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- GDP (PPP):
- $700.5 billion
- -0.8% growth
- -0.7% 5-year compound annual growth
- $41,711 per capita
- Inflation (CPI):
- FDI Inflow:
The Netherlands’ economic freedom score is 73.7, making its economy the 17th freest in the 2015 Index. Its score has decreased by 0.5 point since last year, reflecting declines in four of the 10 economic freedoms, including business freedom and freedom from corruption, that outweigh a significant gain in labor freedom. The Netherlands is ranked 8th out of 43 countries in the Europe region.
The Netherlands has a long history of openness to global commerce and economic freedom. Its port of Rotterdam is among the busiest in the world and serves as a primary entry point for goods to Europe. However, over the past five years, the country’s traditional commitment to the free market has been under stress. Since 2011, economic freedom has declined by 1.0 point, largely as a result of excessive government spending and increased perceptions of corruption.
Despite some negative trends, The Netherlands’ economy still rests on strong foundations of economic freedom. The property rights and investment regimes are the second freest in the world. Business regulations are more efficient than those of regional peers, providing a comparative advantage. However, fiscal policy does remain a concern. Taxes are high, but government spending is even higher, pushing up levels of public debt.
The center-right coalition led by Prime Minister Mark Rutte collapsed in April 2012 when the Freedom Party’s Geert Wilders refused to back Rutte’s austerity package. Rutte’s party and its principal coalition partner, the center-left Labor Party, won increased support to maintain power during elections in September 2012. The Netherlands is a founding member of the European Union and under Rutte’s leadership has been one of the most outspoken supporters of turning power back to EU member states. The Netherlands is a center of international commerce.
The Netherlands has few problems with corruption. Effective anti-corruption measures ensure government integrity, and public tolerance for graft is low. A new campaign financing law took effect in May 2013. The legal framework ensures strong protection of private property rights and enforcement of contracts. Independent of political interference, the judiciary is respected and provides fair adjudication of disputes.
The Netherlands’ top individual income tax rate is 52 percent, and its top corporate tax rate is 25 percent. Other taxes include a value-added tax, environmental taxes, and inheritance taxes. Overall tax revenue equals 38.6 percent of domestic income, and government expenditures equal 50.4 percent of domestic output. Public debt is equivalent to 75 percent of gross domestic product.
It takes four procedures and four days to start a business on average, with no minimum capital required, but completing licensing requirements remains time-consuming. The non-salary cost of employing a worker is high, although severance payments are not overly burdensome. Monetary stability has been well maintained, and the government has cut subsidies to offshore wind power projects.
EU members have a 1.0 percent average tariff rate. Although some non-tariff barriers exist, the EU is relatively open to external trade. The Netherlands generally treats foreign and domestic investors equally. The competitive financial sector offers a wide range of financing instruments. The government has nationalized several banks in recent years but is planning to sell some of its holdings.