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
'06Q1-0.3-3
Q2-0.2-3
Q3-0.2-3
Q40.1-3
'07Q10.4-3
Q20.1-3
Q3-0.4-3
Q4-0.1-3
'08Q10.1-3
Q20.2-3
Q30.4-3
Q40.2-3
'09Q1-0.8-3
Q2-1.8-3
Q3-3.4-3
Q4-5.1-3
'10Q1-5.4-3
Q2-5.6-3
Q3-5.8-3
Q4-5.2-3
'11Q1-4.6-3
Q2-4.7-3
Q3-4.1-3
Q4-4.4-3
'12Q1-4.3-3
Q2-4-3
Q3-4.3-3
Q4-3.9-3
'13Q1-3.7-3
Q2-3.3-3
Q3-2.9-3
Q4-2.9-3
'14Q1-3-3
Q2-2.9-3
Q3-2.5-3
Q4-2.2-3
'15Q1-2-3
Q2-2-3
Q3-2-3
Q4-2-3
'16Q1-1.8-3
Q2-1.1-3
Q3-0.5-3
Q40-3
'17Q10.7-3
Q20.8-3
Q31-3
Q41.2-3
'18Q11.6-3
Q21.9-3
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
'06Q1235.86237.804
Q2241.593242.611
Q3246.461247.356
Q4251.744251.163
'07Q1256.369254.163
Q2257.954257.105
Q3257.158259.426
Q4261.573262.142
'08Q1267.601266.926
Q2272.388271.163
Q3277.113274.273
Q4280.298278.995
'09Q1278.616283.69
Q2274.401286.083
Q3271.289292.722
Q4265.54297.321
'10Q1265.143298.873
Q2268.971304.13
Q3268.658305.18
Q4272.405305.938
'11Q1275.989305.744
Q2274.996305.175
Q3278.777305.092
Q4275.529304.32
'12Q1276.285304.35
Q2278.526304.817
Q3277.133305.083
Q4279.689305.275
'13Q1282.771306.759
Q2285.236306.864
Q3288.609307.706
Q4287.916307.259
'14Q1287.466307.057
Q2288.892308.063
Q3289.92306.918
Q4292.73307.182
'15Q1294.513308.105
Q2293.991307.856
Q3293.981308.019
Q4293.856307.826
'16Q1295.926308.198
Q2301.282308.826
Q3306.337310.149
Q4308.843308.695
'17Q1314.043308.753
Q2315.354309.547
Q3317.847310.431
Q4322.224313.265
'18Q1327.569315.528
Q2331.797317.652
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
'06Q149.260
Q248.660
Q347.560
Q445.260
'07Q145.460
Q245.660
Q344.660
Q44360
'08Q143.960
Q243.860
Q344.160
Q454.760
'09Q157.560
Q256.660
Q357.260
Q456.860
'10Q157.660
Q259.260
Q35960
Q459.360
'11Q159.460
Q260.460
Q361.160
Q461.760
'12Q162.560
Q263.960
Q364.960
Q466.260
'13Q166.660
Q268.360
Q367.860
Q467.760
'14Q167.160
Q268.560
Q368.160
Q467.960
'15Q168.960
Q266.760
Q365.860
Q464.660
'16Q164.360
Q263.260
Q361.660
Q461.960
'17Q159.760
Q258.860
Q35760
Q45760
'18Q155.160
Q25460
Q352.960