IMF commends strong Dutch economic policy

2nd August 2006, Comments 0 comments

2 August 2006, AMSTERDAM — The economic recovery is gathering steam in the Netherlands, supported by the government's strong policies in recent years, the International Monetary Fund (IMF) has said.

2 August 2006

AMSTERDAM — The economic recovery is gathering steam in the Netherlands, supported by the government's strong policies in recent years, the International Monetary Fund (IMF) has said.

In its periodic 'Article IV Consultation' assessment of the Dutch economy, the Executive Board of the IMF noted the turnaround in public finances and structural reforms in key areas including healthcare, disability and financial supervision.

They commended the strong fiscal framework and noted that it meets or exceeds the good-practice standards set by the IMF.

The centre-right coalition government of Dutch Prime Minister Jan Peter Balkenende has faced significant public dissatisfaction since a comprehensive reform programme was introduced in 2003 to boost the country's flagging economy.

Opinion poll numbers for the Balkenende's Christian Democrats (CDA) and his Liberal (VVD) allies have begun to recover now that the economy is performing more strongly.

The Netherlands will experience a period of above average, while inflation will remain low, at about 1.5 percent, according to the IMF. But this would require continued tight controls.

"Looking ahead, Directors agreed that ensuring a solid foundation for sustained economic growth would require in particular ensuring the sustainability of public finances in the face of an ageing population, safeguarding financial stability, and undertaking further structural reforms to raise labour participation, hours worked, and overall productivity."

Continuing wage moderation would help to take full advantage of the global upturn, the IMF said.

The Directors welcomed the authorities comprehensive study on population ageing and recommended "early action to contain medium-term risks and to take advantage of of the current favourable economic environment". To achieve this, they advised achieving a government surplus of 1 percent of Gross Domestic Product (GDP) by 2011.

But fiscal sustainability in the face of an ageing population will also require structural reforms such as raising the retirement age and linking it to changes in life expectancy.

The report cautioned that the 2007 Budget could "turn somewhat expansionary now that the upturn is well in train". The Directors encouraged the Dutch government to "pursue at least a neutral fiscal stance this year and next, and to use any revenue overperformance or below-budget expenditure outturns for deficit reduction".

Click here for the full Article IV report and comment in Expatica's Discussion Forums.

[Copyright Expatica News 2006]

Subject: Dutch news, Netherlands economy

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