Frankfurt am Main, March 31, 2017 -- Moody's Investors Service has today affirmed the Aaa long-term
issuer rating, the Prime-1 (P-1) short term issuer
rating and the Aaa senior unsecured ratings of the Government of the Netherlands.
The outlook remains stable.
The key drivers for affirming the Aaa rating and maintaining the stable
outlook are:
(1) The sound public finances of the Netherlands with a declining debt-to-GDP
ratio set to fall below 60% of GDP within the next two years.
(2) The highly competitive, diversified and open economy of the
Netherlands which we expect to expand annually by 1.8% to
2.0% over coming years.
(3) The very sound institutional framework of the Netherlands with its
broad consensus for prudent fiscal policy.
The long-term country ceilings for local and foreign currency bond
and bank deposits for the Netherlands remain unchanged at Aaa.
Its short-term country ceilings for foreign-currency bonds
and bank deposits remain unchanged at Prime-1 (P-1).
RATINGS RATIONALE
FIRST DRIVER: THE SOUND PUBLIC FINANCES OF THE NETHERLANDS WITH
A DECLINING DEBT RATIO
The first driver of our rating action relates to the sound public finances
of the Netherlands. Moody's anticipates that the general
government debt-to-GDP ratio will fall below 60%
by the end of 2018. This will be supported by a continuation of
small budget surpluses as well as by the proceeds derived from the privatisation
of those assets remaining in public ownership after having been nationalised
during the financial crisis, such as the remaining stake owned by
the government in ABN AMRO Bank N.V.
The debt of the Netherlands is highly affordable, as reflected in
a low interest-payments-to-revenue ratio of 2.4%
in 2016. The Netherlands also benefits from depressed yields in
the context of the quantitative easing policy of the European Central
Bank, contributing to an expected further decline in interest payments.
In 2016, the fiscal surplus was 0.4% of GDP (from
a deficit of 1.9% of GDP in 2015), supported by the
economic recovery and higher-than-expected tax collection.
Higher receipts from taxes came mostly from social contributions,
but also from corporate and value added tax, partially offset by
a decline in gas revenues related to reducing production in the Groningen
field. For 2017 and 2018, we expect a further small fiscal
surpluses of 0.3% and 0.5% of GDP, respectively.
SECOND DRIVER: THE HIGHLY COMPETITIVE AND DIVERSIFIED ECONOMY OF
THE NETHERLANDS
The second driver of our rating action is based upon the very high economic
strength of the Netherlands. We expect the economy to expand annually
by close to 2.0% over coming years. Domestic demand
has strengthened, with investment lifted by a recovery in the housing
market. Consumption is supported by rising house prices and increasing
employment as well as by a lower fiscal burden following a €5 billion
(0.7% of GDP) tax reduction package. Exports will
continue to play a key role, also supported by the weaker euro,
and benefiting in 2017 from recovering world trade.
The very high non-price competitiveness of the Netherlands is reflected
in its 4th ranking (out of 138 countries) in the 2016/2017 World Economic
Forum Global Competitiveness Index (WEF GCI). This is not only
a very high ranking but also an improvement from 5th place last year and
from 8th place the year before, driven partly by improved macroeconomic
conditions and partly by structural reforms.
The economy of the Netherlands remains highly competitive, both
from a price and a non-price perspective, which is reflected
in its limited loss of export market share as compared with other euro
area countries, including Germany (Aaa stable). Overall,
the Netherlands exhibits several important strengths in competitiveness
that allow it to remain highly productive: excellent infrastructure
(3rd place in the respective subscore of the WEF GCI) combined with high
quality higher education and training (3rd place) support the creation
of a sophisticated business environment (5th place). The Netherlands
also scores exceptionally well in the quality of port infrastructure (1st
place) as well as in the burden of customs procedures (8th place),
which are important factors for the Netherlands as an open export and
re-export driven economy.
THIRD DRIVER: THE SOUND INSTITUTIONAL FRAMEWORK OF THE NETHERLANDS
WITH ITS BROAD CONSENSUS FOR PRUDENT FISCAL POLICY
The third driver of our rating action relates to the sound institutional
framework of the Netherlands. The country has a track record of
maintaining prudent fiscal policies and relatively low debt levels,
based upon broad consensus in favour of fiscal consolidation and debt
reduction. Moreover, the Netherlands benefits from a consensus-driven
approach to managing its economic affairs (sometimes referred to as the
'polder model').
The Worldwide Governance Indicators assess the institutional framework
of a sovereign in quantitative terms. In line with other highly
rated euro area and OECD countries, the Netherlands scores highly
for government effectiveness, rule of law and control of corruption,
reaching the 95th, 95th and 92nd percentile amongst all sovereigns
rated by Moody's.
WHAT COULD RESULT IN A DOWNGRADE
Downward pressure upon the rating might occur if we were to observe persistent
economic weakness or if we were to conclude that fiscal metrics were likely
to deteriorate significantly, with the deficit, the overall
debt burden or debt-financing costs on a rising trend. Separately,
a significant rise in the risk of euro area fragmentation, particularly
prompted by events in core countries such as France (Aa2 stable) or Italy
(Baa2 negative), which suggested a sharp rise in the risk of their
exit from the euro area, would be negative for all euro area member
countries and would exert pressure upon the rating of the Netherlands.
GDP per capita (PPP basis, US$): 49,624 (2015
Actual) (also known as Per Capita Income)
Real GDP growth (% change): 2.2% (2016 Actual)
(also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 1% (2016
Actual)
Gen. Gov. Financial Balance/GDP: 0.4%
(2016 Actual) (also known as Fiscal Balance)
Current Account Balance/GDP: 8% (2016 Actual) (also known
as External Balance)
Level of economic development: Very High level of economic resilience
Default history: No default events (on bonds or loans) have been
recorded since 1983.
On 28 March 2017, a rating committee was called to discuss the rating
of the Government of the Netherlands. The main points raised during
the discussion were: The economic fundamentals of the issuer,
including its economic strength, have not materially changed.
The institutional strength/framework of the issuer, have not materially
changed. The governance and/or management of the issuer,
have not materially changed. The fiscal or financial strength of
the issuer, including its debt profile, has not materially
changed.
The principal methodology used in these ratings was Sovereign Bond Ratings
published in December 2016. Please see the Rating Methodologies
page on www.moodys.com for a copy of this methodology.
The weighting of all rating factors is described in the methodology used
in this credit rating action, if applicable.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Simon Griffin
Vice President - Senior Analyst
Sovereign Risk Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Yves Lemay
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
