An industrial nation with limited natural resources, the Netherlands bases its economy on the importation of raw materials for processing into finished products for export. Food processing, metallurgy, chemicals, manufacturing, and oil refining are the principal industries. Agriculture is particularly important to the economy, as about 60% of total agricultural production is exported.
Because of its geographic position on the sea, outstanding harbor facilities, and numerous internal waterways, the Netherlands became a trading, transporting, and brokerage nation. A major role in the economy has always been played by the service industries, such as banks, trading companies, shipping enterprises, and brokerage and supply firms. The economy, being involved in international trade, is sharply affected by economic developments abroad—including fluctuations in prices of primary goods—over which the Netherlands has little or no control.
Growth in GDP averaged just under 3% per year during 1988– 95 with exceptionally strong growth occurring in 1989 (4.8%) and particularly slow growth in 1993 (1.8%). Inflation was low, averaging about 2% a year between 1986 and 1998. The unemployment rate fell from 10.5% in 1985 to 8.4% in 1995, and has continued to fall steadily, reaching an estimated 3% in 2002. For the four years 1997 to 2000, real GDP growth averaged 4%, well ahead of most of Europe. Growth slowed in the global economic slowdown of 2001 to 2.8% and was brought close to a stand-still in 2002, with estimated growth of 0.3%. Inflation jumped from 2.2% in 1999 and 2.6% in 2000 to a yearly average of 4.5% in 2001 due mainly to a hike in the VAT rate, increases in gasoline and food prices. For 2002, inflation is estimated at 3.4% a solid 3.7%.