OECD Economic Surveys : Netherlands 1976.

67 Pages·4.525 MB·English

by  OECD

OECD
ECONOMIC SURVEYS
D 3 3 .) I) I 3 -V7 I D 3 ? 3 3 13 3 3 3 3)3 3 0 ' 3 ? 1 3 .VT I D II i 3 3 3 1 7 1 i 3 ? 11 1 3 1
NETHERLANDS
0 H B .) 3 I -3 .I? ) D D 3 1 B 3 3 ? I 3 JH ) 3 3 IT 3 1 3 i 7 1 I 3 ? ? 3 3 1 3 "1 i 3 D 3 3 3 ) 3 3 1 3
MARCH 1976
BASIC STATISTICS OF THE NETHERLANDS
THE LAND
Area(thousandsq.km.in 1974) 41.2 Majorcities, 1stJan. 1975(thousand
Agriculturalarea(thousandsq.km. inhabitants):
in 1974) 20.9 Amsterdam 758
Tillageandtemporarygrassland Rotterdam 621
(thousandsq.km.in1973) 8.4 TheHague 483
Forest(thousand sq.km.in 1974) 3.1
THE PEOPLE
Population, 1stJuly 1975(thousands) 13654 Employmentin 1974(thousandman
Numberofpersonspersq.km. 404 years) 4579
Netincreasein population(average Agriculture,fishing 304
1970-1974,thousands) 128 Industry 1625
Otheractivities 2650
THE PUBLIC SECTOR
Governmentemployees(incl.military) Expenditure on goods and services in
inpercentoftotalemploymentin per cent ofgross domestic product
1974 12.8 in 1974
Contributiontonetnationalincome Tax revenue (incl. Soc. Sec. com.) in
atfactorcost in 1974(percent) 16.0 percentofnetnationalincomein
1974 49.9
PRODUCTION
Grossdomesticproductin 1974 Growthofrealfixedinvestment,
(USdollars billion) 70.1 1972-1974(annualrate,percent) 0.6
GrowthofrealGDP, 1972-1974 Growthoftotallabourproductivity
(annualrate,percent) 3.8 intheenterprisesector, 1972-1974
Grossfixedinvestmentinpercent (annual rate,percent) 4.4
ofgrossdomesticproductin 1974 22.2 ofwhich: Manufacturing 5.8
FOREIGN TRADE AND PAYMENTS IN 1974
(million US dollars)
Commodityexports, fob 30398 Percentagedistributionofforeigntrade:
Commodityimports,fob 30235 Exports Imports
Services,net 1 782
Transfers,net -302 Byarea:
Currentbalance 1 643 OECDcountries 85.2 75.3
Long-termcapital -I 113 Otherdeveloped countries 3.3 2.5
Basicbalance 530 Developingcountries 9.5 22.2
Exportsofgoodsandservicesin percent
ofGDP 57.3 ByS1TCgroups:
Importsofgoodsandservicesinpercent Food,drinks,tobacco(0, 1) 18.5 12.3
ofGDP 55.0 Materials(2. 3.4) 23.2 27.3
ofwhich: Petroleumand
products 12.6 17.3
Semi-finishedgoodsand
chemicals(5,6) 34.6 28.9
Finishedmanufactured
goods(7,8,9) 23.7 31.5
THE CURRENCY
Monetaryunit: Guilder Currency unitsper USdollar, averages
ofdailyfigures:
Year 1975 2.5307
January 1976 2.6725
Note An international comparison ofcertainbasicstatisticsisgiveninanannextable.
OECD ECONOMIC SURVEYS ^^ &
-r *»*e -,
m"'-'-^ t6'i0
NETHERLANDS
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
The Organisation for Economic Co-operation and Devel¬
opment (OECD) wassetupundera Conventionsignedin Parison
14th December, i960, which provides that the OECD shall pro¬
mote policies designed:
to achieve the highest sustainable economic growth and
employment and a rising standard ofliving in Member
countries, while maintaining financial stability, and thus
tocontributeto the developmentoftheworld economy;
to contribute to sound economic expansion in Member as
well as non-member countries in the process ofeconomic
development;
to contribute to the expansion ofworld trade on a multi¬
lateral, non-discriminatory basis in accordance with inter¬
national obligations.
