Dutch economy to slump further

Dutch economy to slump further
18 June 2003
AMSTERDAM — Having already entered recession, the Dutch economy will suffer 0.4 percent negative growth this year, its first full-year decline since 1982, the central bank DNB warned on Wednesday.

The latest DNB figures indicate that the long hoped-for recovery will not occur. Instead, the bank's quarterly report indicates that the Dutch economy will have to wait for slight improvements in 2004 and 2005. The report forecast a 0.8 percent increase in Gross Domestic Product (GDP) in 2004 and a further 1.8 percent the year after.

DNB president Nout Wellink warned in the central bank's annual report about a month ago that the Dutch economy would decline in 2003, but said at the time that the result could be limited to zero percent. Furthermore, he did not rule out a slight economic recovery before the end of the year.

Inflation is expected to amount to 2.4 percent in 2003, falling back to 1.6 percent next year and 1.3 percent in 2005, Dutch associated press ANP reported. The lower inflation rate follows several years of persistently high price rises above the European Union average, with the Dutch inflation rate coming out at 4.5 percent in 2001 and 3.5 percent in 2002.

The DNB attributed the declining economic growth this year to a large decrease in business investment and small growth in the volume of Dutch exports. The growth in government consumption spending is significantly lower and only moderate growth in households spending is being witnessed.

The Netherlands officially entered into a recession, following figures from the Central Bureau of Statistics (CBS), which revealed that the Dutch economy shrunk by 0.3 percent in the first quarter of 2003 and 0.2 percent of the last quarter of 2002. A recession is defined as two consecutive quarters of negative economic growth.

This year's recession indicates the Netherlands is experiencing a "double dip", considering the country recorded two successive quarters of negative growth at the start of 2001. Despite a recovery, the economy recorded just 1.3 percent growth that year, before falling back to just 0.2 percent last year, the CBS said.

The tough economic times have prompted the Christian Democrat CDA, Liberal VVD and Democrat D66 coalition government to throw together a EUR 13 billion savings plan to try and right the Dutch economic ship and reduce the budget deficit to 0.5 percent of GDP in 2007. Prime Minister Jan Peter Balkenende has warned that everybody will suffer financial pain in the coming few years.

[Copyright Expatica News 2003]