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Government finances marked by crisis

News item | 17-05-2010

The effects of the financial crisis on the real economy rapidly became painfully apparent in 2009. The difference between the economic forecasts and actual developments have never been bigger than in 2009.

The Dutch economy contracted by 4 per cent in the course of 2009. When the Budget Memorandum was drafted, the Netherlands Bureau for Economic Policy Analysis (CPB) forecast an economic growth of 1 per cent. The Dutch economy contracted the most in the first quarter of 2009, with economic contraction at more than 2 per cent.

In the spring, the cabinet took measures to support and stimulate the economy in 2009 and 2010, and to restore the confidence of consumers and business. Government spending made a positive contribution to economic growth. In the second half of 2009, the Netherlands profited as world trade picked up and economic growth returned.

Government finances deteriorated in 2009 because of the crisis. The expected budgetary surplus of 1.2 per cent presented on Budget Day in September 2008 turned into a deficit of 5.3 per cent of GDP. This is a drop by 37bn euro. More than 27bn euro (3.8 percentage points of GDP) can be attributed to lower revenues. Furthermore, the government spent an additional 7bn euro on items such as unemployment benefits and stimulus measures. Local government also showed a higher deficit than expected in the budget for 2009, rising by 3.2bn euro.

Relative to the budget as presented on Budget Day, EMU debt rose from 39.6 per cent to 60.9 per cent of GDP. This is an increase of around 101bn euro. The budget deficit accounts for 37bn euro. Debt rose by another 63bn euro on account of the interventions in the financial sector after publication of the Budget Memorandum on Budget Day 2008.

See also

• The Budget Memorandum and the National Financial Annual Report