TheMembersofOECDarcAustralia,Austria,Belgium,Cana¬
da, Denmark, Finland, France, the Federal Republic ofGermany,
Greece, Iceland, Ireland, Italy,Japan, Luxembourg, the Nether¬
lands, New Zealand, Norway, Portugal, Spain, Sweden, Switzer¬
land, Turkey, the United Kingdom and the United States.
The Socialist Federal Republic ofYugoslavia is associated in
certainworkofthe OECD, particularly that ofthe Economic and
DevelopmentReview Committee.
*
The annualSurveyofthe Netherlands
wasapprovedby the OECD Economic andDevelopment
Review Committeeon 8th March, 1976.
© OECD, 1976.
Queries concerning permissions or translation rights should be
addressed to:
Director ofInformation, OECD
2. rue André-Pascal. 75775 PARIS CEDEX 16. France.
CONTENTS
Introduction 5
I The economyin 1974 and 1975 5
Weakening demand and activity 5
Labour market developments 10
Prices and incomes 17
Foreign trade and payments 21
II Economic policy 28
Fiscal policy 28
Monetarypolicy 31
m Prospects and policy considerations 35
The outlookin 1976 35
Policyconsiderations 38
Annexs
Measuringtheimpact ofbudgetary changes 41
Calendar ofmain economicevents 45
TABLES
Text:
1 Output and expenditure 6
2 Employment and labourforce 12
3 Official estimates ofcomponents ofunemployment 13
4 Incomes and investmentin theenterprise sector 16
5 Producer costs and prices 19
6 Foreign trade 22
7 Balance ofpayments 24
8 Central and local government budget 29
9 Government revenue and expenditure 29
10 Government finance and liquidity creation 33
11 Savingand investment balances 35
12 Demand and outputin 1976 35
13 Official medium-term projections 1976-1980 37
Annex ii
A Expansionary fiscal measures 49
OECDEconomicSurveys
Statistical Annex:
A National productand expenditure, current prices 53
B Origin ofgross domestic product at factorcost, currentprices 54
C Income and expenditure ofhouseholds and private non-profitinstitutions 55
D Industrial production 56
E The labour market and employment 57
F Prices and wages 58
G Money and banking 59
H Merchandise trade 60
DIAGRAMS
Text:
1 Business enquiries in manufacturing industry 8
2 Industrial production and building activity 9
3 Unemployment, vacancies and short-timework 10
4 Labourreserve by regions 11
5 Consumerprices and wages 18
6 Relative exportprices and terms oftrade 23
7 Current external balance 26
8 Export performance 27
9 Money and credit 31
10 Interest rates 32
Annex I:
A The impact ofbudgetary changes 42
INTRODUCTION
In the period since early 1974, the stance of demand-management has been
expansionary, with the principal objective ofcushioning the effects on employment
of the world recession. Policy, however, was not as expansionaryas intended, and
deflationary forces were stronger than expected. Despite a series of discretion¬
ary measures aimed at creating employment, labour market conditions deterio¬
rated substantially throughout the period. Indicators suggest that the downturn
in demand probably levelled offby the end of 1975. In 1974 anti-inflation policy
was successful insofar as the rise in prices, despite major increases in oil and other
commodity prices, was much the same as in the preceding year, but price rises
remained strong in 1975 under the influence of strong domestic cost pressures.
Largely reflecting the higher volumes and prices of natural gas exports, the rise
in oil prices was absorbed in the external accounts in 1974 with only a small reduc¬
tion in the relatively large current external surplus. The surplus remained large
in 1975.
Recent trends in demand and activity, the labour market, inflation and the
balance of payments are briefly reviewed in Part I of this Survey. The section
on the labour market contains a discussion of the causes of unemployment over
a longer period. The policy reactions to recession and inflation are described
in Part II, including a brief review of the 1976 budget proposals. Prospects for
1976 are examined in some detail in Part III, together with a discussion of policy
considerations wich concludes the Survey. On the basis ofpresentfiscal and mone¬
tary policies and the proposed price and incomes controls announced in December
1975, the Secretariatforecasts a limited recovery in real GDP this year, a moderate
slowdown in inflation and an increase in the current external surplus. Unemploy¬
ment, however, is expected to continue to rise somewhat, thus aggravating the
policy dilemma now facing the authorities.
