A Balance-Sheet Analysis of the Dutch Economy

IMF Working Papers, October 22, 2021

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The Dutch economy is characterized by substantial financial balance sheets in the private sector.
Uncommonly large gross financial assets and liabilities are found in the financial sector, whereas households own significant net financial wealth.
The large gross financial assets and liabilities reflect a dominant role of multinational corporations (MNCs).
Despite their size, these financial positions have not brought significant financial stability risks to the country.
Dutch households’ long balance sheets have been associated with depressed consumption and volatile real estate investment, which has probably exacerbated the cyclicality of the economy.
The expected reform of the pension system is likely to change the way household balance sheets interact with private consumption.

Financial sector: presence of uncommonly large gross financial assets and liabilities.
Households: significant net financial wealth but long balance sheets associated with:
- depressed consumption; and
- volatile real estate investment.
Multinational corporations: dominant role underlying large gross financial positions.
Financial stability: large positions have not translated into significant financial stability risks.

Pension reform:
- Expected reform of the pension system is likely to alter interactions between household balance sheets and private consumption.
Cyclicality:
- Household balance sheet dynamics (depressed consumption and volatile real estate investment) likely exacerbate economic cyclicality.
Financial sector monitoring:
- Continued monitoring of large gross financial assets and liabilities in the financial sector is implied given their scale and MNC roles, despite current limited stability risks.