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- GDP (PPP):
- $832.6 billion
- 1.9% growth
- 0.6% 5-year compound annual growth
- $49,166 per capita
- Inflation (CPI):
- FDI Inflow:
The economy of the Netherlands benefits from a traditional emphasis on the rule of law and a robust legal framework. The judicial system, independent and free of corruption, provides strong protection of property rights. Openness to global trade and investment is well established, and the overall regulatory environment remains transparent and efficient.
Government spending has been expansive, but the coalition government has made some progress in narrowing the budget deficit. Cuts in health care and social security spending have helped to place public finances on a more secure footing. In an attempt to strengthen work incentives and reduce fiscal pressures, the government has introduced reforms in the labor market and pensions.
The center-right coalition led by Prime Minister Mark Rutte collapsed in April 2012 when the Freedom Party’s Geert Wilders refused to back Rutte’s austerity package. Rutte’s center-right People’s Party for Freedom and Democracy and its principal coalition partner, the center-left Labor Party, won increased support during elections in September 2012. The Netherlands is a founding member of the European Union but under Rutte’s leadership has been one of the most outspoken supporters of turning power back to EU member states. Euroscepticism is on the rise: In an April 2016 countrywide referendum, Dutch voters voted against approving an EU–Ukraine Association agreement.
The legal framework ensures strong protection of private property rights and enforcement of contracts. Independent of political interference, the judiciary is respected and provides fair adjudication of disputes. There are few problems with political corruption. Effective anticorruption measures and minimal tolerance for corruption ensure government integrity. The Netherlands is a signatory to all major international anticorruption conventions.
The top personal income tax rate is 52 percent, and the top corporate tax rate is 25 percent. Other taxes include a value-added tax and environmental taxes. The overall tax burden equals 36.7 percent of total domestic income. Government spending has amounted to 45.8 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.2 percent of GDP. Public debt is equivalent to 67.6 percent of GDP.
The overall regulatory framework is transparent and competitive. The efficient business framework is conducive to innovation and productivity growth. Monetary stability has been well maintained. Labor regulations are relatively rigid. The nonsalary cost of employing a worker is high, and dismissing an employee is relatively costly. Price controls are in place only for pharmaceuticals.
Trade is extremely important to the economy of the Netherlands; the value of exports and imports taken together equals 154 percent of GDP. The average applied tariff rate is 1.5 percent. There is no general screening of foreign investment, and investment in most sectors of the economy is not restricted. Sensible banking regulations facilitate dynamic entrepreneurial activity, and lending practices are prudent.