UPDATE DUTCH POLITICS: Dutch economy is solid but growth is slowing

On Budget Day (known as ‘Prinsjesdag’, or ‘Prince’s Day’), the third Tuesday of September, the Dutch government announces its plans and ambitions for the coming year. King Willem-Alexander travels in the Glass Coach to the Hall of Knights in The Hague, where he reads the Speech from the Throne, officially opening the parliamentary year.

In addition, the Minister of Finance presents the government budget for the upcoming year, which will be followed by a cycle of parliamentary debates, lasting until the beginning of December.

Key message from this years  King’s Speech is that the Netherlands is doing well (high economic growth, low unemployment), but that in the years to follow economic growth is expected to decrease (due to external factors like Brexit).

Key elements of the King’s Speech & Government budget 2020:

• The Dutch economy is still doing well: this year economic growth will be 1,8% and in 2020 it will be 1,5% of GDP.
• Overall the economy is still strong – with a national debt to decrease to less than 50% of GDP.
• Unemployment rate will increase slightly from 3,5 % this year.
• Factors that impact international trade continue to affect the Dutch economy, as the Netherlands’ internationally oriented economy is vulnerable to global market disturbances (like Brexit).
• Following the above the King made a warning to think about how the Netherlands can earn its money in the future (in both the short and the long term).
• Additional investments include measures to reduce costs for households, affordable housing, youth care, defence and the accelerated phasing out of Groningen gas production. The cabinet also wants to put the pension agreement and climate agreements into practice, to develop a sustainable country and a future-proof pension system.
• Additional budget will also be made available to get housing back on track (100 million euros annually and about one billion euros to build more houses in the coming years). The government is also working on a large investment fund that will include extra government loans.
• The health care premium will increase to an average of 1,421 euros per year (increase of an average of 37 euros per year).
• The government will investigate the possibilities for further investment in innovation, knowledge development and infrastructure, among other things. To this end, the government is working out the contours of an investment fund that will form the basis for ‘effective investments to increase the earning capacity in the long term’.
• The business community foots part of the bill and the government has accepted a smaller budget surplus (0.3% instead of 0,5% (as forecasted).
• Corporate income tax cuts will be delayed and won’t be as high as expected.
• From 2021 onwards, multinationals will be able to offset fewer international losses. The aim was to limit the so-called liquidation loss set-off, but the deduction option remains only for subsidiaries (at least 25% of shares, located in the EU and for a maximum of three years).
• The full King’s speech (in English) can be viewed via this link.