Assessing Dutch Fiscal and Debt Sustainability

IMF Working Papers, December 4, 2020

Source details

Title: Assessing Dutch Fiscal and Debt Sustainability
Authors: Benjamin Carton, Armand P Fouejieu
Date: December 4, 2020
Core finding summary:
- Although the Netherlands entered the so-called Great Lockdown with a strong fiscal position, the Dutch fiscal balance is projected to deteriorate by an unprecedented magnitude, largely as a result of necessary fiscal measures deployed to weather the economic impact of the COVID-19 pandemic.
- The simulations show that even under significant downturn scenarios and assuming an initially less favorable fiscal position due to persistent economic effects of the pandemic, risks to the Dutch fiscal and debt sustainability would remain contained.

Analytical approach:
- The paper performs a stochastic analysis of risks to Dutch fiscal and debt sustainability over the next decade.
Scenarios and assumptions considered:
- Alternative recovery scenarios and associated fiscal consolidation paths.
- A range of macroeconomic shocks drawn from the historical experience of the Netherlands.
- Consideration of initially less favorable fiscal positions due to persistent economic effects of the pandemic.

Fiscal trajectory and risk assessment:
- Projected deterioration of the Dutch fiscal balance by an unprecedented magnitude driven by pandemic-related fiscal measures.
- Stochastic simulations indicate that, even under significant downturn scenarios and less favorable initial fiscal conditions, Dutch fiscal and debt sustainability risks would remain contained.
Domains analyzed (subjects and keywords reflecting scope):
- Fiscal policy, Fiscal risks, Fiscal stance, Government debt management, Public debt, Public financial management (PFM)
- Keywords: Debt, debt issuance, debt level, debt reduction objective, debt target, envisaged fiscal policy path, fiscal deficit, Fiscal risks, Fiscal stance, Global, Government debt management, increase warrant, SGP deficit, stochastic simulations, stochastic simulations., sustainability, WP