Coronavirus expected to hand Netherlands worst-ever budget deficit
The Ministry of Finance is projecting a 92-billion euro budget deficit for 2020 in part because of all emergency measures the government is implementing to cushion the blow caused by the coronavirus pandemic. The country's debt level is likely to rise to levels higher than what is permitted by the European Union, according Wopke Hoekstra, the country's finance minister.
The budget deficit will be approximately 11.8 percent of gross domestic product, Hoekstra wrote in an annual memorandum. The country has not run an annual deficit that high in at least 25 years, according to data from Statistics Netherlands dating back to 1999.
"The year is not yet half over, yet the 2020 budget has already been thoroughly adjusted due to the coronavirus. We know one thing for sure: significant changes will follow this year," the ministry said.
European Union member states are required to cap their annual budget deficit to three percent of GDP. Public debt must not exeed 60 percent of GDP, a rule which the Cabinet said is being suspended in light of "the exceptional circumstances."
At the current projections, the Netherlands could see public debt soar to 65.2 percent of GDP. At the end of 2019, the country carried 395 billion euros in debt.
Coronavirus caused a shocking financial twist for the Netherlands, which ran a 1.7 percent surplus last year equivalent to 14.1 billion euros, according to Statistics Netherlands. It had posted a surplus for four straight years.
Even during the most recent financial crisis, which started in 2008, the budget deficit never went beyond 5.2 percent.
"The cabinet expects a significant economic contraction, can count on significantly lower tax revenues, and is also spending a significant amount of money on support measures," the ministry wrote.
But with many individuals and businesses allowed to postpone various taxes in 2020, the government will need to borrow up to 65 billion euros just to cover spending through the second quarter, which ends in May. Deferred tax payments are likely to total between 35 and 45 billion euros.
"The corona virus deeply affects the lives of all Dutch people. In the first place because people get sick or lose a loved one. But also because people are affected in their work, because there are no more orders coming in, they no longer have work for their staff or are not sure whether they can keep their jobs," the ministry said.