OECD Economic Survey of the Netherlands 2021 - Presentation

2021 OECD ECONOMIC SURVEY OF THE NETHERLANDS Building a stronger recovery The Hague, 16 June 2021

@OECDeconomy @OECD

https://www.oecd.org/economy/netherlands-economic-snapshot/

Main messages The Netherlands has weathered the COVID crisis well thanks to widespread digitalisation and generous policy support. Going forward it should: • Provide better targeted fiscal support until the economic recovery is well underway.

• Adjust labour and housing market policies to reduce inequalities.

• Invest in the green and digital transition to promote prosperity and well-being.

SUPPORTING THE ECONOMY THROUGH COVID-19

The economy weathered the crisis relatively well Real GDP, Index Q1 2019 = 100 110

Netherlands

Netherlands November 2019 projection

OECD

Euro Area

110

105

105

100

100

95

95

90

90

85

85

80 2019Q1

80

2019Q3

2020Q1

2020Q3

2021Q1

2021Q3

2022Q1

2022Q3

Note: The pre-crisis growth path is based on the November 2019 OECD Economic Outlook projection, with linear extrapolation for 2022 based on trend growth in 2021. Source: OECD Economic Outlook 106 and 109 databases.

The recovery is underway Annual growth rates, % unless specified 2020

2021

2022

Gross domestic product

-3.7

2.7

3.7

Private consumption

-6.4

-0.4

6.1

0.6

2.1

1.4

Gross fixed capital formation

-3.6

6.3

3.8

Exports

-4.3

4.7

3.8

Imports

-4.3

4.0

4.2

Unemployment rate (%)

3.8

4.1

4.7

Consumer price index

1.1

1.8

1.5

Current account balance (% of GDP)

7.8

8.8

8.9

General government fiscal balance (% of GDP)

-4.3

-6.1

-2.5

General government gross debt (% of GDP)

54.5

58.5

58.8

Government consumption

Source: OECD Economic Outlook: Statistics and Projections (database).

Exports have rebounded Exports of goods and services (contribution to GDP growth) % pts

% pts 8

8

6

6

4

4

2

2

0

0

-2

-2

-4

-4

-6

-6

-8

-8

-10

-10

2019Q1

2019Q3

2020Q1

2020Q3

2021Q1

2021Q3

Source: OECD (2021), OECD Economic Outlook: Statistics and Projections (database)

2022Q1

2022Q3

Unemployment rose, in particular for the young Unemployment by age groups % of labour force 14 15 to 24 12

25 to 44

% of labour force 14 Total 15 to 74 12

45 to 74

Source: CBS (2021), Monthly labour participation and unemployment (database); CPB (2020), Economic Outlook – November 2020.

Mar-21

Feb-21

Jan-21

Dec-20

Nov-20

Oct-20

Sep-20

Aug-20

Jul-20

0

Jun-20

0

May-20

2 Apr-20

2 Mar-20

4

Feb-20

4

Jan-20

6

Dec-19

6

Nov-19

8

Oct-19

8

Sep-19

10

Aug-19

10

Policy measures eased economic strain Bankruptcies, Index Q4 2019= 100 110

110

100

100

90

90

80

80

70

70

60

60

50

50

Source: CBS

Ageing will put pressure on public spending Illustrative public debt trajectories, general government

% of GDP 160

Labour market reforms

140

% of GDP 160 140

Longer working lives

120

Labour market reforms + longer working lives

120

100

Baseline (General government debt)

100

Note: For more information on the OECD Economics Department Long-term Model see survey.

Source: Simulations based on the OECD Economics Department Long-term Model.

