Dutch debt level falls amid €3 billion surplus; Recession slightly worse than thought

The Dutch government managed to bring down the national debt, while collecting a surplus of 3 billion euros in revenue during the first three quarters of the year. Statistics Netherlands said on Friday. Despite the positive news, it also became clear that the contraction of the Dutch economy was slightly worse in the third quarter than previously thought. A new CBS estimate revised household consumption and investments downwards.

According to the national statistics office, the government achieved a surplus of 3 billion euros in the first three quarters of 2023. That is 2 billion euros more than the first three quarters of 2022. Government debt also decreased by almost 14 billion euros to 467 billion euros in the past three quarters.

The fact that more money has been collected than was spent is not because the government has suddenly become very frugal. Both revenue and expenditure showed a steady increase. Income, mainly from taxes and social security contributions, was 26 billion euros higher than in the same period last year. This amounts to an increase of almost nine percent. Government expenditure also rose sharply, but was less than the revenue collected at 24 billion euros.

This means that the government still has a significant amount of cash on hand that it could spend during the final three months of the year. The Ministry of Finance's autumn 2023 policy statement assumed a deficit of 18.3 billion euros for the whole of 2023. According to Statistics Netherlands, this means that the government could still spend another 21 billion euros above revenue collected in the last quarter of the year and still meet its projections.

Due to the decrease in government debt, the debt ratio has fallen to 45.9 percent, the lowest level in fifteen years. This means that the size of the national debt is now less than 46 percent of the total size of the Dutch economy. The Netherlands has therefore far surpassed the European standards that mandate a maximum debt of 60 percent of gross domestic product (GDP).

Still, the office did calculate that the GDP contracted by 0.3 percent in the third quarter, where earlier projections pegged that figure at 0.2 percent. This was due to companies investing less heavily in machinery, buildings and means of transport. The Dutch economy is still in recession, defined by two or more consecutive quarters of contraction.

It is no surprise that growth was still negative in this revised estimate. It appears that the Dutch economy will also shrink in the current quarter, CBS economist Peter Hein van Mulligen said in November. "The first signs show a continuation of previous quarters. Consumer confidence is still low and there has been no recovery in industry either."

At the same time, this did not mean that the Netherlands is heading towards an economic crisis, the economist said. "The labor market is still tight and there are not many bankruptcies. That is often not the case during an economic crisis."

For this second estimate, Statistics Netherlands used new information that was not previously available. On this basis, the contraction compared to a year earlier has also been revised.

Now Statistics Netherlands states that the Dutch economy has decreased in size by 0.8 percent in one year. According to the first calculation, the contraction was 0.6 percent. Statistics Netherlands said this adjustment is mainly caused by the new figures about industry, trade, the travel and temporary employment sectors.