Netherlands Country Risk Report & Analysis

Resilient economic growth

AA1

LOW RISK for enterprise

Economic risk
Business environment risk
Political risk
Commercial risk
Financing risk

Economic risk
Business environment risk
Political risk
Commercial risk
Financing risk

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GDP	USD909.070bn (World ranking 17, World Bank 2019)
Population	17.33mn (World ranking 66, World Bank 2019)
Form of state	Constitutional Monarchy
Head of government	Mark RUTTE (PM)
Next elections	Mars 2021, Legislative

Favorable business environment
Key trade hub in Europe
Among the largest exporters of crude oil in the world, and the second-largest producer and exporter of natural gas in Europe
High current account surplus
Sound public finances
Healthy banking sector

High private debt, with corporate debt being the 3rd highest in the Eurozone
Very high dependency on the Eurozone economic cycle
High exposure to a hard Brexit

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Still above Eurozone average growth, but lowest since 2014

After several years of GDP growth above 2% levels, strong household consumption and a declining unemployment rate, we expect GDP growth to reach +1.8% in 2019 and +1.7% in 2020, above the Eurozone average of +1.2% and +1.3%, respectively, but the lowest level since 2014. Consumers should continue to support economic growth as wage growth reached +2.1% in 2018 and unemployment stands at a low 4.7%. Nevertheless, we expect consumer spending to slow down: +1.4% in 2019 and +1.6% in 2020. Consumer confidence has declined over the past eight consecutive months and entered into negative territory in February for the first time in four years. This could be explained by the deterioration in households’ expectations regarding their financial situation in the next 12 months but also the general economic situation. The savings rate remains at a high of 15.4% of the gross disposable income. Hence, buffers for future consumption growth are sizeable provided there is enough confidence.

Companies would start to suffer from the low growth environment in the Eurozone

Business investment remains dynamic (close to +5% in 2018) and prospects remain relatively good when looking at the capacity utilization rates (83.9% in Q1 2019), still above the long-term average. However, the slowdown in Eurozone GDP growth and global trade suggest that firms will adjust their investment intentions on the downside. Indeed, the Netherlands, as an export-driven economy is vulnerable to a slowdown in global growth and in trade in particular. For 2019 and 2020, we expect a further slowdown in global GDP growth below the 3% level with particularly low growth in the Eurozone (1.2% in 2019 and 1.3% in 2020) with which the Netherlands has the strongest trade ties.

Non-financial corporations’ margins stand at 39.6% of the value added, slightly below the Eurozone average. In addition, their debt stands at very high levels (172% of GDP, down from the 183% in 2016), third highest in the Eurozone after Luxembourg and Ireland. Turnover growth has not yet been impacted by the lower volume and slower prices momentum that the other Eurozone countries witnessed in 2018. In the manufacturing sector, they grew by almost +6% in 2018 (vs. +2% in Germany for example) but the trend remains on the downside.

Business insolvencies are expected to stabilize in 2019 (at 3630 cases) after five consecutive years of falls. Manufacturers’ sentiment is still positive, although it has deteriorated quite substantially for the last year and is now back to 2016 levels after reaching a record high in the beginning of 2018.

Trade structure by destination/origin

(% of total)

Exports	Rank	Imports
Germany 21%	1	21% Germany
Belgium 12%	2	13% Belgium
United Kingdom 11%	3	8% China
France 7%	4	7% Italy
Italy 5%	5	6% United Kingdom

Trade structure by product

(% of total)

Exports	Rank	Imports
Refined Petroleum Products 9%	1	7% Refined Petroleum Products
Computer Equipment 6%	2	6% Computer Equipment
Pharmaceuticals 5%	3	5% Crude Oil
Telecommunications Equipment 4%	4	5% Telecommunications Equipment
Plastic Articles 4%	5	4% Pharmaceuticals

The paying behavior of domestic companies is very good with payment normally taking place within 47 days; however the rules that implement the latest EU Directive on late payments are less demanding than the EU standards.

Low
Medium
Sensitive
High

Payments
Court proceedings
Insolvency proceedings

Payments
Court proceedings
Insolvency proceedings

In practice, although the courts are reliable, negotiating payment instalments is often the most efficient way to avoid unnecessary costs and a specialized collection agency may often suffice to obtain payment.

When the debtor has become insolvent, debt renegotiation mechanisms are available but remain inefficient and unused, while most bankruptcies are terminated without any payments of dividends to unsecured creditors.