exports, fob 21 964 Percentage distribution of foreign trade:
Commodity imports. fob 21 237 Exports Imports
Services, net 1 112
Transfers, net -54 By area Jan.-Sept. 1973:
Current balance 1 785 OECD countries 87.1 78.4
Long-term capital -1 620 Other developed countries 2.8 2.4
Basic balance 165 Developing countries 10.1 19.2
Exports of goods and services in
per cent of GDP, 1972 46.6 By S1TC groups, 1972:
Imports of goods and services Food, drinks, tobacco
per cent of GDP, 1972 44.2 (0,1) 21.5 13.0
Materials (2, 3, 4) 19.4 22.2
oj which: Petroleum and
products 9.2 12.4
Semi-finished goods and
chemicals (5, 6) 31.3 28.0
Finished manufactured
goods (7, 8, 9) 27.8 36.8
THE CURRENCY
Monetary unit: Guilder Currency units per US dollar,
as at 30.4.1974: 2.5960s
1 1973.
2 Actual average rale in 1973: 2.7924.
Note An international comparison of certain basic statistics is given in an annex table.
OECD ECONOMIC SURVEYS
NETHERLANDS
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
The Organisation for Economic Co-operation and
^Development (OECD) was set up under a Convention
signed m Paris ontMth December, 1960, which provides
that;the,QECD shallpromote policies designed :
to achieve thehighestsustainable economicgrowth
and employment and a rising standard of living in
Member countries, while maintaining financial sta¬
bility, and tfius to contribute to the development of
theworld economy;
~ to contribute to sound economic expansion in
Member as well as non-member countries in the
process of economic development;
to contribute to the expansion of world trade on a
multilateral, non-discriminatory basisinaccordance
with international obligations.
The Members of OECD are Australia, Austria, Bel¬
gium, Canada, Denmark, Finland, France, the Federal
Republic of Germany, Greece, Iceland, Ireland, Italy,
Japan, Luxembourg, the Netherlands, New Zealand, Nor¬
way, Portugal, Spain, Sweden, Switzerland, Turkey, the
United Kingdom and the United Stales.
The Socialist Federal Republic of Yugoslavia is
associated in certain work of the OECD, particularly that
of the Economic andDevelopmentReview Committee.
**
The annual review of Netherlands
by the OECD Economic and Development
Review Committee
took place on 4th June, 1974.
The present Survey has been updated subsequently.
© Organisation for Economic Co-operation and Development,
1974.
Queries concerning permissions or translation rights should be
addressed to :
Director of Information OECD
2, rue André-Pascal, 75775 PARIS CEDEX 16, France
CONTENTS
Introduction 5
I Recent developments 5
The weakness erf demand and output 5
Continued strength on external balance 13
Monetary developments 15
Price and wage performance 18
II Public sector developments 21
The growth and control of public expenditure 23
Public expenditure and inflation 28
III Prospects and conclusions 33
The energy situation 33
The outlook for growth, inflation and the balance of payments 37
Conclusions and policy considerations 39
Annex Main economic policy measures since June 1973 41
TABLES
Text:
1 Government revenue and expenditure 6
2 The household account 7
3 Output and expenditure 9
4 Labour force and employment 10
5 Selected foreign trade indicators 14
6 The balance of payments 16
7 Government financing and liquidity growth 17
8 Implied national account deflators 20
9 Wages rates and disposable worker income 21
10 Social security 24
11 Trends of public and private spending 27
12 Energy balance 1972-1974 34
13 Net foreign trade in energy 35
Statistical Annex:
A National product and expenditure (at current prices) 50
B National product and expenditure (at 1970 prices) 51
C Origin of gross domestic product at factor cost 52
D Income and expenditure of households and private non-profit
institutions 53
E Government revenue and expenditure 54
F Supply and demand indicators 55
G The labour market and employment 56
H Prices and wages 57
I Money and banking 58
J Central government budget 59
K Merchandise trade 60
DIAGRAMS
1 Private consumption and fixed investment 8
2 Industrial production 10
3 Business enquiries in manufacturing industry 11
4 The labour market 12
5 Balance of payments current account 15
6 Money and credit expansion i7
7 Consumer prices 19
8 Public expenditure ratios 22
9 Central government expenditure by function 25
10 Total taxation ratio 30
11 Selected taxation ratios 31
INTRODUCTION
The control of inflation remained a major policy objective in 1973:
restrictive demand management policies were maintained in conjunction
with a number of new anti-inflationary measures. Policy was successful
to the extent that the rate of inflation did not accelerate between 1972
and 1973, despite the strong rise in world commodity prices and an accele¬
ration of other external inflationary forces. For the second successive
year, however, the low pressure of demand was reflected in a relatively
high level of unemployment. The growth of GDP was probably below
the underlying growth rate of capacity, implying additional slack in the
economy. Developments in world oil markets at the end of the year
were expected to further reduce demand as well as exacerbating the problem
of controlling inflation. The authorities reacted in early 1974 by easing
demand management policies and adopting more comprehensive price
and wage controls. In contrast to the domestic situation, foreign
demand was again strong in 1973, there was a further large shift of
resources to the external balance and the current account surplus rose
substantially. The main developments in demand and output, the balance
of payments, prices and wages and the management of the economy in 1973
and early 1974 are briefly discussed in Part I of this Survey.
The recent inflationary experience in many Member countries has
focused attention on the activities of the public sector as one aspect of
the problem. In Part II, the longer-term growth of the Dutch public
sector is considered, along with the effects which the rising demand for
public goods and services and its financing may have on inflationary trends.
