Economic growth in the region of Amsterdam is at a tipping point

The Metropolitan Region of Amsterdam is doing well. In 2018, the economy grew by 3.4 percent, whereas the growth rate in the Netherlands was 2.7 percent. With 4 percent, unemployment is exceptionally low; entrepreneurs are concerned about the scarcities on the labour market. Growth is expected to decline in the coming years to 2.8 percent in 2019, and to 2.3 percent in 2020. These are some of the main results from the Economic Outlook of the Metropolitan Region Amsterdam 2019 (in Dutch abbreviated as EVMRA), produced by a consortium consisting of TNO (the Netherlands Organisation for applied scientific research), NEO Observatory (Netherlands Economic Observatory) and Vrije Universiteit Amsterdam.

Henri de Groot, professor at the Department of Spatial Economics is co-author of the EVMRA and presented the results during the ‘State of the Region’ on June 17 in Theater Amsterdam: ‘The region is doing well when you look at economic growth and the low unemployment rate. But the growth model that brought the region so much economic prosperity in recent decades is at a tipping point.’

‘Not everyone benefits from the favourable economic developments’.

As a cause for the declining growth rates, De Groot mentions, among other things, ECB’s monetary policy resulting in very low interest rates and the moderate wage development. ‘This puts the process of creative destruction under pressure, leading to a slow increase of labour productivity. Combined with an ageing population, which puts the labour market under pressure, and a very low unemployment rate, labour supply is also a growth-limiting factor. Labour participation of low-skilled workers in particular is low, even slightly decreasing. This means that not everyone benefits from the favourable economic developments. And in the coming decades, lots of money will be spent on preparing the region for a climate-resilient and sustainable future.’

‘The latter is our duty, of course’, says Henri de Groot. ‘We have an obligation to invest in sustainability – for future generations. And, as one of the most prosperous regions in the world, we should set an example.’ In addition, he emphasizes training in the form of lifelong learning as an important task for the region: ‘Governments, industries and knowledge institutions need to join forces, and invest in life-long learning in order to keep people fit for the labour market throughout their career. There is still much to be gained. In addition, in the context of the policy decentralisation, municipalities that collectively form the MRA will have to cooperate much more intensively. The current scale of municipalities is too small to tackle the huge challenges they are facing. Existing partnerships are too informal and lack commitment, limiting their effectiveness.’

 

Ellen Woudstra
October 2019

 

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