The Ministry of Finance is projecting a 92-billion euro budget deficit
for 2020 in part because of all emergency measures the government is
implementing to cushion the blow caused by the coronavirus pandemic. The
country's debt level is likely to rise to levels higher than what is
permitted by the European Union, according Wopke Hoekstra, the country's
finance minister.
The budget deficit will be approximately 11.8 percent of gross domestic
product, Hoekstra wrote in an annual memorandum. The country has not run
an annual deficit that high in at least 25 years, according to data
from Statistics Netherlands dating back to 1999.
"The year is not yet half over, yet the 2020 budget has already been
thoroughly adjusted due to the coronavirus. We know one thing for sure:
significant changes will follow this year," the ministry said.
European Union member states are required to cap their annual budget
deficit to three percent of GDP. Public debt must not exeed 60 percent
of GDP, a rule which the Cabinet said is being suspended in light of
"the exceptional circumstances."
At the current projections, the Netherlands could see public debt soar
to 65.2 percent of GDP. At the end of 2019, the country carried 395
billion euros in debt.
Coronavirus caused a shocking financial twist for the Netherlands, which
ran a 1.7 percent surplus last year equivalent to 14.1 billion euros,
according to Statistics Netherlands. It had posted a surplus for four
straight years.
Even during the most recent financial crisis, which started in 2008, the budget deficit never went beyond 5.2 percent.
"The cabinet expects a significant economic contraction, can count on
significantly lower tax revenues, and is also spending a significant
amount of money on support measures," the ministry wrote.
But with many individuals and businesses allowed to postpone various
taxes in 2020, the government will need to borrow up to 65 billion euros
just to cover spending through the second quarter, which ends in May.
Deferred tax payments are likely to total between 35 and 45 billion
euros.
"The corona virus deeply affects the lives of all Dutch people. In the
first place because people get sick or lose a loved one. But also
because people are affected in their work, because there are no more
orders coming in, they no longer have work for their staff or are not
sure whether they can keep their jobs," the ministry said.
Read more Coronavirus expected to hand Netherlands worst-ever budget deficit | NL Times
