Interest rates are rising, but the Dutch government is not yet worried about this

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Analysis – Since last week, there has been a Dutch government Begin to build interest again If the government issues a new 10 year government bond. Shortly after the negative interest rate turned into a positive interest rate, the CPB predicted that government debt would increase significantly in the future.

Still, we do not need to worry that much of the budget will soon be swallowed up by high interest rates.

Government debt is expected to be around 58 percent of national income by the end of this year. However, the new Rutte IV cabinet makes a lot of money available to deal with major problems in areas such as climate and nitrogen.

The CPB estimates that the ratio between national debt and the size of the economy will expand to 92 percent by 2060 over the next decade, significantly higher than the 60 percent recommended by European monetary rules.

The Netherlands is in a better financial position than many European countries

However, there are two warnings for this increase in government debt. First, even under the CPB scenario, the Dutch government’s funding is favorable compared to other European countries. In France Inside Belgium For example, the ratio between government debt and national income has already risen to more than 100 percent. In addition, a lot can happen in 38 years.

For example, in 1990, China’s economy was only 10 percent larger than the Netherlands’. In hindsight it is easy to say, but some at the time predicted that the country would grow into a world economic power, even competing with the United States.

High interest rates in the short term are no problem for the government

Rising interest rates in the bond markets are also not an immediate cause for concern. The Netherlands has issued several bonds with very favorable interest rates, as interest rates have fluctuated at very low levels over the years. As a result, we have lost only 3. 3.4 billion in interest costs in the current year. This is less than 1 percent of the total budget or less than 200 euros per Dutch person.

Currently, government debt securities have an average maturity of eight years. Even if interest rates rise sharply, it does not immediately turn into higher interest rates.

One of the consequences of rising interest rates is that the euro may gain some strength. It can be admitted that this will be detrimental to the international competitiveness of the export sector. But the Netherlands has grown into a transport and export country, mainly due to its business orientation and favorable location. If a currency advantage is a determining factor for future success, some things can go wrong.

Just Justs is a currency expert iBanFirst. He has more than twenty years of experience in the world of currency.