Statement by the IMF Staff Representative June 13, 2007

The 2007 Article IV Consultation with the Kingdom of the Netherlands explains fiscal policy and financial sector issues. Improvements in the macroeconomic and business environments and technological innovation have contributed positively to Dutch competitiveness. Executive Directors emphasized that continued improvement in the underlying fiscal position requires tight spending control. They recommended that the authorities implement offsetting expenditure-reducing measures. They also commended the risk-oriented, cross-sectoral approach to financial sector supervision, pointing out that, in many respects, the design and implementation of supervision in the Netherlands are international best practice.

Abstract

The 2007 Article IV Consultation with the Kingdom of the Netherlands explains fiscal policy and financial sector issues. Improvements in the macroeconomic and business environments and technological innovation have contributed positively to Dutch competitiveness. Executive Directors emphasized that continued improvement in the underlying fiscal position requires tight spending control. They recommended that the authorities implement offsetting expenditure-reducing measures. They also commended the risk-oriented, cross-sectoral approach to financial sector supervision, pointing out that, in many respects, the design and implementation of supervision in the Netherlands are international best practice.

1. This staff statement provides information on developments that has become available since the preparation of the staff report for the 2007 Article IV Consultation. The new information does not alter the thrust of the staff appraisal.

2. Recent data are broadly in line with staff projections. Real GDP in the first quarter of 2007 was 0.6 percent higher than in the previous quarter (2.5 percent higher than a year earlier). Meanwhile, consumer and producer confidence have remained strong through May 2007; unemployment has continued to fall, with the number of unemployed in April 2007 reaching the lowest level in four years; and year-on-year CPI inflation in May (HICP basis) was 2.0 percent.

3. The 2007 fiscal deficit is now officially projected to be larger than reported in the staff report. In particular, in the Spring Memorandum (a document sent by the ministry of finance to parliament in late May that contains a midyear overview of the current budget), the authorities project a 2007 general government deficit of 0.7 percent of GDP (versus their earlier projection of a deficit of 0.1-0.3 percent of GDP as noted in the staff report). This widening of the projected deficit mainly reflects lower natural gas revenues and health sector overruns. The revision strengthens the staff report’s case for early remedial actions to tighten the fiscal stance and return to a course of fiscal consolidation.

Kingdom of the Netherlands: Netherlands: 2007 Article IV Consultation: Staff Report; Staff Statement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for the Kingdom of the Netherlands: Netherlands
Author: International Monetary Fund