Government deficit at 0.3 percent of GDP in 2023

© Hollandse Hoogte / Lex van Lieshout
The Dutch government spent 3.5 billion euros more than it received in 2023. This is equivalent to 0.3 percent of gross domestic product (GDP), and was slightly higher than the 2022 deficit, which was 0.1 percent of GDP. At the end of 2023, government debt stood at 481 billion euros, almost the same level as at year-end 2022, while as a percentage of GDP it fell to 46.5 percent. This stood at 50.1 percent in the previous year. Statistics Netherlands (CBS) reports this on the basis of initial, provisional figures on government finance over the year 2023.
The general government balance and government debt are the main indicators for the current public finance requirements. The European convergence criteria allow a maximum deficit of 3 percent of GDP and a maximum debt level of 60 percent of GDP. Since 2017, the Dutch government's deficit and debt have met these European standards, with the exception of 2020 when the deficit slightly exceeded 3 percent.
The government's 2023 deficit is lower than previously estimated by the CPB Netherlands Bureau for Economic Policy Analysis and the Ministry of Finance, among others. The Autumn Memorandum of November 2023, for example, assumed a budget deficit of 1.8 percent of GDP. Revenue deficits have been below the Autumn Memorandum estimates in recent years, especially from 2020 onwards.

Government revenues rose by 7 percent

Government revenues increased by approximately 7 percent in 2023 compared to 2022. Taxes and contributions rose by more than 35 billion euros. Revenue from wage and income taxes increased the most, by 10 billion euros. Revenue from corporate tax also increased by 9 billion euros compared to 2022. Revenue from dividend tax grew relatively strongly by 6 billion euros, which was double the amount received inthe previous year. This was likely due to a planned rate adjustment in the income tax rate for box 2 in 2024, which means that higher income will be taxed more heavily. Owner-manager shareholders may have chosen to distribute more profit to themselves in 2023, so that it would be taxed under the old rate. Higher prices for products and services led to higher tax revenues, including VAT (6 billion euros), while other revenues actually decreased by 5 billion euros. Due in part to lower energy prices in 2023, the government earned less from natural gas than in 2022.

Expenditure up by 8 percent

In 2023, expenditure rose by nearly 8 percent relative to one year previously. Of the 33 billion euro increase, 20 billion extra was spent on social benefits in cash and in kind, which also includes spending on healthcare. The government increased supplementary benefits in 2023, as well as other benefits that went up due to indexation. Relative to 2022, an additional 6 billion euros was spent on government employee salaries and an additional 7 billion on purchasing goods and services. This seems to be mainly a result of higher prices. Other expenses showed pluses and minuses. Higher spending on interest and capital transfers were offset by lower expenditure on subsidies and other current transfers.

Debt fell to 46.5 percent of GDP

At the end of 2023, public debt was more or less at the same level as one year previously, at 481 billion euros. This was largely due to the small deficit in 2023, which increased the debt slightly. On the other hand, the utilisation of bank balances and deposits and receipts from other financial assets allowed debt to be reduced.

Public debt as a percentage of GDP was down 3.7 percentage points relative to one year previously, when the gross debt ratio was 50.1 percent. This decline was due to relatively strong GDP growth of 8 percent in 2023, mainly due to higher prices. Over the past 30 years, only the debt-to-GDP ratios at the end of 2006 and 2007 have been lower. However, euro-denominated debt was more than 210 billion lower then.

Sources