Economy of The Netherlands - Overview

Overview

The Netherlands has a prosperous and open economy, which depends heavily on foreign trade. The economy is noted for stable industrial relations, fairly low unemployment and inflation, a sizable current account surplus, and an important role as a European transportation hub. Industrial activity is predominantly in food processing, chemicals, petroleum refining, and electrical machinery. A highly mechanised agricultural sector employs no more than 2% of the labour force but provides large surpluses for the food-processing industry and for exports. The Netherlands, along with 11 of its EU partners, began circulating the euro currency on 1 January 2002. The country is one of the leading European nations for attracting foreign direct investment.

The stern financial policy has been abandoned in 2009 on account of the current credit crises. The relatively large banking sector was partly nationalised and bailed out through government interventions. Unemployment rates dropped to about 5% in the summer of 2011, but then rebounded, and are currently at 6%. The state budget deficit for 2011 was 4.7%, considerably larger than expected, and much larger than the EU-mandated maximum of 3%. The government already implemented austerity measures in 2011, but the economic turndown in the latter half of that year made a next round of austerity measures inevitable. The current precarious situation of the Rutte cabinet makes easy decision on new austerity measures difficult, which has resulted in a de facto new round of coalition talks solely about austerity measures. Those talks should be finished at least before late April 2012, as the EU demands a budget proprosal before May 1.