It is far from guaranteed that the economic growth the Netherlands has enjoyed in recent years will continue, ING economists warned in a new report. The economists say that the country is running short of the labor, space, infrastructure, and investment needed to keep the economy growing the way it has.
The analysts argue that higher government spending has driven much of the recent economic expansion. Substantial purchasing-power measures have also been introduced. “That means the extra outlays have mainly served to cushion the negative effects of economic shocks, rather than to strengthen the economy’s longer-term foundations.”
Discounts on energy bills and fuel excise duties were enacted, for example, but infrastructure was not reinforced. The bank points to a large backlog of deferred maintenance. That became visible when the Merwede bridge on the A27 closed to trucks because the structure had weakened. Another example is when the Hardenberger bridge, which carries the A28, had to be shut for several days for emergency repairs.
ING’s economists are not the first to flag the consequences of neglected upkeep. The bank is, however, more explicit in stating that the problem can reduce economic growth, the ANP noted.
Factors that sustain the economy over the longer term are also constrained by, among other things, “fickle” politics, ING reported. Growth-promoting policy can become the “sacrificial lamb” when there is no immediate sense of urgency.
A tight labor market, an aging population, and lower immigration likewise make it “hard to see where the extra labor hours will come from to produce substantial further growth.”