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- GDP (PPP):
- $798.6 billion
- 0.9% growth
- 0.3% 5-year compound annual growth
- $47,355 per capita
- Inflation (CPI):
- FDI Inflow:
The Netherlands maintains a flexible and competitive economy that benefits from openness to global trade and investment and from an efficient regulatory environment that encourages robust entrepreneurial activity. Monetary stability is well maintained, and the judicial system, independent and free of corruption, provides strong protection for property rights.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 74.6 (up 0.9 point)
- Economic Freedom Status: Mostly Free
- Global Ranking: 16th
- Regional Ranking: 7th in Europe
- Notable Successes: Rule of Law, Open Markets, and Regulatory Efficiency
- Concerns: Management of Public Finance
- Overall Score Change Since 2012: +1.3
Fiscal policy remains a concern. Government spending remains high, pushing public debt to over 65 percent of GDP. Spending on subsidies, unemployment support, and other social transfers has kept the budget balance negative. The government has announced plans to reform the burdensome and complex tax regime.
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 party, the 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. The Dutch economy was one of the hardest hit by the 2008 financial crisis but has rebounded with solid growth. Today, it is a center of international commerce. Important sectors include tourism, manufacturing, technology, and agriculture.
Political corruption presents few problems. Effective anti-corruption measures and minimal societal tolerance for graft ensure government integrity. The Netherlands is a signatory to all major international anti-corruption conventions. 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.
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 37.4 percent of total domestic income. Government spending amounts to 46.8 percent of GDP. The budget has been in deficit, and public debt exceeds 65 percent of GDP. The pension system has been reformed to address spiraling costs.
The overall regulatory framework is transparent and competitive. Launching a business is subject to minimum capital requirements, but establishing a company takes only five days. Labor regulations are relatively rigid, and the non-salary cost of employing a worker is high. Monetary stability has been well maintained, but the government subsidizes mortgages and heavily controls, subsidizes, and regulates the prices of wind energy.
EU members have a 1 percent average tariff rate. Trade agreements are currently being negotiated with countries that include the United States and Japan. There is no general screening of foreign investment, but investment in a few sectors is restricted. The well-developed financial sector has been competitive, although the banking sector is under strain and has become more oriented toward the domestic market.