Coface Group
Netherlands

Netherlands

Population 17.2 million
GDP per capita 52,646 US$
A2
Country risk assessment
A1
Business Climate
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Synthesis

major macro economic indicators

 

  2018 2019 2020 (e) 2021 (f)
GDP growth (%) 2.4 2.0 -3.8 2.9
Inflation (yearly average, %) 1.7 2.6 1.3 2.2
Budget balance (% GDP) 1.4 1.8 -4.0 -4.9
Current account balance (% GDP) 10.8 9.4 7.0 9.1
Public debt (% GDP) 52.4 48.7 51.4 57.1

(e): Estimate (f): Forecast

STRENGTHS

  • Port activity (Rotterdam is Europe’s number-one port)
  • Establishment of home-grown international companies working with a dense network of SMEs is highly attractive for foreign investors
  • Diversified and flexible exports (services have a share of 11.2% in total exports value added) and external accounts in surplus
  • Strong digitalization with lot of home office, home schooling and online retail possible
  • High quality infrastructure and good living standards

WEAKNESSES

  • Exposure to the European economy, especially Germany and the UK: exports to the United Kingdom generated 3.3% of the country’s value added in 2018
  • Debt of private households is very high (236% of disposable income in 2019)
  • Banks dependent on wholesale financing (loans/deposits = 136%) and real estate
  • Ageing population; pension system under pressure

RISK ASSESSMENT

A bumpy road to economic recovery

The conditions for a reviving economy are in place for 2021. However, the course of the COVID-19 pandemic has caused setbacks. The year 2021 already started negatively. The economy was in a partial lockdown with closed schools since November 2020, when, in January 2021, all non-essential shops were closed, as well as restaurants and bars. The normal daily life came to a standstill. In addition, a nightly curfew was introduced, the first one since the end of World War II. People reacted negatively to the severe measures, which lead to the heaviest riots in the last 40 years with street battles in January. The economic activity suffered from this harsh lockdown and decreased by 0.8% QoQ in the first quarter of the year. In comparison to the first lockdown, however, people were used to the situation and consumed more via online shopping. Production could keep on as hygienic protocols were already implemented in the production process and foreign trade was strong in early 2021. Especially the dynamic demand for European goods from China and the U.S., as well as the strong activity of the manufacturing sector in Dutch neighbouring countries helped the foreign trade, one of the main industries of the Dutch economy. From 20 April, the lockdown was progressively eased, with almost no measures left in early July. However, since then, infections increased rapidly, leading to the 5th wave of the pandemic. As a result, light restriction measures were introduced. The Netherlands have with 11% of the population a high share of total COVID-infections since the start of the pandemic (the same as Sweden, however with a lower death-rate). Despite this, a dynamic recovery is expected for the spring and summer quarters. The well developing vaccination campaign (at mid-July 45% of the population were fully vaccinated) is comforting the positive outlook. Due to frequently changing travel-restrictions, many people will stay at home during the summer holidays and, together with a huge number of German tourists, support the Dutch tourism-sector (the Netherlands have a structural negative tourism-balance). The recovery in the summer is backed by a strong consumption, as the government has extended its current programs for furlough and help for self-employed until the end of September 2021, as well as the public credit guarantee scheme until the end of the year (EUR 12.5 billion, 1.7% of GDP). In addition, the government has decided to ease the tax system, i.e. to lower the first bracket of the income tax (for the majority of people) by 0.25 percentage points to 37.1%. Additional support will come from the ECB, which extended its asset purchases by EUR 500 billion up to EUR 1850 billion, so that it has enough liquidity to buy assets in an unchanged manner until the end of March 2022. However, the further spread of the Delta-mutation of the COVID-19 virus remains a negative risk for the second half of the year.

 

Fiscal balance remains in the red, external one in the green

After a strong deterioration of the fiscal balance in 2020, the public deficit should reach an even higher level  in 2021 as, on the one side, corporate and income taxes will generate lower revenues than in former years and, on the other side, the government’s expenditures will remain high with the prolonged support-measures. This will increase the public debt ratio, but it will remain below the Maastricht-target of 60% of GDP. The Dutch current account surplus, however, should recover in 2021, still strongly dependent on the trade in goods surplus, which should improve in line with the main export destinations in the Eurozone, the UK and U.S. Moreover, the balance of income, which registered a deficit in 2020, could turn to a surplus again thanks to the recovery in revenues from Dutch assets abroad (net foreign assets reached a record of EUR 267.1 billion in 2019).

 

The positive image of PM Rutte is crumbling rapidly

In March 2021, Prime Minister Mark Rutte and his party VVD (conservative-liberal) won for the fourth time in a row the general election. Right before the election in early 2021, however, the government had to step down from its office because of a child benefit scandal, in which thousands of families were wrongly accused of defrauding the child welfare system. Rutte and most of his ministers stayed in the office as a caretaker government. This had no major negative effect on his party. The VVD reached 34 seats out of the 150 seats in the parliament, 1 more than four years ago, while single coalition partners lost votes. However, during the negotiations for a new coalition, information was leaked that showed that PM Rutte had lied about prematurely talks about ministerial positions. This lead to a motion of no confidence against Rutte as Prime Minister, which was rejected. The parliament, however did formally reprimand him of a motion of disapproval and some former coalition-partners announced the end of their collaboration with Rutte. By mid-July 2021, there was still no formation of a new government in the Netherlands. Nevertheless, talks have gone on and a new-election this year is unlikely.

 

Last updated: August 2021

Payment

In the Netherlands, bank transfers are by far the most common payment method for both domestic and export business-to-business transactions. All Dutch banks are linked to the SWIFT electronic network, which provides low-cost, flexible and rapid processing of international payments. Direct debit and different centralised local cashing systems are also widely used. Online sales are increasingly popular and most companies now use digital banking software. Cash payments are gradually disappearing and other payment methods, like cheques and bills of exchange are rarely used.

