Economy to contract by 4.75%: think tank

The Dutch economy will shrink by 4.75% this year, more than previously expected, the government’s macroeconomic think tank CPB said on Tuesday.

The CPB has now revised down its forecasts for the fourth time within 12 months. It blames the 15% decline in world trade which will hit the trade-based Dutch economy particularly hard, for the worsening figures.
The downturn in consumer spending is another factor, the CPB said. Consumers are set to spend almost 3% less this year.
The new forecasts also say unemployment will rise to 9.5% of the working population by the end of next year.
Budget talks
Today’s figures will be used as the basis for next year’s budget negotiations and ministers had expected a downturn.
The CPB also says the budget deficit is set to rise to 6.7% of GDP next year. This means the government will be spending €40bn more than it will collect in taxes, the Volkskrant reports.
‘What we have experienced so far is a recession of unthinkable proportions. We have not experienced this since World War (II),’ said the head of the CPB Coen Teulings.
Last week the central bank said the economy would contract by 5.4% this year.
‘The Dutch central bank assumes that the recovery in world trade will take a bit longer than we think, and it also expects a bit lower level of consumer spending due to the rise in unemployment,’ Teulings was quoted as saying by Reuters.
Christian Democrat MP Frans de Neree told ANP the new forecasts were no reason for the government to take additional steps to boost the economy. But the measures agreed earlier this year should be implemented quickly, he said.
But employers organisation VNO-NCW urged the government to widen its approach. In particular more effort should be made to stimulate the construction sector, such as lowering value added tax on renovation work, the organisation said in the Financieele Dagblad.
Finance minister Wouter Bos told Nos tv the new figures are ‘alarming’ but that he did not intend to change strategy every time revised estimates are released.
The rise in unemployment is the most serious aspect of the crisis, he said. ‘One in 10 households will notice it,’ he said.

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