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Overview of the Economic Survey of the Netherlands   

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The Netherlands is expected to see growth resume only slowly, implying further increases in unemployment in the short term. Current fiscal targets imply a pro-cyclical stance for the next couple of years. In the medium term, economic performance will be affected by continued globalisation and ageing of the labour force. In this perspective, structural fiscal consolidation measures are necessary to secure fiscal sustainability, but the government should also prepare the business sector for the ongoing challenges of globalisation, and adapt labour market institutions for an older and shrinking labour force.

Government finances should be brought under control to support confidence, comply with the rules of the Stability and Growth Pact, and secure fiscal sustainability. In the case of a severe economic downturn, fiscal consolidation should avoid excessive pro-cyclicality as this could endanger the economic recovery and potentially aggravate current account imbalances within the euro area. Improving fiscal sustainability should be pursued once the recovery has become self-sustained, focusing on structural spending measures combined with reforms to boost employment and participation rates.

Globalisation is presenting new market opportunities. The economy has benefited from globalisation via stronger international trade and higher foreign direct investments. Looking ahead, continued globalisation would push companies to become more innovative and search for new activities and markets. To further this process, the government is reforming policies for the business sector. Part of the reform agenda is a targeted approach to strengthen key sectors. However, attention should be paid to avoid that the new approach becomes a vehicle for favouring particular firms or industries. The other part of the agenda is to improve framework conditions, which is commendable and should be combined with other framework policies, notably in the area of labour and product markets.

Preparing the labour market for the future. Globalisation has benefited workers via higher real wages (with a larger positive effect for high-skilled workers) and long periods of high employment and low unemployment. However, if the economy is to benefit more from globalisation, there is a need to reform employment protection for workers with permanent contracts and wage formation to increase the ability of the labour market to allocate increasingly scarce labour resources to their most productive use. Also, under-utilised labour resources should be mobilised.

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Controlling health expenses is the key to securing fiscal sustainability. Health spending, particularly in the area of long-term care, is set to increase with population ageing, which is also going to change health service demands. To meet both objectives, the government is introducing more competition. To fully reap the benefits of competition, this should be combined with measures to strengthen the hand of health insurers by addressing asymmetric information problems. This notably requires enabling performance-based contracting and addressing information asymmetries. In the area of long-term care, controlling costs would require giving care purchasers adequate financial incentives and improving targeting.

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