Government debt as a percentage of GDP on an annual basis is referred to as the government debt ratio. At the end of 2016, the debt ratio still stood at 61.8 percent, exceeding the EMU target of 60 percent at the end of a calendar year. Changes in government debt and GDP developments affect the debt ratio. Part of 3.1 percentage point decrease in the first half of 2017, i.e. 1.2 percentage points, was on account of GDP growth.
Public debt down by 14 billion euros
The 14 billion euro decline in government debt was partly due to the sale of financial assets. In the first half year, for example, the Dutch State sold shares in ASR at a value of over 2 billion euros as well as a part of its interest in ABN AMRO to the amount of 1.5 billion euros. In addition, termination of interest rate derivatives yielded over 2 billion euros for central government.
Aside from the sale of assets, the State also received a one-off remittance exceeding 3 billion euros from the European Union in Q1 as part of a reduction in EU contributions. Furthermore, treasury banking by local authorities increased by 2 billion euros, which meant less central government borrowing outside the government. Mutual debts among Dutch authorities are not taken into account in calculating public debt.
Rising revenues and stable expenditure
Public debt decreased not only due to the sale of financial assets, but also due to a positive balance of public revenues and expenditure. Expenditure was up by more than 5 billion euros in the first half of 2017 relative to 2016, mainly as a result of higher tax revenues. Wage and income tax and social premiums yielded nearly 4 billion euros more, corporation tax 1 billion euros more. Partly due to higher household consumption and a higher number of houses sold during the first two quarters, VAT and transfer tax revenues were also higher.
Public expenditure remained at a level similar to recent years. Higher revenues and stable expenditure resulted in an annual budget surplus to the amount of 8 billion euros for the period Q3 2016 to Q2 2017, i.e. 1.1 percent of GDP. The CPB Netherlands Bureau for Economic Policy Analysis estimates a positive government balance of 0.6 percent of GDP in its Macro Economic Outlook for 2017.