Dutch government deficit and debt reduced considerably

25/03/2016 16:00

According to figures released today by Statistics Netherlands (CBS), the Netherlands’ general government deficit in 2015 came out at 1.8 percent of gross domestic product (GDP). This iss 0.6 percentage point lower than in the previous year. There was also a considerable reduction in the public debt-to-GDP ratio of 3.1 percentage points, resulting in 65.1 percent of GDP. These are the first official calculations of the actual government deficit and government debt of the Netherlands as will be reported to the European Commission today.

In 2015, the Dutch government ran a budget deficit of over 12 billion euros, i.e. 3 billion euros lower than in 2014. At 1.8 percent of GDP, last year’s budget deficit means the Netherlands remained below the 3 percent reference value for the third consecutive year. In 2012, it was twice as high at 3.9 percent of GDP, well above this standard. Last year’s deficit was slightly lower than expected: six months ago, the Budget Memorandum used an estimated deficit of 2.2 percent while earlier this month, the Netherlands Bureau for Economic Policy Analysis (CPB) used an estimate of 1.9 percent.

Public debt reduced by 10 billion euros

By the end of 2015, the Dutch national debt had reached a level of 442 billion euros, 10 billion euros lower than one year previously. The government was able to achieve debt reduction and finance its budget deficit with revenues from the sale of financial assets as well as loan repayments. For example, part of the ABN AMRO bank shares were sold on the stock market. Early termination of interest rate derivatives raised revenues further. The gross debt ratio thus came out at 65,1 percent.That is 3.1 percentage points lower than the ratio in December 2014, although it still exceeds the Euro convergence criteria of a 60 percent debt-to-GDP ratio. The lower debt ratio is not merely the result of debt redemption, but is to an equal extent related to an increase in GDP .

Government deficit and government debt
	EMU criteria	Deficit (left-hand axis)	Debt-to-GDP ratio (right-hand axis)
2001	60	0.3	48.7
2002	60	2.1	48.2
2003	60	3	49.3
2004	60	1.7	49.6
2005	60	0.3	48.9
2006	60	-0.2	44.5
2007	60	-0.2	42.4
2008	60	-0.2	54.5
2009	60	5.4	56.5
2010	60	5	59
2011	60	4.3	61.7
2012	60	3.9	66.4
2013	60	2.4	67.9
2014	60	2.4	68.2
2015	60	1.8	65.1

Government deficit and government debt
	EMU criteria	Deficit (left-hand axis)	Debt-to-GDP ratio (right-hand axis)
2001	60	0.3	48.7
2002	60	2.1	48.2
2003	60	3	49.3
2004	60	1.7	49.6
2005	60	0.3	48.9
2006	60	-0.2	44.5
2007	60	-0.2	42.4
2008	60	-0.2	54.5
2009	60	5.4	56.5
2010	60	5	59
2011	60	4.3	61.7
2012	60	3.9	66.4
2013	60	2.4	67.9
2014	60	2.4	68.2
2015	60	1.8	65.1

Natural gas revenues cut in half

Central government, primarily consisting of the government at national level, accounted for the bulk of the budget deficit; expenditure came out 11 billion euros in excess of revenues. One year previously, the deficit was 7 instead of 11 billion euros. The deficit increase was partly caused by an extra contribution to local governments and social security funds of 8 billion euros. Central government revenues increased somewhat by slightly under 3 billion euros. Tax revenues went up by almost 8 billion euros due to both tax measures and economic growth. However, other public revenues dropped sharply: natural gas revenues were no more than 5 billion euros last year, half the level of one year previously.

Natural gas revenues
	Natural gas revenues
2001	6.4
2002	5.3
2003	6
2004	6.7
2005	7.6
2006	10.6
2007	9.8
2008	15.1
2009	10.4
2010	10.7
2011	11.9
2012	14.6
2013	15.4
2014	10.3
2015	5.3

Natural gas revenues
	Natural gas revenues
2001	6.4
2002	5.3
2003	6
2004	6.7
2005	7.6
2006	10.6
2007	9.8
2008	15.1
2009	10.4
2010	10.7
2011	11.9
2012	14.6
2013	15.4
2014	10.3
2015	5.3

Social security funds in plus

In 2015, the social security funds sector ran a surplus of 1.2 billion euros after six years of heavy deficits. One of the underlying factors was the abolition of the AWBZ health care law and the introduction of an Act on Long-term Care (Wet Langdurige Zorg) following reforms in the social security system. The AWBZ care fund had shown heavy deficits in recent years, but the WLZ fund ran a slight budget surplus in its first year. The reforms in the social security system further led to shifts in expenditure. Social security funds compensated less health care expenditure, as municipal governments have taken over the funding of care for the elderly and long-term sick people.

Local government deficit stable, provincial deficits up

In 2015, the local government budget deficit amounted to slightly over 2 billion euros, the same as in the previous two years. Municipal government deficits increased somewhat to more than 1 billion euros. This level was also reached by the provincial governments last year, in contrast with the deficit of 2014 which was below 1 billion. As a result of decentralisation in the social sector, local governments’ expenditure went up. Health care expenditure, for example, rose by 7 billion euros while other expenditure was cut by 2 billion euros. On balance, expenditure by local governments increased by 4.5 billion euros. Revenues increased at a rate almost equal to the expenditure: mainly due to the transfer of revenues from central to local government, local government revenues increased at a rate nearly equal to that of expenditure.

Government expenditure remains stable

Since 2010, total government expenditure (adjusted for cash flows among the various governments) has been more or less stable at a level of over 300 billion euros. Revenues on the other hand increased following nominal GDP growth. In 2015, revenues failed to keep pace with GDP due to the decline in natural gas revenues.