News item | 18-05-2022 | 10:15
Corona also determined life in the Netherlands in 2021. Many people became ill and restrictive measures remained necessary. Entrepreneurs went through difficult times and the cabinet again spent a lot on support and recovery packages. Despite this, the Dutch economy recovered quickly. After contraction in 2020, a year later there was strong economic growth of 5%. Partly because of this, government finances were in better shape than expected at the end of 2021.
This is apparent from the Central Government’s Annual Financial Report and the National Annual Report, which Minister Sigrid Kaag of Finance sends to the House of Representatives on Accountability Day on behalf of the cabinet.
“We look back on 2021 as a year of strong recovery with high economic growth and low unemployment,” said Minister Kaag. ‘We now desperately need the flexibility and resilience that the Dutch showed in the corona crisis. At the moment we are dealing with a terrible war in Ukraine. In addition to enormous human suffering, this war also has financial consequences. We also have to face these exceptional times together by keeping the course and making careful choices.’
In order to help companies affected by corona and to ensure that employees keep their jobs, the government continued to assist with support packages in 2021. More than €30 billion was spent on these support packages and on measures to combat the coronavirus, such as vaccinations and testing capacity.
Public finances and economic developments
Despite the unforeseen extra expenditure due to the corona pandemic, public finances were in better shape than expected in 2021. This was partly due to the rapid economic recovery. The government received more taxes. Because more people had a job, fewer benefits were needed. The government budget deficit (central government, municipalities and other governments) was 2.5% of the Gross Domestic Product (GDP). Government debt stood at 52.1% of GDP.
Economic growth was strong at 5.0% in 2021; the economy recovered from the economic blow of the corona crisis in 2020. The labor market was historically tight in 2021, unemployment remained low (4.2%). The tight labor market did not translate into strong wage growth. Wages increased on average by 2.2%. Inflation will average 2.7% in 2021, but has risen sharply in recent months to more than 5%.
Rapid elaboration of compensation schemes
In the annual reports, the cabinet takes stock of income and expenditure in 2021 and provides insight into how the various ministries have spent the money. In response to the annual reports, the Court of Audit will inform you on Accountability Day whether the money has been spent lawfully and what could be improved.
As in 2020, central government financial management was also under pressure in 2021. The past year was dominated by the corona crisis, compensation schemes for Groningen and recovery of childcare allowance. Under great pressure, ministries have drawn up various regulations. In some cases this was at the expense of the legality of the financial transactions.
The government wants to reverse this development by paying extra attention to careful financial processes. Among other things, by examining the financial frameworks, such as the Central Government Financial Management Regulations. This is to prevent incidental irregularities from taking on a structural character. The government also wants to maintain an orderly budget process and to allow 1 moment for decision-making on the budget. Calmness in the budget process is very important. This ensures that all interests can be carefully weighed up and gives time to do everything according to the rules. This contributes to better policy and to the regularity of public finances.