International Monetary Economics

Assessment 2A: Executive summary Report

Task 1 Specific Market Reaearch
The Netherlands is the 6th largest monetary force in the Eurozone and the 5 th biggest
exporter of goods. The nation is exceptionally open to trade and thusly to the
worldwide financial conjuncture. For the past several years, the recovery in Europe
has supported the Dutch economy to evolve at a powerful pace, despite trade
vulnerability at worldwide level, the Brexit interaction and most of all the escalation
of the COVID-19 pandemic caused the made economy to contract by an estimated
5.4% of GDP in 2020 (ING, 2020), after the remarkable decrease of 8.5% in Q2 2020.
At The King Centre of International Economics, further investigations on the Dutch
economic context will be conducted to explore the opportunities and development
potential of this country.
Task 2 Data Sources

 Unemployment rate

Unemployment rates in the Netherlands from 2017 to 2020 are respectively:

4.84%, 3.83%, 3.2% and 2.98%. The decrease of the unemployment rate goodly
affects on economic development and on inflation. This likewise implies that the
income and living standards of the employees have been essentially enhanced.
Finally, the social order is settled. As per O'Neill, 2021, negative phenomena such
as theft, protests, gambling have been reduced significantly and there is not much
disturbance in the political work in the Netherlands.

 CoVid-19 data

Until April 16th 2021, The Netherlands has experienced 1,369,411 Covid
infections and 16,848 deaths. The first Covid-19 infection happened on February
27, 2020, trailed by more cases after travelers got back from winter sport in Italy
and Austria. The first Covid-19-death was noticed on March 6. The disease
epidemic gradually became more serious from September 2020 and showed signs
of a slight decrease in the Christmas/New Year period. However, since February
2021, the government had to declare social exclusion again after seeing an
increase in cases in the community. The government has started to vaccinate
 priority groups and it is expected that until June 2022, all of the population will be
vaccinated.

 Inflation rates
Inflationary factors remained stayed stifled in 2020 (1.2%) as an outcome of low
worldwide energy costs and diminished domestic interest. Notwithstanding, the
inflation rate in 2019 was 2.67% - the highest since 2013. This is essentially
attributable to the value climbs in energy, food and drinks in the Netherlands.
Additionally, in January 2019, the lower VAT rate was raised from 6 to 9 percent.
Likewise, energy charges and certain excise obligations were increased.
It is forecasted that in the future, the normal inflation rate are expected to balance out
around 1.5% in the medium term, the economic advancement pace of the country will
be steady (O'Neill, 2021). This is principally because the authority has more choices
for instruments to stimulate investment in domestic currency, unemployment rate
declines and consumption increases.
 Interest rates

Since June 2019, interest rates in the Netherlands have fallen underneath 0%.
European Central Bank (ECB) wants to stimulate to prevent deflation scenario - the
situation of falling commodity prices and deflecting the capital recovery momentum is
very fragile. Negative interest rates will stimulate stronger loan demand. In the next
few years, interest rates are forecast to continue below 0% due to the impact of the
Covid-19 pandemic.

 Real GDP growth 

From 2018 to 2019, GDP in the Netherlands exhibited a 1.8 percent surge.
Notwithstanding, in 2020, the country recorded a negative real GDP growth: -5.4%.
This is not simply because of the coronavirus diseases. The Netherlands was going to
feel the future influences of the United Kingdom leaving the EU, as the UK was one
of the Netherlands’ greatest exchanging accomplices. During March 2020, the Dutch
economy was likewise adversely affected by crisis such as the U.S-China trade war or
the unexpected drop oil costs. In 2021 and 2022, work market changes and curbed
wage growth are relied upon to moderate the speed of the recovery in domestic
interest. Given the solid recovery in the global goods trade, net exports are set to
devote emphatically to GDP rise over the forecast horizon (Nordea, 2021).

