Feb. 22 (Bloomberg) -- The European Commission cut its forecast for the Dutch economy and now projects a second year of contraction as domestic demand remains depressed.
The commission, the European Union executive in Brussels, today forecast that gross domestic product in the Netherlands, the fifth-largest economy in the euro area, will decline 0.6 percent in 2013. That compares with a November forecast for growth of 0.3 percent.
Consumer spending and corporate investment should start to revive in the second half of the year, the commission said in its latest economic forecasts. Economic growth is seen at 1.1 percent in 2014, while the budget deficit is forecast to narrow to 3.6 percent of GDP this year from 4.1 percent in 2012, according to the report, exceeding the EU ceiling of 3 percent of GDP.
“This is largely related to the nationalization of bank-insurer SNS Reaal,” EU Economic and Monetary Affairs Commissioner Olli Rehn told a press conference today in Brussels. “As to the structural fiscal effort so far, it appears the Netherlands has taken effective action.”
Dutch Prime Minister Mark Rutte has pledged to implement an austerity package worth about 16 billion euros ($21 billion) in the next four years to bring the deficit to below the EU ceiling.
The Dutch Central Planning CPB predicted on Dec. 19 that the deficit will be 3.3 percent of GDP in 2013 and that the economy will shrink 0.5 percent this year. On Feb. 28, CPB will disclose its forecasts for the budget deficit for 2013. Dutch consumer confidence dropped in February to the lowest level since records began in 1986, the national statistics bureau said yesterday.
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