2050

2048

2046

2044

2042

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

0

2016

0

2014

20 2012

20 2010

40

2008

40

2006

60

2004

60

2002

80

2000

80

Spending pressures are less severe than in most OECD countries Additional spending pressures from 2021 to 2060, by spending category % pts of potential GDP 20 Health expenditure

Pension expenditure

% pts of potential GDP 20 Others 15

10

10

5

5

0

0

-5

-5

GRC PRT LVA ISR LTU GBR CAN NZL EST NLD AUS DEU IRL CHE HUN USA ITA DNK FIN ESP SWE ISL FRA NOR SVN KOR CZE LUX BEL JPN AUT POL SVK

15

Note: Spending pressures are defined as revenue increases needed to maintain a constant debt to GDP ratio.

Source: Simulations using the OECD Economics Department Long-term Model.

Recommendations to support the economy • Provide targeted fiscal support until the economic recovery is well underway.

• Phase out policies aimed at preserving existing companies and jobs when the health crisis is brought under control.

• Design in advance a multi-year plan for fiscal adjustment once the recovery is self-sustained.

• Fully implement the tri-partite occupational pension agreement moving to defined contributions.

REDUCING HOUSEHOLD DEBT AND RE-BALANCING THE HOUSING MARKET

House prices continue to rise Real house prices Index 2015=100 140

Netherlands

Euro area

OECD

Index 2015=100 140

130

130

120

120

110

110

100

100

90

90

2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3 2018Q1 2018Q3 2019Q1 2019Q3 2020Q1 2020Q3

Source: OECD (2021), OECD Economic Outlook: Statistics and Projections; CBS (2021), House Prices: new and existing dwellings price index (database), CBS (2021), Dwellings and non-residential stock; changes, utility function, regions.

Home-owner tax relief benefits the wealthy % 100 90

Percentage of owner households by income Low income

High income

% 100 90

80

80

70

70

60

60

50

50

40

40

30

30

20

20

10

10

0

0

NLD

OECD

Note: Low-income households are those with equivalised net disposable income in the bottom quintile of the distribution.

Source: Calculations based on data from OECD Affordable Housing Database.

Rent controls stifle private rental supply Share of households, private rental excluding social % of households 60

% of households 60

50

50

40

40

30

30

20

20

10

10

0

0

Note: For more details on definitions see OECD affordable housing Database.

Source: Calculations based on data from OECD, OECD Affordable Housing Database.

Recommendations to reduce household debt and rebalance the housing market • Increase the supply of housing by speeding up land use planning and building procedures, designating housing construction locations, and making binding agreements with all parties involved.

• Gradually reduce favourable tax treatment of owner-occupied housing beyond current plans.

• Gradually limit rent controls to a narrower part of the market.

• Evaluate how housing corporations affect the overall housing market and ensure that enough space is left for a private rental market.

REDUCING LABOUR MARKET DUALITY AND INEQUALITIES

The divide in worker status is high Protection of workers on temporary contracts

Protection of workers on regular contracts

5

3,5 3

4

2,5 3

2

2

1,5 1

1

USA CHE CAN AUS AUT GBR DNK EST DEU OECD NOR KOR FIN ESP FRA SWE LUX BEL ITA NLD PRT ISR

CAN USA GBR AUS NLD CHE ISR SWE FIN DEU DNK OECD AUT BEL PRT KOR EST NOR ESP FRA ITA LUX

0

0,5

Note: The index ranges from 0 (low regulatory protection) to 6 (high regulatory protection).

Source: OECD (2020), OECD Employment Protection Database.

0

The share of flexible workers has increased % of population 15-75 80

% of population 15-75 80 2010

70

2019

70

60

60

50

50

40

40

30

30

20

20

10

10

0

0

Permanent employees

Self-employed (with employees)

Flexible employees

Self-employed (without employees)

Source: Statistics Netherlands (CBS): De arbeidsmarkt in cijfers 2019 [The labour market in numbers 2019]; and CBS open data platform.

Women’s labour participation is rising Employment, 15-64 year-olds Number of persons, millions 6 5

Number of persons, millions 6 Women 5

Men

Source: OECD (2021), OECD Labour Force Statistics (database).

