Dutch Budget Deficit Is Seen Widening as Recession Continues

The Dutch budget deficit will widen more than initially forecast next year after the country’s recession extended into a fourth quarter, increasing pressure on Prime Minister Mark Rutte to do more to spur growth.

The budget shortfall will expand to 3.9 percent of gross domestic product in 2014 from 3 percent this year, the country’s planning agency CPB in The Hague said in a report today. In June, it projected deficits of 3.5 percent for 2013 and 3.7 percent for next year. The fifth-largest economy in the euro area will contract 1.25 percent this year and grow 0.75 percent in 2014, CPB forecast.

While the 17-nation euro area emerged from a record-long recession in the second quarter, led by Germany and France, GDP in the Netherlands fell 0.2 percent. The economy has contracted in eight of the last nine quarters and isn’t expected to return to growth until next year, according to Bloomberg’s quarterly economic survey published on Aug. 9.

“The Dutch economy is developing less favorably” than predicted two months ago, CPB said. Weaker real-wage developments will weigh on private consumption in 2014, it said.

Third Recession

The Dutch economy is in its third recession since the financial crisis started in 2008 and will contract 1 percent this year, according to Bloomberg’s quarterly survey.

Unemployment rose to 8.7 percent in July, national statistics bureau CBS said today, the highest since at least 2001. Unemployment is expected to rise to 9.25 percent in 2014, CPB said. Inflation is at 3.1 percent.

Rutte’s cabinet may seal an agreement of more than 8 billion euros ($10.5 billion) of cost cuts and tax increases, Het Financieele Dagblad reported yesterday, citing unidentified people familiar with the cabinet’s thinking. This amount is in addition to a four-year, 16 billion-euro package decided on in November when the coalition government took office.

Finance Minister Jeroen Dijsselbloem will not cut 2014 budget deficit by more than 6 billion euro, he said in an interview on RTLZ television today. “This shows we are not blindly hunting for the 3 percent deficit limit,” he said. European Union Commissioner Olli Rehn requested savings of 6 billion euro during a visit in The Hague in June.

Dijsselbloem is scheduled to present the 2014 budget and a detailed plan of austerity measures on Sept. 17.

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