This report does not constitute a rating action.
PARIS (S&P Global Ratings) May 22, 2024--On May 16, six months after the Netherlands' general elections, four parties--the Party for Freedom (PVV); the People's Party for Freedom and Democracy (VVD); the Farmer-Citizen Movement (BBB); and the center-right New Social Contract (NSC)--agreed to form a coalition government, with the prime minister yet to be nominated. The heterogeneous character of the coalition and the lack of majority in the senate may complicate the new coalition's policymaking efforts.
The coalition agreement contains plans to support household purchasing power, with tax relief and lower mandatory health care contributions, to incentivize housing construction, and to support agriculture. Proposed measures also include cutting the corporate tax rate and energy tax bill. To fund these measures, the coalition plans to curtail the public wage bill (including via headcount reductions), and cut spending on foreign aid and education, as well as lowering EU financial contributions and immigration-related costs. The new government has also suggested it will phase out the €20 billion Dutch Growth Fund, created in 2020 to support investment in research and development, innovation, and infrastructure.
On paper, the new plans represent a more expansionary fiscal stance with a budget deficit target of 2.8% of GDP for next year. Given very modest government indebtedness, the fiscal space of the Netherlands (unsolicited; AAA/Stable/A+1) is ample, so a shift toward somewhat higher budget deficits would carry no immediate implications for the sovereign ratings.
Furthermore, because of our view of the Dutch authorities' track record of outperforming targets, and our expectations of robust government revenue and persistent public underspending--in infrastructure for example--budget deficits could be below the levels laid out in the coalition agreement. In that context, we continue to expect net general government debt to remain relatively stable, at around 40% of GDP over 2024-2027, preserving ample fiscal buffers that benefit the Netherlands’ creditworthiness.
Related Research
- Sovereign Ratings History, May 17, 2024
- Sovereign Ratings List, May 17, 2024
- Sovereign Ratings Score Snapshot, May 7, 2024
- Sovereign Risk Indicators, April 8, 2024. A free interactive version is available at http://www.spratings.com/sri
- Banking Industry Country Risk Assessment: The Netherlands, Sept. 29, 2023
- Default, Transition, and Recovery: 2022 Annual Global Sovereign Default And Rating Transition Study, April 28, 2023
- European Housing Prices: A Sticky, Gradual Decline, Jan. 11, 2023
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| Primary Contact: | Sebastien Boreux, Paris 33-14-075-2598; sebastien.boreux@spglobal.com |
| Secondary Contact: | Remy Carasse, Paris 33-14-420-6741; remy.carasse@spglobal.com |
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