 Net Debt - as per International investment position

The debt-to-GDP proportion leaped to 59.3% in 2020 (from 48.4% one year before),
and should balance out about 61% in 2021-22. Rising net debt does not mean that the
country is in danger. Yet, when public debt increases, the government will have to
tighten spending to reduce the budget deficit. This also has the possibility of reducing
investment in the Netherlands, impeding the recovery of the economy and slowing
down the growth rate.
Task 3 Contextualizing the data collated
 The country’s current account balance
The current account surplus in the Netherlands limited to EUR 13.89 billion in the
final quarter of 2020 from EUR 23.18 billion in the relating time of the earlier year.
The administrations surplus decreased to EUR 4.17 billion from EUR 5.38 billion a
year before, while the essential income account fluctuated to a deficiency of EUR
6.71 billion from a EUR 1.89 billion excess and the secondary income deficit
augmented to EUR 3.69 billion from EUR 1.96 billion. Interestingly, the goods
surplus expanded to EUR 20.11 billion from EUR 17.88 billion a year sooner.
Observing the entire 2020, the Netherlands current account surplus lessened to EUR
62.33 billion contrasted with EUR 80.60 billion in the earlier year.
Previously, The Dutch current account has raised significantly since the last part of
90’s, coming generally from the trade balance in products. The Dutch current account
surplus is chiefly clarified by structural elements, of which two stick out: the
moderately high savings and overseas investments by multinational enterprises and
benefits reserves, and the internationalization of the Dutch economy (Rojas-
Romagosa & Van de Horst, 2015)
As a result, it can be seen that the financial and economic status of the Netherlands
has been seriously affected by the impact of the Covid-19 epidemic. The Dutch
current account balance ought to stay in surplus but will reduce perceptibly as exports
will ease quicker than imports. The economy is expected to improve in 2021 when the
Netherlands starts to vaccinate people and the disease situation is calm.
Lately the authority's financial policy has been enlarged, in any case, the Dutch public
finances stayed sound, recording budget surpluses. The pattern upturned in 2020,
when the actions taken to control the COVID-19 epidemic (estimated at 6.5% of
GDP) created the profound public shortfall since 1995. According to IMF, the
authority's budget is anticipated to stay in red both this year (-4.5%) and in 2022 (-
1.7%). The fate of Brexit cycle could likewise affect the Dutch trade viewpoint.
 Dutch policy developments
The country target at bosting cooperation. Improvement firm assists decrease poverty.
The government trust that growing cooperation is still wanted because there are more
refugees, conflicts and migrants than ever before (Van & Kranendonk, 2014). Some
pivotal changes in improving company policy in Netherlands are:

- Focus on the precarious areas near Europe: the Middle East and North Africa, West
Africa/the Sahel, the Horn of Africa.
- Extra subsidize will be used each year on necessity care and the encounter of
refugees in their areas of origin.
- Resilient concentration on equal chances for girls and women.
- €60 million each year will be used through new schedules targeted at education -
mainly vocational education - employment and income for the youth and women in
the spotlight countries.
- More than €80 million extra per year will be used to tackle climate change.
- More funds will be accessible for firms and intelligent cooperations that look for
supplying developing nations, especially in factors where Dutch industry and trade
are universal leaders.
- Government-led trade duties will concentrate more on small and medium-sized
enterprises and startups.
- More chances that digitalisation displays for sustainable prosperity.
 Netherland’s development of the digital economy
As per ING (2020), the Netherlands positions 4th in 28 EU Member States in the
Digital Economy and Society Index. Almost 100% of families approach to broadband
web and the Netherlands keeps on performing astoundingly as far as portable web.
The top notch infrastructure with a few fixed telecom structures and three mobile
system suppliers guarantees strong connectivity. The Netherlands positions betwixt
the best-performing nations with the most elevated level of occupants who have above
rudiments overall digital abilities. The quantity of IT experts has expanded somewhat
and is likewise over the EU average. One of the necessary standards fundamental the
Dutch Digitalization Strategy, is outfitting everybody with the correct abilities and
capabilities. This will help the Netherlands’ desire to turn into Europe’s computerized
favorite. The nation is focused on progressing new advanced technologies. It is
devoting critically in digital technologies thanks to joint activities with the EU. The
Netherlands signed EU statements on the European Blockchain Partnership,
Cooperation on Artificial Intelligence and Quantum Computing Infrastructure.

Task 4 Analysis on Exchange rate

The authority currency of Netherlands is the Euro. Consequently, Netherlands do not

utilize a customary version of fixed exchange rate which keeps Euro at an overall
fixed level to its trading accomplices. Alternately, the government utilize floating
exchange rate which is dictated by the market. In 2020, uncertainty from the Covid
pandemic builds unpredictability in currency markets, containing the EUR. However,
the USD is moderately more vulnerable than the Euro. Among different reasons, the
US has been more contrarily affected by the pandemic than different nations,
especially in the 'second wave' of diseases. If the coronavirus pandemic is controlled
effectively going forward, the Euro will get stronger in coming years. Therefore, the
subsequent changes in the Euro exchange rate against other countries depend closely
on how the Dutch government controls the epidemic.
 References
ING (2020). The Netherlands in 2021: More positive about recovery despite second-
dip. Economic and Financial Analysis, 1-5.
Nordea (2021). The economic context of the Netherlands. Accessed on 10 th April,
2021. https://www.nordeatrade.com/en/explore-new-
market/netherlands/economical-context.
O’Neill, A. (2021). Inflation rate in the Netherlands. Online accessed on 15 April,
2021. https://www.statista.com/statistics/276708/inflation-rate-in-the-netherlands/.
O’Neill, A. (2021). Unemployment rate in the Netherlands. Online accessed on 15
April, 2021. https://www.statista.com/statistics/263703/unemployment-rate-in-the-
netherlands/.
Rojas-Romagosa, H., & Van de Horst, A. (2015). Causes and policy implications of
Dutch current account surplus, 1-19.
Van, E.F., & Kranendonk, H. (2014). Vermogensschokken en consumptie in
Nederland, CPB Background Document.