Rising unemployment and reduced consumer spending are the main reasons why the economy will only show marginal growth over the next three years, the government’s macro-economic think-tank CPB said on Tuesday.
In addition, the budget deficit will be 4.6% next year, not 4.5% as earlier forecast, the organisation said in its definitive forecasts for the next three years.
The minority government and anti-immigration PVV are currently locked in negotiations on how to find savings of at least €9bn in order to reduce the budget deficit to below 3%, in line with monetary union rules.
They are under pressure to limit the effect on spending power as much as possible because of fears consumers will keep an even tighter hold on their purses.
New figures from the national statistics office CBS on Tuesday showed consumer confidence fell further this month and is now lower than it was during the 2008 recession.
The CPB also said the recession will continue into the second half of this year, when the economy will contract by 0.75%. In 2013, the economy will grow 1.25% and 1.5% in 2014, when the next elections are due to be held.
Speaking at a news conference, CPD director Coen Teulings said: ‘This is a fairly big recession. This is the double dip’.
In order to encourage people to start spending again ‘it is vital that politicians can offer clarity to consumers as soon as possible,’ Teulings said. ‘In the short term, cuts always have a negative effect on growth.’