Dutch economy in recession, prospects for 2012 depend on Eurozone crisis

Dutch economy in recession, prospects for 2012 depend on Eurozone crisis

The Dutch economy is in recession. In 2012, GDP is expected to decline by ½ percent, while the unemployment level increases by 90.000 persons, to 5¼ percent of the labour force. The budget deficit goes down to 4.1% in 2012, which is less than previously expected due to the worsened economic prospects.

The forecasted 2012 budget deficit passes the ‘signal margin’ by 0.4%. This was made public today by CPB Netherlands Bureau for Economic Policy Analysis in its December forecast, published as CPB Policy Brief 2011/13.

This December forecast is based on a ‘muddling-through scenario’, which assumes that the Eurozone crisis will neither be solved, nor further escalated downwards. The forecast also assumes that the financial markets will see some tranquillity in the course of 2012, while economic growth will also slowly return. However, for this moment it is uncertainty that mostly determines the European economies, which leads to a decrease of the relevant world trade for the Netherlands in 2012 and a negative GDP growth for the Eurozone area as a whole.

The Dutch economy is in recession. The expected slight recovery of economic growth will not be seen until the second half of 2012. Dutch GDP in 2012 will be ½percent lower, compared to 2011. This economic decline is mostly due to lower foreign trade. In addition, Dutch consumers and investors keep spending levels down, while growth is also negatively impacted by restrictive budgetary policies.

The current forecast is less optimistic about the public budget than the previous forecast of September 2011. This is almost exclusively due to the worsened growth prospects. The forecasted budget deficit in 2012 passes the so-called ‘signal margin’. However, the budgetary rules set by the current government only call for additional measures if this will also be the case in the forecast for 2013. CPB Netherlands Bureau for Economic Policy Analysis will publish its first 2013 forecast in February 2012.

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