Cabinet counts on ‘astronomical’ budget deficit of 68 billion euros

The government expects that the budget deficit of the Netherlands will amount to 8.7 percent of gross domestic product (GDP) this year due to the corona crisis. That means a deficit of 68 billion euros, according to an estimate that Minister Wopke Hoekstra (Finance, CDA) sent to the House of Representatives on Friday.

The shortage is considerably less than the 92 billion euros that Hoekstra took into account when the Spring Memorandum was published at the end of April. That was a ‘rough estimate’, the minister wrote on Friday. The Netherlands Bureau for Economic Policy Analysis (CPB) has now made a macroeconomic estimate. The Cabinet also has more insight into the expenditure on the support measures for companies and the lost tax revenues.

Prime Minister Mark Rutte (VVD) spoke at his weekly press conference on Friday afternoon about “an astronomical deficit”. He said that the Netherlands can afford the support measures because government finances have been put in order in recent years. “That we are all capable of making this possible is because we had built up buffers,” he said, according to news agency ANP.

Also read: CPB advises expansionary fiscal policy: bring investments forward

Substantial more

The shortfall of 68 billion euros is considerably more than budgeted for Budget Day. At that time, the government still took into account a surplus of 2 billion. Due to the measures taken by the government to combat the outbreak and to limit economic consequences, the public debt rises to 63.1 percent of GDP – a total amount of EUR 491 billion. The CPB takes into account an economic contraction of 6.4 percent.

The Ministry emphasizes that the current estimate is a ‘rough estimate’. This may change ‘depending on the development of the coronavirus in the Netherlands and abroad and the financial and economic consequences thereof’.

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