Government deficit at 5.3 percent in 2009

31/03/2010 15:00
  • Government debt exceeds 60 percent of GDP
  • Budget deficit per capita nearly 2 thousand euro
  • Negative results for social funds
  • Government support financial sector runs up to 2 billion euro

According to the first estimates carried out by Statistics Netherlands, the government deficit over 2009 stood at 5.3 percent of the GDP, as against a government surplus of 0.7 percent of the GDP in 2008. Government debt expressed as a percentage of the GDP grew by 2.7 percentage points to 60.9 percent. Last year, government finances overstepped both the EMU deficit criterion of 3 percent and the EMU debt criterion of 60 percent.

Last year’s deficit was 30.2 billion euro. This results in a per capita deficit of nearly 2 thousand euro. In 2009, Dutch government spending exceeded government revenues by 19.6 billion euro. The deficit at the local government level was 3.4 billion euro. Municipal authorities had to cope with slumping land sales. Revenues from building permit fees were also quite disappointing. Social funds faced a huge deficit of 7.2 billion euro as revenues from social contributions declined and the overall amount paid out was higher. The deficit of social funds was levelled off by an extra government contribution of more than 4 billion euro. Government contributions totalled more than 17 billion euro in 2009. Contributions to social funds have been inadequate for years to cover unemployment benefits, old age pensions, health care costs, etc.

Public expenditure rose by nearly 8 percent in 2009. Public investments increased by more than 10 percent relative to 2008. Social benefits grew considerably by approximately 8 percent, accounting for more than 40 percent of the increase in public expenditure. Government support provided to the financial sector also contributed to an increase in public expenditure, i.e. extra interest charges and capital transfers. On the other hand, financial contributions to the EU were lower.

Government revenues dropped by nearly 5 percent. This was predominantly caused by lower revenues from corporate tax, VAT, property transfer tax and dividend tax. Total revenues from wage tax and social contributions remained almost the same. Natural gas revenues plummeted by one third relative to 2008, but there were extra revenues from interest and dividends as a result of the financial support provided to the financial sector.

Government support provided to the financial sector led to extra costs and extra revenues. Altogether, supportive measures cost nearly 2 billion euro in 2009.

Public debt rose marginally by 0.3 billion euro last year. Government debt remained more or less stable, because the deficit could be financed by sales of participations and repayments of granted loans. In 2008, the Dutch government had over 81 billion euro outstanding in the financial sector. Last year, the amount was reduced to 56 billion euro, but public debt expressed as a percentage of the GDP rose more rapidly as a result of the declining GDP.