Netherlands encouraged to coordinate reforms for economic growth

By on 28/04/2014
Angel Gurria, secretary -general of the OECD (c) All rights reserved by OECD

The economic outlook for the Netherlands looks promising, but work needs to be done by its government to coordinate reforms and boost growth in the country.

That’s the verdict of three recent reports from the OECD, which estimates that the Dutch economy will grow by one per cent this year, and 1.3 per cent in 2015.

With these forecasts in mind, the OECD says that the government’s reforms to public spending, and the housing and labour markets, are paying off. But it also identifies some areas of concern, and says they need to be addressed if the Netherlands is to return to pre-recession growth rates.

One area of concern for the OECD is the exposure of the country’s banking sector to high household indebtedness. According to its recent ‘Economic Survey of the Netherlands’, one third of all Dutch households currently have negative equity, because nominal house prices in the country have dropped by 20 per cent since their peak in early 2008.

To mitigate the risk that this debt profile poses to Dutch financial institutions, the OECD recommends that higher down payments and regular equity repayments are built into all mortgages.

In addition, the organisation suggests that the maximum loan-to-value ratio should always be set below the value of a property, and that the reduction of mortgage interest relief should be accelerated.

If these recommendations are implemented, the OECD says that banks “will increase their resilience to housing sector developments.”

In a different report, entitled the ‘Review of Innovation Policy in the Netherlands’, the OECD identifies the country as one of “the most advanced knowledge economies in Europe”. It says, though, that more can be done to engage small innovative businesses in a government strategy, known as “Top Sector”, to promote growth in Holland’s high-performing industries.

Moreover, it argues that more support should be given to encourage innovation through joint Research and Development projects between research institutions and private companies.

Finally, in its ‘Territorial Review of the Netherlands’, the OECD recommends that the government develops a national framework for urban policy, with a view to enhancing the economic performance of its cities.

This will involve aligning the Top Sector strategy with the EU’s regional cluster policy to offer local development incentives, and extending the timeframe for existing decentralisation and territorial reforms in Dutch cities.

Speaking about his organisation’s recommendations to the Netherlands, OECD secretary-general Angel Gurria said: “The reforms identified in these three reports are self-reinforcing. Strengthening the balance sheet of banks and households can benefit the economy as a whole. Sharpening innovation policy can contribute to advancing the country’s competitive edge in key sectors. And improving urban and territorial policy can help ensure that Dutch cities maximise their potential in terms of productivity and lifting living standards across the country.”

 

About Kevin Sorkin

Pendragon International Media publish www.globalgovernmentforum.com, a community of senior government officials around the world. Global Government Forum is an important international network focusing on impartial, government news, analysis and best practice. The content addresses the real issues facing senior leaders in public service policy and administration today and aims to support them in developing public services for the future. Our aim is to help all organisations engage with this important community by improving understanding and strengthening relationships. I am the founder of the Civil Service Awards and Civil Service Live, which are now established industry leading brands and extremely important events for government. I also launched and published Civil Service World, civilserviceworld.com and Civil Service World Research and Information bringing together the civil service community to enable communication, sharing of best practice, inspire and motivate the civil service community. Over the years I have established relationships with the most senior officials in government and the private sector and have built a very strong and positive reputation across the industry.

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