2022 Index of Economic Freedom

Netherlands

OVERALL SCORE79.5
WORLD RANK8
Rule of Law

Property Rights96.2

Judicial Effectiveness96.9

Government Integrity92.3

Government Size

Tax Burden51.2

Government Spending45.4

Fiscal Health93.6

Regulatory Efficiency

Business Freedom88.1

Labor Freedom58.9

Monetary Freedom82.1

Open Markets

Trade Freedom79.2

Investment Freedom90.0

Financial Freedom80.0

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Quick Facts
  • Population:
    • 17.4 million
  • GDP (PPP):
    • $1.0 trillion
    • -3.8% growth
    • 1.1% 5-year compound annual growth
    • $57,534 per capita
  • Unemployment:
    • 4.1%
  • Inflation (CPI):
    • 1.1%
  • FDI Inflow:
    • $-115300.0 million

The Netherlands’ economic freedom score is 79.5, making its economy the 8th freest in the 2022 Index. The Netherlands is ranked 5th among 45 countries in the Europe region, and its overall score is above the regional and world averages.

The Dutch economy slowed from 2017 to 2019, turned negative in 2020, and rebounded in 2021. During those five years, economic freedom has expanded. Lifted by improvements in scores for rule of law and fiscal health, the Netherlands has recorded a 3.7-point overall gain of economic freedom since 2017 and has moved to the top of the “Mostly Free” category. Nine of the Netherlands’ indicators are strongly positive, but the economy remains burdened by heavy taxation and government spending.

IMPACT OF COVID-19: As of December 1, 2021, 19,909 deaths had been attributed to the pandemic in the Netherlands, and the government’s response to the crisis ranked 53rd among the countries included in this Index in terms of its stringency. The economy contracted by 3.8 percent in 2020.

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Background

Prime Minister Mark Rutte resigned in January 2021 after a scandal involving child welfare payments. His center-right People’s Party for Freedom and Democracy lost seats in the March 2021 elections but remains the largest party in Parliament. Coalition negotiations to form a new government, which Prime Minister Rutte is expected to lead, were ongoing in December. Reductions in the Netherlands’ annual budget contributions helped to secure Dutch support for the EU’s coronavirus recovery fund. A European transportation hub, the Netherlands has the EU’s fifth-largest economy, supported by exports of chemicals, refined petroleum, and electrical machinery as well as by a highly mechanized and profitable agricultural sector.

Rule of Law

Property Rights 96.2 Create a Graph using this measurement

Judicial Effectiveness 96.9 Create a Graph using this measurement

Government Integrity 92.3 Create a Graph using this measurement

Private property rights are strongly protected, and contracts are reliably enforced. The judiciary is independent of political interference and provides impartial adjudication of disputes. Tolerance for political corruption is very low, and any cases that do arise are prosecuted expeditiously. Anticorruption laws are effective and promote government integrity. The Netherlands is a signatory to major international anticorruption conventions.

Government Size

The top individual 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 39.3 percent of total domestic income. Government spending has amounted to 42.7 percent of total output (GDP) over the past three years, and budget deficits have averaged 0.6 percent of GDP. Public debt is equivalent to 54.0 percent of GDP.

Regulatory Efficiency

It is not hard to start a business or resolve insolvency in the Netherlands. The business community is known for its innovation. The labor market is heavily regulated. Participation in the labor market by older workers is growing. The number of independent contractors has been rising. The government has funded a $2.4 billion subsidy for construction of one of the world’s largest carbon capture and storage projects.

Open Markets

As a member of the EU, the Netherlands has 46 preferential trade agreements in force. The trade weighted average tariff rate (common among EU members) is 2.9 percent with 640 EU-mandated nontariff measures in force. The Netherlands has an additional four country-specific nontariff barriers. There is no restrictive screening of foreign investment, and most sectors are open. Sensible banking regulations facilitate entrepreneurial growth.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Switzerland84.22.3
2Ireland820.6
3Luxembourg80.64.6
4Estonia801.8
5Netherlands79.52.7
6Finland78.32.2
7Denmark780.2
8Sweden77.93.2
9Iceland77-0.4
10Norway76.93.5
11Germany76.13.6
12Lithuania75.8-1.1
13Latvia74.82.5
14Czech Republic74.40.6
15Austria73.8-0.1
16Cyprus72.91.5
17United Kingdom72.7-5.7
18Georgia71.8-5.4
19Malta71.51.3
20Bulgaria710.6
21Portugal70.83.3
22Slovenia70.52.2
23Slovak Republic69.73.4
24Belgium69.6-0.5
25Poland68.7-1.0
26Spain68.2-1.7
27Croatia67.64.0
28Romania67.1-2.4
29Hungary66.9-0.3
30Albania66.61.4
31France65.90.2
32North Macedonia65.7-2.9
33Italy65.40.5
34Armenia65.3-6.6
35Serbia65.2-2.0
36Bosnia and Herzegovina63.40.5
37Azerbaijan61.6-8.5
38Greece61.50.6
39Moldova61.3-1.2
40Kosovo60.1-6.4
41Montenegro57.8-5.6
42Turkey56.9-7.1
43Russia56.1-5.4
44Ukraine54.1-2.1
45Belarus53-8.0
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