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- GDP (PPP):
- $869.4 billion
- 1.9% growth
- 0.8% 5-year compound annual growth
- $51,049 per capita
- Inflation (CPI):
- FDI Inflow:
The Netherlands’ economic freedom score is 76.2, making its economy the 17th freest in the 2018 Index. Its overall score has increased by 0.4 point, with improvements in fiscal health and judicial effectiveness offsetting a significant decline in labor freedom. The Netherlands is ranked 10th among 44 countries in the Europe region, and its overall score is above the regional and world averages.
The Netherlands’s economy flourishes through openness to global trade and investment and an honest and independent judicial system that provides strong protection of property rights and fosters the rule of law. The most recent government’s priorities have been fiscal consolidation and implementation of some structural reforms, including reform of the labor market. The official retirement age will rise gradually by 2021. This will help to put public finances on a broadly sustainable medium-term to long-term path, provided policies are not changed by a new government.
Prime Minister Mark Rutte’s center-right People’s Party for Freedom and Democracy won the most seats in the March 2017 parliamentary elections. With Euroscepticism on the rise, Geert Wilders’ populist Party for Freedom won the second-largest number of seats. Coalition talks among the VVD and several smaller parties continued until late 2017. Although the Netherlands is a founding member of the European Union, Rutte has been an outspoken supporter of turning power back to EU member states. The Netherlands is the EU’s seventh-largest economy and a transportation hub. Leading economic sectors include chemicals, petroleum refining, and electrical machinery. A highly mechanized agricultural sector provides large surpluses that have made the country the world’s second-largest agricultural exporter.
Rights to real and moveable private property are strongly protected, and contracts are enforced within an excellent legal framework. Independent of political interference, the judiciary is respected and provides fair adjudication of disputes. The Netherlands has few problems with political corruption; anticorruption measures are effective, and societal tolerance of corruption is minimal.
The top personal income tax rate is 52 percent, and the top corporate tax rate is 25 percent. Other taxes include value-added and environmental taxes. The overall tax burden equals 37.8 percent of total domestic income. Over the past three years, government spending has amounted to 45.0 percent of total output (GDP), and budget deficits have averaged 1.6 percent of GDP. Public debt is equivalent to 62.6 percent of GDP.
Business freedom is protected effectively under a transparent and efficient system of regulations. The labor market, however, is overly controlled. Nonsalary labor costs are high, and dismissing a worker is relatively costly. The government is phasing out subsidies for renewable energy. Price controls are in place only for pharmaceuticals.
Trade is extremely important to the Netherlands’ economy; the combined value of exports and imports equals 151 percent of GDP. The average applied tariff rate is 1.6 percent. Nontariff barriers impede some trade. In general, government policies do not significantly interfere with foreign investment. The well-developed financial sector has been competitive, but the banking sector, under strain, has become more oriented toward the domestic market.