A note on the energy situation is contained in Part 111 which then discusses
short-term prospects for the Dutch economy before turning to a number
of policy considerations.
I RECENT DEVELOPMENTS
The weakness of demand and output
The weakness of domestic demand which became evident in 1971
continued into the first half of 1974. In 1973 GDP grew by 4.5 per cent
compared with 4.4 per cent in the previous year, and the Central Planning
Bureau estimated a growth rate of 2.5 per cent in 1974 despite some
easing of demand-management policies. The lack of buoyancy in the
economy was largely due to domestic demand conditions reflecting the
restrictive policy stance adopted in 1972 and maintained last year in an
OECD Economic Surveys
effort to contain the price inflation spiral by avoiding the emergence of
excess demand. However, it seems likely that demand management policy
was more restrictive than was intended at the time of framing the 1973
Budget.
The main aim of the 1973 Budget was to contribute to a moderation
of inflationary trends and an improvement in the employment situation.
The volume of government expenditure, however, was adversely affected
by price increases for goods and services. The strong growth of nominal
incomes and prices also resulted in a sharp increase in government revenue
and ultimately the central government budget was in surplus. As a result
of these developments government consumption rose by a modest 1 per cent
in 1973 compared with 1.6 per cent in 1972 and an average rate in the
1960's of over 3 per cent. Government fixed investment fell by 4.5 per
cent in 1973 following a fall of 8.5 per cent in the previous year.
Table 1 Government revenue and expenditure
National accountsbasis, currentprices
General government
Central government
incl. social security
1972 1973 19741 1972 1973 19741
Percentage change
Current revenue 16.7 16.5 13.3 15.7 18.8 14.5
Current expenditure 18.2 17.0 17.4 16.5 17.7 17.8
of which: for goods and services 10.7 9.8 16.7 12.8 13.4 17.6
Gross fixed investment -15 14 2 5 16
Per cent of GDI*
Current saving 4.1 4.1 3.3 4.8 5.5 4.3
Net lending and capital transfers 3.1 3.2 2.4 1.2 2.2 0.8
1 Forecasts by the Central Planning Bureau published in April 1974.
2 GDP rose as follows (per cent)):
Nominal Real
1972 13.7 4.4
1973 13.2 4.5
1974 12.0 2.5
Source: Annex Table E.
Higher taxation and social security contributions combined with the
effects of higher prices on real disposable incomes were largely responsible
for sluggish private consumption in 1973. The rise in real disposable
income fell back in 1973 to 3.7 per cent after rising by 4.9 per cent in
the previous year. At the same time, the personal savings ratio showed
Netherlands
a moderate increase, thus further dampening the growth of private con¬
sumption1. Indeed, the rise of 2.5 per cent in private consumption in
1973 was less than half the average annual rate in the 1960's.
Table 2 The household account
1972 1973 19741
Percentage change
Incomebeforetaxandgovernmenttransfers 13.6 14.6 11.0
Wages and salaries (including employers1 social security
contributions) 13.7 15.1 14.6
Incomefrompropertyandentrepreneurships 13.1 12.6 -1.2
Other(pensionsandtransfersabroad) 15.6 17.2 18.5
Incomeaftertaxandgovernmenttransfers 13.7 13.0 11.4
Impliedpricedeflatorforprivateconsumption 8.3 9 11.5
Realdisposablehouseholdincome2 4.9 3.7
Realhouseholdconsumption 3.3 2.5 2.5
Wagesandsalaries(percentofincomebeforetaxandgovernment
transfers) 72.7 73.0 75.4
Saving(percentofdisposableincome)2 19.6 20.5 18.6
Net taxation (per cent of income before tax and government
transfers) 11.6 12.8 12.5
Taxesandsocialsecuritycontributions 37.1 39.2 41.5
Currenttransfersfromgovernmentandsocialsecurity 25.6 26.4 29.0
1 Central Planning Bureau forecast published in May 1974.
2 Contributions to pension funds are included in disposable Income and saving.
Source: Annex table D.
Of theother components ofdomesticdemand, business fixed investment
recovered from two years of absolute decline to increase by 8.5 per cent
in 1973. However, investment in dwellings which had been very buoyant
in 1972, showed only a moderate rise. In total, the growth of final
domestic demand was somewhat greater than in 1972, but nevertheless
was less than half the longer-term average. This weakness was offset
to a considerable degree by strong external demand. Largely as a result
of domestic demand conditions and the strength of world trade the volume
of merchandise exports rose by 12 per cent. The volume of imports
also rose considerably, influenced by buoyant exports and heavy stock-
building.
While short-time work became less widespread in 1973, industrial
employment declined, continuing a tendency that has prevailed since 1971.
The main reason for this decline seems to have been a reluctance by the
1 Increased spending on private housing may partly explain the rise in the
savings ratio.
OECD Economic Survey*
Diagram 1 Private consomption and fixed investment
Quarterly volume indices, seasonally adjusted, 1970 = 100
Inet»«érmi'Jog,sc«f«
120
110
105
100 P
/naWasamf.fof,seal*
Giossfixedinvestnent
frightacmlt)
110
100
95 -
^J
*
1969 1970 197? 1973
Source: Statistisch Bulletin, CBS.
employers to recruit and replace labour in conditions of rapid inflation,
with steeply rising labour costs, and uncertainty about the prospects for
demand. With employment falling and industrial production flat for much
8