The European Commission lowered its 2014 economic forecast for the Netherlands, citing weak domestic consumption that will only gradually pick up in the course of next year.
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, increasing 0.2 percent in 2014. That compares with a May forecast for 0.9 percent growth. This year the Dutch economy will contract 1 percent, the commission said.
“Consumer confidence, whilst showing a slight improvement in recent months, remains markedly below the long-term average, underlining the weakness of consumption,” the commission said today in its autumn economic forecasts. “While for 2014 domestic demand growth is still expected to be negative, a gradual pick up is set to take place in the course of the year.”
The commission predicts the budget deficit to remain above 3 percent of GDP next year and to narrow to 3 percent in 2015. The deficit for this year is seen at 3.3 percent of GDP.
The deficit forecast includes an additional austerity package of 6 billion euros ($8.1 billion) on which Prime Minister Mark Rutte reached an agreement with three of the opposition parties on Oct. 11. This amount comes on top of a four-year, 16 billion-euro package the coalition of the Liberal Party and the Labor Party approved late last year. The four-year plan calls for 3.5 billion euros in deficit reduction to take effect in 2014.
About 6 billion euros in austerity measures would be needed to get the deficit within the EU’s 3 percent limit of GDP in 2014, EU Commissioner Olli Rehn told reporters in The Hague on June 11 after a meeting with Dutch Finance Minister Jeroen Dijsselbloem. The Netherlands, going through its third recession in five years, has been in breach of the EU limit since the beginning of the debt crisis in 2008.
The Dutch central planning agency CPB predicted on Oct. 17 that the deficit will hit 3.3 percent of GDP in 2013 and will remain at the same level in 2014. The economy will contract 1.25 percent this year and grow 0.5 percent in 2014, the bureau said a month earlier.