Holland in recession next year

Monday 08 December 2008

The Dutch economy is set to shrink for the first time since the early 1980s next year, according to the latest prediction from the government's economic forecasting body CPB published on Monday.

The CPB puts the decline at 0.75% in 2009 and says companies which depend on exports will bear the brunt of the downturn.

In 2010, the economy will pick up again, with growth reaching 1%, the organisation says.

'Nevertheless, the uncertainty surrounding the timing of the recovery remains great,' the CPB said. 'Financial crises tend to last longer than a dip in the economic cycle.'

The figures are the first from the CPB to incorporate the effect of the credit crisis. In September, when the government presented its 2009 spending plans, the organisation said the economy would grow by 1.25% next year.

The new figures also indicate that unemployment is set to rise to 6.5%, or by 200,000 people, by 2010. Currently, the official Dutch unemployment rate is around 2.6%, the lowest in Europe.

But the CPB says that 'lower commodity and energy prices will dampen inflation, which will benefit spending power'. On average, spending power will rise 1.75% next year, with inflation falling to 1.5%.

The new CPB forecast also says that the government's budget deficit will reach 2.4% in 2010, due to lower tax and gas income and increased spending on social benefits.

Nevertheless, it would be wrong for the government to start cutting costs. 'These are unusual times. It would not be sensible to squeeze the economy even more,' CPB chief Coen Teulings said.

On Friday prime minister Jan Peter Balkenende admitted for the first time that the Netherlands was heading for recession.

© DutchNews.nl

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