Germany outperforms Dutch economy

With 1.7 percent, last year’s economic growth rate in the Netherlands was significantly lower than Germany’s 3.6 percent. The range of German export products is such that Germany benefits more from the global economic recovery than the Netherlands. The German construction sector also performed better than the Dutch construction sector.

Economic growth and expenditure, 2010

Economic growth and expenditure, 2010

Differences in exports products

Exports contributed most last year to the economic recovery in the Netherlands and Germany. The effects of growing exports were more evident in Germany than in the Netherlands. This is due to the range of products the two countries export. Germany’s export basket contains machinery, cars and other capital goods, whereas in Dutch exports food products play an important part. Germany also exports far more made-in-Germany products. Such products contribute more to the national economy than re-exported products. Re-exports constitute a significant part of Dutch exports.

German exports, rather than Dutch exports, are sensitive to global economic developments. This also became evident in 2009 when the economic crisis swept the globe. The economic downturn in Germany was more serious than in the Netherlands, because German exports slumped.

Construction sector slows down economic recovery in the Netherlands

The economic growth rate in the Netherlands was also slower than in Germany because the Dutch construction sector performed poorly. Investments in residential and non-residential building projects dropped by 11.8 percent last year compared to 2009, the most dramatic downturn in more than two decades. The number of residential and non-residential and civil engineering projects dropped substantially, whereas in Germany investments in the construction sector grew marginally in 2010 after a long period of stagnation. More capital was invested in the residential building projects.

Gross domestic product, 2002-2010

Gross domestic product, 2002-2010

Netherlands more prosperous

Although economic growth was less vigorous in the Netherlands last year, the standard of living is still higher than in Germany. The GDP per capita in the Netherlands in 2010 was approximately 35,500 euro versus 30,600 euro (-14 percent) in Germany. The lower standard of living in Germany is predominantly due to the German reunification in 1990. The economic growth rate in the Netherlands in the period prior to the economic crisis was also significantly higher in the Netherlands than in Germany. Between 2002 and 2008, the annual growth rates for the Dutch and German economies averaged 2.3 and 1.5 percent respectively.

Peter Hein van Mulligen and Senne Janssen