2019

2016

2013

2010

2007

2004

2001

1998

0

1995

0

1992

1 1989

1 1986

2

1983

2

1980

3

1977

3

1974

4

1971

4

Nearly 60% of women work part-time Gender gap in working hours % 30

% 30

24

24

18

18

12

12

6

6

0

0

SWE

OECD

Note: Average usual weekly hours worked on the main job.

Source: OECD (2021), OECD Labour Force Statistics (database).

DEU

NLD

More part-time work means lower pay and pensions for women Gap between women’s and men’s pensions as a share of men’s pensions % 50

% 50

40

40

30

30

20

20

10

10

0

0

Note: The figure refers to population aged 65 or older. Gender gap in pensions calculated using the following formula: 1 – women’s average pension / men’s average pension. It includes persons who obtain old-age benefit (public or private), survival pension or disability benefit.

Source: OECD (2019), Pensions at a Glance 2019: OECD and G20 Indicators and Eurostat (2021), Gender pay gap in unadjusted form by NACE Rev. 2 activity.

Recommendations to reduce labour market duality and inequalities • Implement the Commission for the Regulation of Work recommendations, including:

– Allow employers to adapt jobs, workplace and working hours of regular employees in line with the needs of the economy.

– Align tax rates and social security contributions between contract types for workers doing similar jobs.

• Go further than current plans in reserving leave entitlements following childbirth for partners.

• Increase leave replacement rates after the birth of a child for partners to the level available to mothers.

• Reduce user prices for childcare.

INVESTING IN THE ENVIRONMENT

Many are exposed to air pollution Exposure to more than 10 micrograms/m3 % of population 100 90 80 70 60 50 40 30 20 10 0

HUN SVK ISR POL SVN TUR CRI CZE MEX KOR COL CHL NLD JPN GRC BEL ITA DEU AUT EU-27 LVA FRA LUX OECD GBR LTU CHE ESP DNK PRT USA ISL CAN SWE NOR IRL AUS EST FIN NZL

% of population 100 90 80 70 60 50 40 30 20 10 0

Source: OECD (2021), Air pollution exposure (indicator)

High nitrogen emissions constrain investment Nitrogen emissions per capita

Nitrogen emissions per km2

Kg 30

Tonnes 7 6

25

5

20

4

15

3

10

2

5

1

0

0

EU-27

Netherlands

Note: SO2 equivalent emissions of NOx and NH3.

Source: Eurostat

EU-27

Netherlands

Air quality improved only temporarily during the pandemic % difference in air pollution per month compared to average of 2018 & 2019 NO2

60

PM2.5

PM10

40

Oxford Stringency Index 80.1-100

20 0

70.1-80

-20

55.1-70

-40

40.1-55 0.1-40

-60 -80 Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Note: Air pollution per month is calculated as monthly average (µg/m3) over all measurement stations Source: European environment agency; Hale et al. and Oxford COVID-19 Government Response Tracker, Blavatnik School of Government.

Even more must be done to meet emission targets Megatons of CO2 equivalent 200

200

180

180

160 140 120 100

Baseline projection¹

160

Additional policy measures

140

NLD Climate Act

2015

120

2020

2025

2030

100

Note: 1.Baseline projections are from the Netherlands Environmental Assessment Agency and based on policy planned and outlined by May 2020.

Source: PBL Netherlands and RIVM.

Recommendations to invest in the environment • Make emission pricing more consistent across sectors and fuels not covered by the EU emissions trading scheme.

• Consolidate instruments to manage transferable nitrogen emission rights to further facilitate standardisation and transfer of rights.

• Further enhance cross-border cooperation to tackle the nitrogen problem.

