Dutch economy doing well, wages lag behind, IMF says
The outlook for the Netherlands economy is still positive, the International Monetary Fund said in its annual report on the Netherlands. The IMF again raised concerns about the growth of wages in the country being smaller than other countries with comparable economies. Annual wage growth in the Netherlands is around 1 percent, too little to compensate for inflation, the IMF said, NOS and ANP report.
The IMF slightly reduced its economic growth estimate for the Netherlands from 3.2 percent to 3.1 percent for this year. Next year the Dutch economy is expected to grow by 2.4 percent, the same as previous estimates.
The Dutch economic recovery will continue for the time being, mainly thanks to increasing consumption and investment, according to the IMF. Though the fund warns of lurking risks like uncertainty about the Brexit and the emerging protectionism in the world.
Inflation in the Netherlands is still low, partly because of the slow growth in wages. The IMF has been saying for some time that Dutch employees can benefit more from the growing economy. In February IMF member Thomas Dorsey also said that Dutch trade unions should fight harder for higher wages.
Other issues raised by the IMF in February, are also mentioned in this report. The IMF notes that the Dutch housing market is stalled due to a lack of affordable rental housing. The fund wants the housing market to be further reformed, for example by reducing the mortgage interest deduction more quickly and further reducing mortgage debt. The financial sector should work on expanding its buffers further in the coming years.
It is important that politicians speed up the reform of the pension system, according to the IMF. The pension system must be more transparent and pensions must be distributed more fairly between the generations. The IMF also notes that the growth of employment is mainly due to an increase in flexible employees - people working with temporary contracts and the self-employed. The IMF is therefore pleased that the government is looking into how to make permanent contracts more attractive for employers, and how to prevent the abuse of flexible workers.
The IMF called it good that the Netherlands is working on preventing tax evasion by large multinationals, though it is still too early to assess what effect the measures announced by the government will have.