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- GDP (PPP):
- $707.0 billion
- -0.9% growth
- 0.0% 5-year compound annual growth
- $42,194 per capita
- Inflation (CPI):
- FDI Inflow:
The Netherlands’ economic freedom score is 74.2, making its economy the 15th freest in the 2014 Index. Its score is 0.7 point better than last year, with a strong improvement in business freedom more than balancing modest declines in several other freedoms. The Netherlands is ranked 6th out of 43 countries in the Europe region.
Over the 20-year history of the Index, the Netherlands’ economic freedom score has advanced by over 4 points. Improvements in half of the 10 economic freedoms, including significant gains in fiscal freedom, control of government spending, trade freedom, and investment freedom, have been partially offset by declines in monetary freedom and financial freedom. Considered “moderately free” in the 1990s, the Netherlands’ economy has been rated “mostly free” since 2000.
Open to global commerce, the Netherlands has long benefited from a high degree of regulatory efficiency that facilitates entrepreneurial activity. The judicial system provides strong protection for property rights. However, public spending continues to be quite high, and the overall tax regime is burdensome and complex.
In June 2010, Mark Rutte of the Peoples Party for Freedom and Democracy became prime minister as head of a center-right coalition. In April 2012, the coalition collapsed when the Freedom Party’s Geert Wilders refused to back Rutte’s austerity package. In early elections in September 2012, Rutte’s party and its principal coalition partner won increased support to maintain power. Under Rutte’s leadership, the Netherlands has been one of the staunchest supporters in the EU for turning power back to member states. The Netherlands is a center of international commerce. Rotterdam is one of the world’s largest ports and Europe’s largest in terms of cargo tonnage handled. The economy is sensitive to global market conditions, and in 2013, the Netherlands was one of nine members of the eurozone to be in recession.
The legal framework ensures strong protection of private property rights and enforcement of contracts. Citizens and foreigners purchasing real property receive equal treatment. Independent of political interference, the judiciary is respected and provides fair adjudication of disputes. Intellectual property rights are relatively well protected. Effective anti-corruption measures and minimal tolerance for corruption ensure government integrity.
The top individual income tax rate is 52 percent, and the top corporate tax rate is 25 percent. Other taxes include a value-added tax (VAT) and environmental taxes. The overall tax burden takes up 38.7 percent of gross domestic income. Public expenditures amount to about half the size of the domestic economy. The government has been in breach of EU deficit rules since 2009, and debt levels have reached over 70 percent of GDP.
The entrepreneurial framework is transparent and efficient. Starting a business takes four procedures and four days on average, but licensing can be time-consuming. The labor market lacks flexibility, but the non-salary cost of employment is not high in comparison to other countries in the region. Monetary stability has been well maintained, and the government has cut subsidies to offshore wind power projects.
EU members have a low 1.1 percent average tariff rate and, in general, few non-tariff barriers to trade. Foreign and domestic investors in the Netherlands are treated equally under the law. The well-developed financial sector has been competitive but has been forced to restructure drastically since 2009. The government has remained involved in the banking sector through ownership, guarantees, and capital injections.