BOOSTING PRODUCTIVITY

Productivity growth has been slow Labour productivity growth 5

% annual average, 2009-19

% annual average, 2009-19 5 4

3

3

2

2

1

1

0

0

-1

-1

-2

-2

MEX LUX ITA NOR GBR NLD NZL BEL AUT FIN USA FRA PRT CAN OECD ESP ISL DEU CHE SWE AUS JPN HUN CHL ISR DNK SVN CZE SVK EST TUR LTU KOR LVA POL

4

Note: Labour productivity is measured as real GDP per hour Source: OECD (2021), OECD Productivity Statistics (database).

The Netherlands could be more digitalised ICT adoption, composite index, 2019 Index 100

90

90

80

80

70

70

60

60

50

50

40

40

COL MEX TUR CHL HUN ITA GRC POL AUT IRL BEL ISR CZE SVN SVK DEU CAN PRT OECD GBR AUS FRA USA NLD NZL LUX ESP CHE EST LVA FIN LTU NOR DNK ISL JPN SWE KOR

Index 100

Note: For more information on composite index see survey.

Source: World Economic Forum (2019), Global Competitiveness Report Pillar 3 ICT Adoption, October.

High levels of teleworking helped during the crisis % of respondents working from home 70 Before COVID 19 60

% of respondents working from home 70 During COVID 19 60

Source: Eurofound (2020), Living, working and COVID-19 dataset.

FIN

LUX

BEL

NLD

DNK

IRL

AUT

SWE

ITA

CZE

PRT

FRA

0

LTU

0

DEU

10 EU

10 EST

20

POL

20

SVK

30

LVA

30

ESP

40

HUN

40

GRC

50

SVN

50

Small firms lag behind in the adoption of digital technologies Businesses using selected digital technologies (% of firms), by size class % of firms 100

Small

Medium

Large

80

% of firms 90 80 70 60

60

50 40

40

30 20

20

10 0

Cloud computing

Big data analysis

0

Note: Firms with at least 10 employees. Small firms are those having 10-49 employees, medium-sized firms 50-249 employees, and large firms 250 employees or more.

Source: OECD (2021), ICT Access and Usage by Business (database).

Employment in some sectors hard-hit by COVID-19 is also vulnerable to automation 75

% pts

Hours worked (LHS)

Risk of automation (RHS)

Index

75

50

50

25

25

0

0

-25

-25

-50

-50

-75

-75

Information & communication

Wholesale & retail trade

Manufacturing Transportation Administrative Accommodation & storage & & support services food services

Note: Data on hours worked refer to the percentage change between 2019Q2 and 2020Q2.

Source: Author's calculations based on Nedelkoska and Quintini (2018) and Eurostat (2021), Short-term business statistics.

Spending on training is relatively low Labour market policy spending per unemployed (% of GDP per capita) by policy type, 2018 or latest % of GDP per capita 0,5 Training 0,4

% of GDP per capita 0,5 0.76

Other labour market policies

0,4 0,3

0,2

0,2

0,1

0,1

0

MEX GRC CHL USA LVA CAN AUS ISR NZL SVN ITA ESP SVK JPN IRL KOR EST PRT FRA OECD CHE NOR POL FIN CZE NLD LUX SWE HUN AUT DEU BEL DNK

0,3

Note: Other labour market policies includes: Early retirement & job sharing, PES & placement, Recruitment incentives, start-up incentives & direct job creation.

Source: OECD (2020), Labour Market Programmes (database); and OECD (2020), OECD Economic Outlook: Statistics and Projections (database).

0

Recommendations to boost productivity • Increase direct support to SMEs to facilitate the adoption of digital tools, including business advisory services and testing facilities.

• Encourage enterprises to implement existing digital security standards.

• Increase training subsidies to jobseekers and workers with high up-skilling and re-skilling needs.

For more information Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

Borowiecki, M. et al. (2021), “Can intangibles and digital adoption lift productivity growth? Firm-level evidence from the Netherlands”, OECD Economics Department Working Papers, forthcoming, OECD, Paris.

https://www.oecd.org/economy/netherlands-economic-snapshot/

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