I THE ECONOMY IN 1974 AND 1975
As in most Member countries, the present recession in the Netherlands is
the most severe experienced in the post-war period. Until 1975 the only year
inwhichreal GDPhadfallenwas 1958, butthen byabouthalfthe rate of2 percent
officially estimated for 1975. Surplus capacity in industry is substantially greater
than in 1958, while unemployment is at a post-war high. Short-time work has
become widespread. At the same time, the rate of inflation has remained relati¬
vely high and the current external account is in substantial surplus.
Weakening demand and activity
Although real GDP grew by 3\per cent in 1974, the increase was concentrated
in the first half ofthe year. As can be seen from Table 1, most ofthe growth in
1974 came from the real foreign balance and from stockbuilding, part of which
seems to have been involuntary. Private consumption was relatively buoyant
Table 1 OutputandExpenditure
A Annually B Half-yearly estimates
1974 Percentage changes in Percentage changes in volume*, seasonally
Glds. volume1 adjusted,hair-yearlyrates
bill.
1964/1972 1973 1974 1975" 1973/11 1974/1 1974/11 1975/1» 1975/11'
average
Privateconsumption 104.1 5.6 3.1 2.6 2.5 1.8 0.8 1.8 1.6 0.1
Governmentfinalconsumption 31.9 2.9 0.9 0.4 4.3 -0.6 0.6 0.2 3.1 2.2
Grossfixedinvestment 41.3 4.9 5.6 -4.2 -6.5 -1.1 -3.0 -1.9 ^.3 -2.8
Dwellings 10.6 7.7 2.1 -12.7 -12.6 -6.5 -4.2 -11.6 -3.3 -7.4
Enterprises,excludingdwellings 23.9 4.4 12.1 -0.5 -7.1 3.0 -3.4 3.2 -7.0 -3.4
Government 6.8 3.1 -10.0 -5.1 5.0 -6.4 0.9 -5.4 5.1 5.4
Finaldomesticdemand 177.3 4.9 3.4 0.5 0.6 0.7 -0.2 0.6 0.5 -0.2
Stockbuilding3 4.3 -0.2 0.8 0.8 -2.7 0.1 1.2 -1.0 -1.6 -1.2
Totaldomesticdemand 181.6 4.7 4.1 1.3 -2.2 0.7 1.1 -0.5 -1.3 -1.5
Foreignbalance* 4.3 0.6 0.3 2.0 0.2 0.3 1.2 0.9 -0.7 0.8
Exports, excludingfactorincome 106.6 10.2 11.9 2.2 -4.0 0.5 3.1 -2.3 -3.8 2.0
Imports,excludingfactorincome 102.3 9.0 12.0 -1.3 -4.6 0.9 -AA -2.6 0.4
GDPatmarketprices 186.0 5.3 4.3 3.3 -2.0 1.0 2.2 0.5 -1.9 -0.6
1 Constant 1970 pricesexceptfor 1975 estimates which are in 1974 prices.
I1
2 Estimates by the Central Planning Bureau, November 1975.
3 Changes in stockbuildingand foreign balanceareexpressedaspercentageofGDPofprevious period.
4 At the preceding year's prices.
Sources:CentralBureau ofStatistics,NationaleRekeningen;CentralPlanningBureau, MacroEconomise!»Verkenning;directcommunicationtotheOECD.
Netherlands
in the second half ofthe year, reflecting substantial wage increases, tax relief mea¬
sures and aprobablefall in the savings ratio. The recoveryin private consumption
and a turnaround in import volumes were associated with a rundown of stocks
which more than offset a small rise in final domestic demand. Nevertheless, a
larger fall in import than export volumes resulted in a small rise in real GDP in
the second half of 1974.