Debt collection

Amicable phase

A debt collection process usually begins and ends by sending the debtor a (sometimes registered) collection letter. Sending letters (only) by email is becoming more and more customary. Besides the principal claim amount, the collection letter usually also includes a demand to pay accrued interest and extrajudicial costs. If the interest rates and/or costs have not been agreed by contract, Dutch law regulates the limits for both. If amicable actions, which include reminders by phone and possibly a debtor visit, do not result in full payment, the creditor can initiate legal action, in accordance with Dutch civil law.

 

Legal process
Fast-track procedures

In urgent cases, claims can be submitted for a fast track procedure (kort geding). These proceedings resemble those of the regular civil court but, if convinced of the plaintiff’s arguments, the judge (ruled by the President of the district court) delivers a verdict within a very short period of time – usually between two to four weeks. During this somewhat simplified procedure, the judge often makes a temporary or provisional ruling for more urgent matters. If, subsequent to this provisional decision, the parties do not reach a final settlement on all issues, they then need to obtain a final judgement in a “regular” civil suit (bodemprocedure). The fast track procedure in the Netherlands differs from the (European) payment order procedure used in many other European states. It always requires the assistance of a lawyer and personal appearances by all parties before the judge. As this makes the fast track procedure rather expensive, it is not often used in regular collection cases.

 

Ordinary proceedings

The regular civil court procedure, held in one of the eleven district courts (Rechtbank), is the most frequently used recourse of action. Claims of €25,000 or less are heard by a judge of the cantonal sector of the district court (kantonrechter), while claims in excess of €25,000 are presented before the civil law sector. The main difference in the civil law sector is that both the plaintiff and the debtor have to be represented by a lawyer, whereas in the cantonal sector parties are permitted to argue their own cases. Both types of procedures begin with a bailiff serving the debtor with a writ of summons. In many cases, debtors do not contest the claim or appear in court. This results in a judgment by default being given, usually within six to eight weeks. If the debtor does appear in court, the judge sets a date for them or their lawyer to prepare a written statement of defence (conclusie van antwoord). However, when appearing before a cantonal sector judge, debtors can represent themselves and plead their cases verbally. After the first plea, it is standard procedure for the judge to schedule personal appearances by both parties to obtain more information and to see if a settlement is possible (comparitie van partijen). If not, the court can either pass judgement immediately or, in more complex cases, give the plaintiff the opportunity to deliver a replication (conclusie van repliek). The defendant can then reply by rejoinder (conclusie van dupliek). These proceedings take, on average, six to twelve months.

 

Winding-up proceedings

A third and often effective procedure for collecting payments is by filing a winding-up petition at the district court. This type of petition must be filed by a lawyer and the applicant needs to submit evidence of a payment default on an undisputed debt and of the existence of at least one other creditor having an undisputed claim of any kind (for example, commercial debt, outstanding alimony or taxes). The debtor is then formally notified by a bailiff that a winding-up petition has been filed. To avoid bankruptcy, the debtor can choose to appear in court to dispute the claim (or the fact that there are other creditors) or propose an out of court settlement. As most debtors try to reach a settlement, these proceedings are often cancelled before the date of the court hearing. Otherwise, and if there is sufficient evidence, the debtor is then declared bankrupt. Approximately 95% of all bankruptcies result in no payment being received by non-preferential creditors.

 

Retention of title and right of reclamation

Besides initiating legal action or claiming retention of title (if stipulated), sellers of goods can often exercise their right of reclamation (recht van reclame) for unpaid goods. This entails sending the debtor a registered letter which invokes this right. The contract is thus terminated and by law, ownership of the goods returns to the creditor. However, this recourse of action does require the goods to be in their original state. The registered letter must be sent within 6 weeks of the claim being due and within 60 days of the goods being delivered. 

Enforcement of a legal decision

If a debtor does not voluntarily comply with a court decision, the creditor can initiate actions to enforce the judge’s ruling. As most court decisions become effective immediately, creditors do not need to wait for the three month period of appeal to expire. Enforcement laws lay down statutory rules on coercive measures and how these measures can be applied. In the Netherlands, only bailiffs are authorised to levy enforcements and are instructed by the creditor. Two conditions need to be met before coercive measures begin. The bailiff must be in possession of a writ of execution (an original and enforceable judgment) and the party on which the enforcement will be levied must have prior official notification of the writ.

Court decisions rendered by other EU countries benefit from specific enforcement mechanisms, including the EU payment Order and the European Small Claims procedure. Decisions issued by non-EU countries can be recognised and enforced on a reciprocal basis, provided that the issuing country is part of a bilateral or multilateral agreement with the Netherlands. In the absence of such an agreement, an exequatur procedure can be carried out in the Dutch courts. 

Insolvency proceedings

Restructuring proceedings

Corporate debt restructuring entails using the suspension of payments (surseance van betaling) procedure. The debtor is granted temporary relief from creditors, in order to allow them to reorganise, continue with business operations and ultimately satisfy their creditors’ claims, all under the supervision of a court-appointed administrator. A plan is proposed and must be approved by two-thirds of the creditors representing three-quarters of the total outstanding debt.

 

Bankruptcy proceedings

The debtor’s assets are liquidated by the court-appointed trustee. This procedure commences when the debtor has ceased payments and the District court has declared the debtor bankrupt. If a creditor makes a request for the debtor to be declared bankrupt, there must be at least two creditors with overdue claims. However, when liquidation is requested by the debtor, evidence of additional creditors is not mandatory.

The trustee establishes a list of creditors, the debtor’s assets are auctioned and the proceeds then distributed between the creditors.

Insolvencies - Netherlands
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