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IMF Country Report No. 23/107

KINGDOM OF THE NETHERLANDS—NETHERLANDS

SELECTED ISSUES

March 2023

This paper on Ireland was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on February 8, 2023.

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Title page

KINGDOM OF THE NETHERLANDS—THE NETHERLANDS

SELECTED ISSUES

February 8, 2023

Approved By

European Department

Contents

• DUTCH INFLATION: DEVELOPMENTS, DRIVERS, AND THE RISK OF WAGE-PRICE SPIRAL

• A. Different Measures of Inflation: A Methodological Review

• B. The Role of Domestic and Global Factors: An Empirical Assessment

• C. Wholesale Energy Price Pass-Through

• D. Profits at Risk? Breaking Down the GDP Deflator

• E. Conclusions

• FIGURES

• 1. Dutch Inflation Developments

• 2. Measures of Inflation

• 3. Energy Consumption, Inflation Differential and Growth

• 4. Phillips Curve Coefficients for Headline and Core Inflation

• 5. Implied Contribution to Headline and Core Inflation

• 6. Gas and Electricity Prices for Households

• 7. Core Inflation Composition and Energy Pass-Through

• 8. NLD vs EA: GDP and ULC Composition

• 9. Quarterly GDP Deflator and ULC Composition in the Netherlands

• References

• ANNEX

• I. Phillips Curve Specification

• ASSESSING RECENT CLIMATE POLICY INITIATIVES IN THE NETHERLANDS

• A. Introduction

• B. Mitigation

• C. Assessing Climate Risks and Adaption Initiatives in the Netherlands

• D. Summary of Policy Recommendations

• FIGURES

• 1. Household Burden from Price Shocks and Budget Shares for Energy, Selected European Countries, 2022

• 2. Trends in International Fuel Prices

• 3. Impact of €50 Pure Carbon Charge on Production Costs for Selected Industries in the Netherlands, 2030

• 4. Impact of a €25/tCO2 Carbon Tax on Residential Natural Gas Prices in the Netherlands

• 5. Projected Revenue from Km-Based Taxation, 2030

• 6. Current and Efficient Fuel Prices, Selected European Countries, 2020

• 7. Temperature and Precipitations: Observed Trends and Projections

• 8. Extreme Heat and Intense Rainfall: Projections

• 9. Projections of Drought Indicators

• 10. Debt-to-GDP Under Different Climate Change Scenarios

• BOXES

• 1. Supporting Public Investments in Clean Technology Infrastructure

• 2. The Delta Programme

• 3. A Stylized Cost-Benefit Analysis of SLR Using CIAM from 2050 to 2079

• TABLES

• 1. Climate-Related Investments in the Dutch Recovery and Resilience Plan

• 2. Tax Rates on Natural Gas and Electricity by Consumption Bracket

• 3. Percent Change in GDP per Capita

• 4. Economic Damage from Weather and Climate-Related Extreme Events,1980–2020

• 5. Estimated Damage for 2018–2050

• 6. Welfare Change from Selected Climate Impacts (Percentage of GDP) for the Central Europe North region and EU-27+UK for Two Levels of Global Warming

• ANNEX

• I. The Coastal Impacts and Adaptation Model

• References

• HOUSING SUPPLY IN THE NETHERLANDS: THE ROAD TO MORE AFFORDABLE LIVING

• A. Introduction

• B. Existing Government Housing Policies and Socio-Economic Implications

• C. Challenges to Revive a Flagging Housing Supply

• D. The Way Forward: Government Proposals and Policy Recommendations

• E. Conclusions

• FIGURES

• 1. Demographic Trends and Housing Valuations

• 2. Tenant Structure and Housing Affordability

• 3. Housing Cost Burdens and Distributional Equity Implications

• 4. Housing Investment

• 5. Population Density and Construction Costs

• References