Budget surplus at 2.1 percent of GDP in Q3 2018

© Hollandse Hoogte / Peter Hilz
Government revenues exceeded expenditure by almost 12 billion euros in the first three quarters of 2018. On a year-on-year basis, measured from Q4 2017 up to and including Q3 2018, this results in a government budget surplus of 2.1 percent of gross domestic product (GDP). Statistics Netherlands (CBS) reports this on the basis of new figures.

Government balance (% of GDP)
 BalanceEMU target
'06 Q1-0.3-3
'06 Q2-0.2-3
'06 Q3-0.2-3
'06 Q40.1-3
'07 Q10.4-3
'07 Q20.1-3
'07 Q3-0.4-3
'07 Q4-0.1-3
'08 Q10.1-3
'08 Q20.2-3
'08 Q30.4-3
'08 Q40.2-3
'09 Q1-0.8-3
'09 Q2-1.8-3
'09 Q3-3.4-3
'09 Q4-5.1-3
'10 Q1-5.4-3
'10 Q2-5.6-3
'10 Q3-5.8-3
'10 Q4-5.2-3
'11 Q1-4.6-3
'11 Q2-4.7-3
'11 Q3-4.1-3
'11 Q4-4.4-3
'12 Q1-4.3-3
'12 Q2-4-3
'12 Q3-4.3-3
'12 Q4-3.9-3
'13 Q1-3.7-3
'13 Q2-3.3-3
'13 Q3-2.9-3
'13 Q4-2.9-3
'14 Q1-3-3
'14 Q2-2.9-3
'14 Q3-2.5-3
'14 Q4-2.2-3
'15 Q1-2-3
'15 Q2-2-3
'15 Q3-2-3
'15 Q4-2-3
'16 Q1-1.8-3
'16 Q2-1.1-3
'16 Q3-0.5-3
'16 Q40-3
'17 Q10.7-3
'17 Q20.8-3
'17 Q31-3
'17 Q41.2-3
'18 Q11.6-3
'18 Q21.9-3
'18 Q32.1-3

Expenditure ratio at all-time low

Government expenditure has surged in 2018 compared to previous years. As of 2010, expenditure remained just below 310 billion euros for years, due to the government curbing it. The Rutte III government has indicated earlier that it plans to increase spending again in various policy areas. This is reflected in the expenditure growth during the first three quarters of 2018. However, government expenditure is increasing less rapidly than the economy. The expenditure ratio fell by 0.6 percentage point as a result and stood at 41.9 percent of GDP after the third quarter on an annual basis. Never before was the expenditure ratio this low.

Government revenue and expenditure (bn euros)
 RevenueExpenditure
'06 Q1235.86237.804
'06 Q2241.593242.611
'06 Q3246.461247.356
'06 Q4251.744251.163
'07 Q1256.369254.163
'07 Q2257.954257.105
'07 Q3257.158259.426
'07 Q4261.573262.142
'08 Q1267.601266.926
'08 Q2272.388271.163
'08 Q3277.113274.273
'08 Q4280.298278.995
'09 Q1278.616283.69
'09 Q2274.401286.083
'09 Q3271.289292.722
'09 Q4265.54297.321
'10 Q1265.143298.873
'10 Q2268.971304.13
'10 Q3268.658305.18
'10 Q4272.405305.938
'11 Q1275.989305.744
'11 Q2274.996305.175
'11 Q3278.777305.092
'11 Q4275.529304.32
'12 Q1276.285304.35
'12 Q2278.526304.817
'12 Q3277.133305.083
'12 Q4279.689305.275
'13 Q1282.771306.759
'13 Q2285.236306.864
'13 Q3288.609307.706
'13 Q4287.916307.259
'14 Q1287.466307.057
'14 Q2288.892308.063
'14 Q3289.92306.918
'14 Q4292.73307.182
'15 Q1294.513308.105
'15 Q2293.991307.856
'15 Q3293.981308.019
'15 Q4293.856307.826
'16 Q1295.926308.198
'16 Q2301.282308.826
'16 Q3306.337310.149
'16 Q4308.843308.695
'17 Q1314.043308.753
'17 Q2315.354309.547
'17 Q3317.847310.431
'17 Q4322.224313.265
'18 Q1327.569315.528
'18 Q2331.797317.652
'18 Q3335.843320.108

High surplus

From Q1 to Q3 2018, government revenues were nearly 14 billion euros higher than in the same period last year. This is almost entirely attributable to taxes and social contributions. In addition, a non-recurring gain of nearly 0.8 billion euros was received following a settlement with ING. Expenditure also increased, by 7 billion euros. As a result, the government ended up having 7 billion euros more in the first three quarters of 2018 than in the same period last year.

In its December estimate for the entire calendar year 2018, the Netherlands Bureau for Economic Policy Analysis (CPB) projects a surplus of 1.1 percent of GDP. The final realisation of the budget surplus for the entire year of 2018 depends on realised figures over Q4. Lower economic growth or large incidental expenses in Q4 may still reduce the surplus as calculated currently for the the first three quarters. In the past two years, the government achieved a surplus in the fourth quarter.

Debt ratio down to 52.9 percent

Government debt amounted to 52.9 percent of GDP at the end of Q3. This means that the debt ratio has dropped by 4.1 percentage points since the start of the year. Slightly less than half of the decline in debt ratio is due to the budget surplus. The surplus allows for redemption of public debt. The largest part of the decline (around half) can be explained by the rise in GDP, the so-called denominator effect: for example, if GDP rises by 2 percentage points, the debt ratio will go down by approximately 1 percentage point without any redemption involved. Government debt also declines as a result of revenue from interest rate derivatives. This accounted for 0.5 percentage point in debt reduction. The Ministry of Finance anticipates a debt ratio of 52.7 percent by the end of the year.

Debt ratio (% of GDP)
 Debt ratioEMU target
'06 Q149.260
'06 Q248.660
'06 Q347.560
'06 Q445.260
'07 Q145.460
'07 Q245.660
'07 Q344.660
'07 Q44360
'08 Q143.960
'08 Q243.860
'08 Q344.160
'08 Q454.760
'09 Q157.560
'09 Q256.660
'09 Q357.260
'09 Q456.860
'10 Q157.660
'10 Q259.260
'10 Q35960
'10 Q459.360
'11 Q159.460
'11 Q260.460
'11 Q361.160
'11 Q461.760
'12 Q162.560
'12 Q263.960
'12 Q364.960
'12 Q466.260
'13 Q166.660
'13 Q268.360
'13 Q367.860
'13 Q467.760
'14 Q167.160
'14 Q268.560
'14 Q368.160
'14 Q467.960
'15 Q168.960
'15 Q266.760
'15 Q365.860
'15 Q464.660
'16 Q164.360
'16 Q263.260
'16 Q361.660
'16 Q461.960
'17 Q159.760
'17 Q258.860
'17 Q35760
'17 Q45760
'18 Q155.160
'18 Q25460
'18 Q352.960