Budget surplus up to 1.9 percent of GDP in mid-2018

© Hollandse Hoogte / Peter Elenbaas luchtfotografie
Government revenues were nearly 5 billion euros higher in the first six months of 2018 than in the same period last year. This resulted in a year-on-year increase in the budget surplus, equivalent to 1.9 percent of gross domestic product (GDP), measured from Q3 2017 up to and including Q2 2018. Government debt continued to decline steadily in the first six months of 2018. By the end of June this year, government debt stood at 54 percent of GDP; this is a decline of 3 percentage points of GDP since the beginning of this year. Statistics Netherlands (CBS) reports this based on new government finance statistics.

Government balance, semi-annual and annual figures (% of GDP)
   Government balanceEMU target
2008II0.2-3
IV0.2-3
2009II-1.8-3
IV-5.1-3
2010II-5.6-3
IV-5.2-3
2011II-4.7-3
IV-4.4-3
2012II-4-3
IV-3.9-3
2013II-3.3-3
IV-2.9-3
2014II-2.9-3
IV-2.2-3
2015II-2-3
IV-2-3
2016II-1.1-3
IV0-3
2017II0.8-3
IV1.2-3
II1.9-3

Collective burden rising

In the first six months of 2018, government revenues exceeded expenditure by nearly 11 billion euros, double the amount recorded for the first six months of 2017. Revenues mainly increased due to higher income from taxes and social security contributions, including VAT, corporate tax and wage and income taxes. Over the past few years, this income has risen more rapidly than GDP. In mid-2018, the burden of income tax and social security - also known as the tax and social security burden - increased further to 38.5 percent of GDP. This represents an increase of over 3 percentage points after 2012. In 2003 and 2004, the tax and social security burden stood at 34.5 percent of GDP. Non-fiscal resources, representing slightly more than 10 percent of government revenues, rose by nearly 1 billion euros in the first six months. This included profit distributions by subsidiaries, for example.

Expenditure rising again

In the first six months of 2018, government expenditure showed a relatively sharp rise of 4 billion euros. It was 300 and 310 billion euros in the period 2010-2016. In mid-2018, expenditure increased to 318 billion euros on an annual basis. The increase has been observable across many areas. Aside from higher spending on state pension (AOW) entitlement benefits and health care, a rise was furthermore seen in remuneration of employees and purchases of goods and services.

Whereas the government achieved 1.2 percent of GDP in surplus over the entire calendar year 2017, the balance was 1.9 percent of GDP in the first six months of 2018, measured on a year-on-year basis as the balance of the previous four quarters. The government budget balance realised amounted to 10 billion euros over the first six months of this year. The 2019 Budget Memorandum assumes a surplus of slightly under 6 billion euros for the entire calendar year 2018.

Government revenue and expenditure, semi-annual and annual figures (bn euros)
   RevenueExpenditure
2008II272.4271.2
IV280.3279
2009II274.4286.1
IV265.5297.3
2010II269304.1
IV272.4305.9
2011II275305.2
IV275.5304.3
2012II278.5304.8
IV279.7305.3
2013II285.2306.9
IV287.9307.3
2014II288.9308.1
IV292.7307.2
2015II294307.9
IV293.9307.8
2016II301.3308.8
IV308.8308.7
2017II315.4309.5
IV322.2313.3
II331.8317.7

Debt ratio down to 54 percent

Public debt stood at 408 billion euros as of 1 July 2018. This is equivalent to 54 percent of GDP, or 3 percentage points lower than at the end of 2017. The strong decline in debt ratio was caused by both a sharp rise in GDP (denominator effect) and debt redemption. In the first half of this year, the government redeemed almost 12 billion euros in debt. The bulk of this amount was repaid from the 10 billion euros in surplus which was achieved in these first six months.

Debt ratio (public debt as a percentage of GDP), semi-annual and annual figures (% of GDP)
   Debt ratioEMU target
2008II43.860
IV54.760
2009II56.660
IV56.860
2010II59.260
IV59.360
2011II60.460
IV61.760
2012II63.960
IV66.260
2013II68.360
IV67.760
2014II68.560
IV67.960
2015II66.760
IV64.660
2016II63.260
IV6260
2017II58.860
IV5760
II5460