Public deficit 27 billion euros in first nine months of 2020

In Q3, the government faced a deficit of 12 billion euros. This was still 24 billion euros in the second quarter. Due to the fact that the government had a positive balance of 9 billion euros over the first quarter, the deficit after three quarters amounts to 27 billion euros. Last year, the Netherlands still posted a surplus of 11 billion euros over the first three quarters.

COVID-19-related costs halved in Q3

In Q3, the government spent 10 billion euros more than one year previously. Over 6 billion euros is directly attributable to coronavirus-related expenses. In Q2, public spending was even18 billion euros higher than one year previously. This included approximately 13 billion euros which was spent due to public measures against coronavirus. This means that the additional costs related to COVID-19 were roughly halved in the next quarter. In total, during the first three quarters of 2020, the government incurred additional costs of around 20 billion euros as a result of the coronavirus measures. The bulk of this amount comprised the government’s wage subsidies (NOW scheme), which so far stand at 14 billion euros. Income support to help self-employed people through the coronavirus crisis (TOZO scheme) has so far cost more than 2 billion euros.

Lower tax revenues

In Q3, public revenue fell by over 1 billion euros relative to the same quarter in 2019. Tax and premium income decreased less rapidly than in the previous quarter: by approximately 1 billion euros, versus 5 billion euros in Q2 2020. In that quarter, the decrease was mainly due to lower revenues from corporate income tax. These revenues were also down in Q3, by slightly under 1 billion euros. Furthermore, the government received less dividend tax due to lower dividend payments. There was recovery in other tax collections relative to the previous quarter. Revenues from value added taxes, for example, increased slightly again.

Gross debt ratio stable at 55.2 percent

At the end of September, government debt came out at 441 billion euros, approximately 47 billion higher than at the end of 2019. This is equivalent to 55.2 percent of gross domestic product (GDP), 6.5 percentage points higher than at the end of last year.

The government balance and the debt-to-GDP ratio are important indicators for the state of public finances in a country. The Netherlands has complied with the 3 percent deficit criterion of the European Union since 2013; and it has complied with the European standard of fault of 60 percent since 2017. The 2021 Autumn Memorandum anticipates a debt level of nearly 49 billion euros by the end of 2020, equivalent to 6.2 percent of the estimated GDP. At the end of Q4, the government debt is expected to reach close to 449 billion euros or 57.4 percent of the estimated GDP.