At the end of 1974, real GDP was probably falling absolutely, and in the first
half of 1975 the rate of decline was considerable (about 4 per cent at an annual
rate below the previous halfyear's level). A series ofexpansionary fiscal measures
in 1974 helped to sustain final domestic demand, which seems to have shown a
modest rise. Private consumption again increased at a moderate rate. The effects
on household incomes of falling employment, increasing short-time work and
lower wage rises, were offset to a large extent by higher government transfers and
tax reductions, while there was some reduction ofthe personal savings ratio. An
important element in the growth of private consumption in the first half of 1975
was a recovery in car purchases from the depressed 1974 level. Reflecting the
reflationary measures, government consumption is estimated to have risen at an
annual rate of over 6 per cent between the second half of 1974 and the first half
of 1975. Government fixed investment also expanded strongly, but less than had
been officially forecast at the time of presenting an expansionary fiscal pack¬
age in November 1974.
The relative buoyancy of private consumption and total government expen¬
diture, however, was largely counterbalanced by a further marked deterioration
in private fixed investment. Business fixed investment was cut back in response
to increasing surplus capacity resulting from the sluggishness of domestic and
external demand and a reduction ofcorporate profits. The combination ofrapid,
though moderating, wage rises, falling productivity and increased competition
acted to reduce corporate profits. The decline in housing investment persisted,
influenced mainly by highinterestrates and alarge stock ofunsold dwellings. The
stock adjustment, which started in the second half of 1974, gathered pace in the
first half of 1975 and accounted for much of the fall of about 4 per cent at an
annual rate in real GDP between thetwoperiods. Businesssurveyssuggestthatthe
rundown in stocks was heavily concentrated in other than producers'stocks of
finished products; the sharpfall in export volumes, partly unmatched onthe import
side, possibly led to some involuntary accumulation by producers.
Mainly because of a continued rundown of stocks, the decline in real GDP
seems to have persisted into the second half of 1975, but at a slower rate. But
perhaps more importantly, final domestic demand which had helped to cushion
the fall in GDP in the preceding twelve months lost strength and fell a little below
the level in the first half. Private consumption, in particular, weakened percep¬
tibly. A rise in household savings1 in response to risingunemploymentand infla¬
tionaryexpectationsmayhaveactedasabrakeonexpenditure. In addition, it seems
likely that real incomes slowed as a result offalling employment and shorter wor¬
king hours. Provisional data suggest some recovery in consumer spending
in the second halfof1975. Withprivatefixed investmentdecliningfurther, govern¬
ment consumption andinvestment provided the main stimulus to domestic demand.
There was, however, a significant improvement in external demand after August.
1 The behaviour of household savings in the course of the year is unclear. The official
estimatesareforanunchangedsavingsratioattheaverage1974levelfortheyearasawhole. While
saving behaviouris influenced by complexfactors, there seems on balance to belittle in the 1975
situationthatcouldhaveledhouseholdstointerruptthepreviousyear'stendencytowardssavinga
growing proportion of their income. Car purchases last spring probably involved some decline
ofthesavingsratio,butthiscouldhavebeenmorethanoffsetbytheincreaseoftheratiothereafter.
OECD Economic Surveys
Diagram 1 BusinessEnquiriesinManufacturingIndustry
30 Outputcomparedwithpreviousmonth Differences 30
betweenseasonally
20 adjustedpercentages 20
ofenterprises
10 \ 4\ replying; 10
higher/lower
0 0
v. L;
30 Outputchangeovernext3months -10
V1
20 -20
10 -30
rising/falling
0 0
10 - -10
_-20
50
j'\-\ loohigh/
40 /" toolow 40
.-* Stocksoffinishedgoods
'
20 1 _ 20
"»*....
0 0
4 **
1
Leveloftotalorders
20 - -20
hifih/low -30
40
Totalorderinflow
20 i 20
\j
"» /
0 0
i rising/falling
20 / il -20
Exportorderinflow
-40
SE
Capacityutilisation1 -60
84 (percentageutilisation)^
32 82
80 SO
78 78
75 76
I960 1370 1971 1975
1 Notseasonallyadjusted.
Sources: CBS, Conjunctuurtest and OECD, Main Economic Indicators; Secretariat seasonal
adjustment.
For 1975 as a whole, GDP is officially estimated to have declined by about
2 -per cent, which is more than explained by the stock adjustment (see Table 1).
While the destocking may have slowed down towards the end of the year, it is
uncertain that the process has finished. Manufacturers' opinions in November
on stocks of finished goods were still relatively pessimistic, suggesting that further
substantial adjustment was possible. In addition, the survey, while showing a