Follow Us

Follow us on Twitter  Follow us on LinkedIn
 

10 May 2013

IMF Executive Board Concludes 2013 Article IV Consultation with the Kingdom of the Netherlands


The main policy challenge is to restore growth and manage downside risks, while allowing for an orderly adjustment of private sector balance sheets.

The Netherlands’ track record of robust public finances and status as a safe  haven are attributes of the euro area (EA) AAA countries. However, the economy faces many of the challenges of the periphery economies, including headwinds from a highly indebted household sector, significant financial sector stresses, declining real estate prices, and weak domestic demand. However, the cycle of household and bank deleveraging, declining house prices and weak domestic demand would be amplified by any adverse external developments, particularly in the rest of the euro area, unanticipated shocks to domestic confidence, or heightened policy uncertainty. A more medium-term risk is that policy measures fail to avoid a decline in the economy’s growth potential.

Fiscal consolidation should focus on structural targets aimed at ensuring sustainable public debt dynamics over the medium term, and avoid excessive procyclicality linked to short-term macroeconomic developments. Ensuring the resilience of the banking system is a top priority, given its exposure to falling real estate prices and heavy reliance on wholesale funding. The measured pace of implementation of housing sector policies, including reductions in mortgage interest deductibility (MID) and loan-to-value (LTV) ratios, is appropriate. Additional policies to improve the functioning of housing and labour markets should be phased in.

Full report



© International Monetary Fund


< Next Previous >
Key
 Hover over the blue highlighted text to view the acronym meaning
Hover over these icons for more information



Add new comment