EU Cuts Dutch Economic Forecasts on Depressed Domestic Demand

The European Commission cut its Dutch economic forecasts for this year and next on depressed domestic demand.

The commission, the European Union’s executive arm in Brussels, sees gross domestic product in the Netherlands, the fifth-largest economy in the euro area, declining 0.8 percent in 2013. That compares with a February forecast for a decline of 0.6 percent.

“Domestic demand is forecast to remain depressed into 2013, as budget consolidation and negative wealth effects, chiefly emanating from the housing market, continue to pose a drag on the Dutch economy,” the commission said today in its spring economic forecast.

“In 2014, domestic demand is expected to begin to pick up gradually, supporting a fragile recovery, with real GDP increasing by 0.9 percent,” the commission said. The EU forecast for Dutch economic growth next year was lowered from 1.1 percent.

The commission forecasts the Dutch budget deficit to narrow to 3.6 percent of GDP this year and to remain at that level in 2014, according to the report. That’s in excess of the EU ceiling of 3 percent of GDP.

Dutch Prime Minister Mark Rutte agreed on a four-year, 16 billion-euro ($21 billion) austerity package in October and will decide later this year on additional measures of 4.3 billion euros for 2014.

The Dutch Central Planning predicted on Feb. 28 the deficit will hit 3.3 percent of gross domestic product in 2013 and 3.4 percent in 2014. The economy will shrink 0.5 percent in 2013, though growth may pick up later this year, resulting in an expansion of 1 percent in 2014, the planning agency said.

To contact the reporter on this story: Corina Ruhe in Amsterdam at cruhe@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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