Foreword
Our economists forecast economic growth of 3¼% last year in the Outlook 2007. While it now looks like they were right on target after all, for much of the year it appeared that they had missed the mark. This is because the year that is now drawing to a close started off so weak that the economists had to adjust their forecasts for 2007 and 2008 downward during the course of the year. But we now know that these adjustments were unnecessary. There are currently indications that economic growth in 2007 will indeed be 3¼%, which means this year will go down in the record books as the first business cycle peak since 2000. This does not, however, detract from the fact that the economy will slow down in 2008.
Consumer spending, exports and business investment all contributed to the excellent economic performance of the Netherlands in 2007. The unprecedented fall in consumer confidence in September due to unrest in the financial markets has not diminished the lustre of this achievement so far. It is important to note that our economists view the willingness to buy as a much more important indicator which has decreased to a considerably lesser degree than consumer confidence. Despite the aforementioned unrest, business conficence in the Netherlands remained high and as a result Dutch business continues to demonstrate a strong willingness to invest. From a global perspective, there are also clear indications that growth is supported widely enough to be able to absorb the most severe effects of the credit crisis. While it appears that the related impact on the Dutch economy will remain limited, it is an illusion to think that the credit crisis will leave the Netherlands completely unscathed.
Although we will take a small step back in 2008, the economic outlook for the year ahead is on balance still favourable. The Netherlands will continue to realise strong growth. Our economists are estimating growth of 2¾%, which is considerably higher than the growth forecasted for the rest of Europe. There are, nonetheless, several issues that require attention. A lower growth rate in the United States and Europe, an expensive euro, and weakening bank lending will all lead to lower growth in the Netherlands in 2008. There are also a number of domestic challenges facing the Netherlands. For example, tensions in the labour market are rising considerably. Unemployment continues to decline gradually and looks set to reach its lowest level in 25 years. And with 236,000 job vacancies, we have already surpassed the highest level of the last business cycle.
The shortage in the labour market is more than just a quantitative problem. There is also an increasing qualitative mismatch between supply and demand. The ageing population and ensuing shrinking working population will cause the shortages in the labour market to increase further in the coming decades. We foresee major bottlenecks in education, healthcare, the commercial services sector, construction and industry. This motivated our economists to closely examine the growing labour market issues and possible solutions in this edition of Outlook.
Our infrastructure also demands attention. Re-exports to our European hinterland play an increasingly important role for the Netherlands’ small open economy. Mobility bottlenecks are, however, placing the Dutch position as Europe’s distribution hub under threat. The Port of Rotterdam is, for example, becoming overcrowded and lorries are increasingly stuck in traffic jams. Further investment in infrastructure is vital if the Netherlands is to remain successful as a distribution country.
In closing, it is absolutely imperative that we implement measures to make our economic growth more sustainable. The current Dutch government has already taken some steps by introducing higher taxes on energy consumption, non-fuel efficient cars and air travel. But these measures mark only a modest beginning. It is, after all, becoming increasingly clear that the shortage of energy sources due to the surging demand from Asia will become tangible in the Netherlands at a much more rapid pace than was thought for many years. The Netherlands will only be able to continue to achieve sustainable growth if it succeeds in taking a leading role in promoting energy-saving technologies. And time is running out.