Public debt at 1.7 percent after third quarter

Statistics Netherlands (CBS) reports that the public deficit over the period Q4 2014 - Q3 2015 amounts to 1.7 percent of the gross domestic product (GDP). During this period public expenditure exceeded public revenue by 11.4 billion euros. One of the criteria set by the European Union (EU) is that the public deficit over an entire calendar year should not exceed 3 percent of GDP.

Public deficit in Q4 generally lower

The deficit over the first three quarters was lower than the 2.2 percent of GDP estimated in December by the Netherlands Bureau for Economic Policy Analysis for the entire year 2015. To reach this target, the deficit over the fourth quarter must be approximately 3 billion euros. In the last three years, the Q4 deficit has always been less than 3 billion euros. Generally, the public deficit in the fourth quarter tends to be lower than in the other three quarters.

Public revenue up, public expenditure down

The deficit over 2014 amounted to 2.4 percent of GDP. Over the first three quarters of 2015, the deficit shrank to 1.7 percent as a result of lower expenses and higher revenues. Expenditure was reduced by 2.5 billion euros, partly because interest costs were low.

Public revenues over the first three quarters of 2015 fell by 1.7 billion euros relative to the same period last year. As the economy picked up, revenues from VAT, corporate tax and wage and income tax increased. Revenues from health care insurance premiums also increased. Several temporary tax measures, e.g. the resolution levy for banks and the crisis levy for high wages were discontinued, which pushed down total tax revenue. On balance, revenue from taxes and premiums and contributions rose by 4.2 billion euros. Revenue from sources other than taxes fell by 2.5 billion euros. Natural gas revenues decreased dramatically, as natural gas prices fell and the volume of natural gas extracted in the Netherlands was cut down to reduce the risk of earthquakes in the province of Groningen.

Debt-to-GDP ratio reduced to 66.3 percent

By the end of the third quarter, public debt was just over 447 billion euros, i.e. 66.3 percent of GDP. Public debt has been reduced by nearly 5 billion euros since the beginning of 2015. In spite of the deficits, public debt could be reduced because money became available as outstanding loans were repaid. Local governments, for example, received nearly 2 billion euros from Vattenfall for the sale of Dutch energy company Nuon. Currently, the debt-to-GDP ratio is nearly 2 percentage points lower than at the beginning of this year, but still far above the 60 percent criterion set by the European Union.

As from today, CBS will publish a monitor each quarter including various short articles on public finances.