Is the economy as booming as we think?

Is the economy as booming as we think?

Mainly due to export and the fact that people buy more stuff, the gross domestic product (GDP) grew by 0,5 percent in the last quarter of 2016. Sounds like good news, but according to Bas Jacobs (Erasmus School of Economics) the growth is being slowed down by too many cutbacks that were made during the crisis.

Let's start with the figures. The last quarter showed the largest consumption growth in the past nine years. More consumption is in line with the reinforcement of employment and the recovery in the housing market. In 2016 20,5 percent more houses were sold and bought, figures from CBS showed recently.

Consumers spent more on clothes, cars and electrical appliances, gas and services like catering, recreation and culture. Compared to the last quarter of 2015, the GDP grew 2,3 percent. It has been growing for 11 quarters consecutively and grew by 2,1 percent last year.

Export

Exports of goods and services grew in the fourth quarter of 2016 a bit more than in the previous one. Dutch companies have exported significantly more chemicals and natural gas than the previous year. The same counts for machinery and food. For the first time since the second quarter of 2015 exports of goods and services grew faster than imports. This is mainly due to lower growth in imports, like cars.

Growth

The production of energy companies grew strongest: less electricity imports and more demand from abroad for electricity. The production of the construction sector grew significantly again, especially the construction of housing. Furthermore, the business services, especially the production of the staffing industry and industry both grew. For the first time in three years investments shrunk.

Too many cutbacks

According to Professor of economics and public finance at Erasmus University Rotterdam Bas Jacobs, we’re not quite there yet. There still is quite some unemployment, he says at BNR. ‘Our country is not running on full capacity and inflation is low.

Jacobs: 'Cutbacks are necessary in bad economical circumstances, and when things go well, you need to invest - not vice versa. Stimulating the economy is a good idea, but we should have started doing this years ago. In previous years there’s been considerable cutbacks and taxes were raised, and now we’re reversing this 10 to 28 percent? We lost growth unnecessarily, let's hope we can catch up on some of that!'

Jacobs also has some advice for the political parties: ‘According to the economic world, tax reforms are necessary, but no political party takes concrete steps with regard to the labor market, pensions, business tax, or home owners. Things are going relatively well and the need for reformations seems less relevant. That's a shame, if you ask me.'

More information

Source: BNR, Volkskrant