Its government's fiscal metrics remain robust despite significant short-term fiscal measures to support household purchasing power and institutions and governance are among the strongest in Moody's rated universe.

The stable outlook reflects Moody's view that downside risks to the Netherlands' credit profile are mitigated by a high degree of economic resilience, significant fiscal space, the sovereign's institutional capacity to manage shocks, and a proven track record of addressing long-term challenges such as demographic change. The Netherlands also has limited susceptibility to event risks.

The country’s industrial structure is not oriented towards energy-hungry sectors that are most exposed to a prolonged period of high energy prices. In fact, the country’s strength in semiconductor production is an economic advantage in the coming years, the rating agency said.

In addition, its company structure is less oriented toward micro and small companies, whose balance sheets are less resilient, Moody’s said in a press release.

Economic growth remained quite strong at an estimated 4.2 per cent in 2022 due to the buoyant economic performance in the first half of the year, though in the second half households' purchasing power was severely affected as high inflation, combined with moderate wage increases, resulted in a fall of real wages for the year as a whole.

These headwinds will continue in 2023, and Moody's expects 0.1 per cent real gross domestic product (GDP) growth this year.

However, the rating agency expects the 2023 central government budget to provide material support to purchasing power, which will help the country avoid an outright economic contraction for the year as a whole.

Fibre2Fashion News Desk (DS)