Launch of the 2021 OECD Economic Survey of the Netherlands, 16 June 2021

 

Remarks by Mathias Cormann,

Secretary-General, OECD

Paris, 16 June 2021

Dear Minister Blok, Ambassador Biessen, colleagues, dear friends,

I’m delighted to present the 2021 OECD Economic Survey of the Netherlands. I want to thank you, Minister Blok, for joining me for the launch of this report, and to thank you and your experts at the Ministry of Economic Affairs and Climate Policy for the excellent collaboration our team has enjoyed throughout the preparation of this Survey.

Like many other advanced economies, the Netherlands is recovering from its largest economic contraction since the Second World War. Almost overnight, the COVID-19 virus caused profound changes to mobility, work methods as well as spending and saving behaviour. Many businesses, especially in travel and hospitality, had to scale down or close their doors, raising fears of bankruptcies and job losses on a massive scale.

Thankfully, the sharp contraction did not become a protracted slump. As in other OECD countries, the government of the Netherlands swiftly implemented a comprehensive support package, protecting people, businesses and jobs.
The fact that the Netherlands went into this pandemic in a position of comparative fiscal strength, with a relatively low pre-pandemic level of public debt, gave it a strong capacity to provide the necessary fiscal support when the crisis hit. Accommodative monetary policy at the euro area level complemented the fiscal support. The Netherlands’ structural and institutional strengths, including a high level of digital skills, also contributed to mitigating the economic impact of the pandemic.

The Netherlands is also a very open globally focused economy, with the quick rebound in Dutch exports after the sharp decline during the first half of 2020 boosting the strength of the recovery. The fall in GDP in the Netherlands last year, at 3.7%, was only just over half that across the euro area. We see moderately strong output growth this year and next, at 2.7% in 2021 and 3.7% in 2022.

There are, however, still uncertainties and downside risks, with vaccine-resistant virus strains a particular concern.

Brexit is also expected to be a drag on the Dutch economy to the tune of 0.5% of GDP over the medium term, with 9 per cent of exports going to the United Kingdom in 2019, before the reimposition of a hard border.

The 2021 OECD Economic Survey of the Netherlands argues that the government should continue to support the recovery and seize the opportunity to build back in such a way as to create a stronger, more resilient economy.

Today, we want to highlight four challenges:

The first challenge is reviving productivity growth, which has been weak. Over the past decade the average annual rate of labour productivity was only 0.2%, substantially less than that achieved by some of your peers in your neighbourhood such as Germany (0.6%) and France (0.8%).

Going even further faster with the digital transformation of the Dutch economy, by promoting uptake of digital technologies, especially in small and medium-sized enterprises, is one of the keys.

Efforts to up-skill and re-skill relevant parts of the labour market were already important before the COVID crisis, to ensure all have the best possible opportunity to participate and benefit from the digital transformation of the economy, but those efforts are even more crucial as we seek to optimise the strength and the quality of the recovery.

We welcome the government’s Personal Learning and Development Budget as a new and innovative approach.

Second In the Netherlands, over one fifth of workers are on temporary contracts, which is nearly double the OECD average. This is partly a social issue, since non-standard workers are less protected. But it can also be an issue of productivity, since for these workers and the firms who employ them, the incentive to invest in human capital can be less. The recommendations of the Commission for the Regulation of Work provide a balanced solution, combining more flexibility in regular work contracts with more protection for non-standard workers. A related issue is that many women work part-time. Incentivising more women to work full-time is a way to reduce the gender gap in earnings and pensions and allow the human resources of the country to be more fully used.

Third, people and nature are exposed to unsustainable levels of nitrogen emissions due to high population density as well as high industrial and agricultural production. The courts have ruled that new investment in infrastructure, buildings and agriculture cannot increase nitrogen deposits in natural habitats, and that greenhouse gas emissions must be urgently reduced, prompting an immediate set of concrete measures last year.

But with these rulings, environmental pressures have moved firmly from being a future risk to posing constraints on economic activity here and now. This requires concrete national-level actions, as well as further improved regional and international cooperation. The OECD’s International Programme for Action on Climate, can be a way to help the Netherlands implement the Paris Agreement objectives, through a set of climate-related indicators, tailored recommendations and the sharing of best practices.

Reducing housing market imbalances is the fourth challenge. House prices are rising fast, and household debt levels are among the highest in the OECD, creating macroeconomic and financial vulnerabilities. Limited housing supply is part of the problem. Most rental housing is defined as social housing and rent-controlled. Increasing supply, reducing tax subsidies and lifting restrictions on the rental market would not only reduce macroeconomic risks and inequality of opportunity, but also help boost growth.

As the Netherlands emerges from the pandemic, there is the opportunity to deal with some of these systemic challenges and to continue to build a stronger, more resilient, inclusive and sustainable economy. I hope that this Survey is helpful in this regard. Be assured that the OECD stands ready to continue to support the government of the Netherlands in delivering better policies for better lives.

Thank you.

See also Press Release

 

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