Economic growth is projected to strengthen further and to remain broad-based. Private consumption and residential investment will remain robust thanks to the housing market recovery, employment growth and a reduction in income taxes. The brighter economic outlook should further support business investment. The relatively strong performance of the Netherlands’ key export markets will underpin export growth.
Tax cuts and new expenditures in 2016 will broadly offset the tightening effects of previously-decided fiscal consolidation; the resulting neutral fiscal stance is appropriate. The labour market would benefit from continuing the harmonisation of temporary and permanent contracts. Reducing mortgage interest relief and increasing the scope of the unregulated rental sector would improve the functioning of the housing market.
Following a recent court verdict, the government now targets lower greenhouse gas emissions for 2020. Additional efforts should reduce emissions not covered by the EU Emissions Trading System, for example from natural gas use by households, to ensure that EU-wide emissions will fall. Reconsidering the planned tax exemption for coal used in electricity generation and gradually phasing out the advantageous tax treatment of diesel relative to gasoline would be beneficial for the local environment.