Dutch Economy Growing Stronger than Expected

Dutch Economy Growing Stronger than Expected

The Dutch economy is growing stronger than expected this year, according to new estimates by De Nederlandsche Bank (DNB) presented Tuesday.

Over the next few years the growth rate of the Dutch economy will remain subdued, with GDP growth stabilising at around 2% annually, according to the new half-yearly forecast by DNB published today.

Due to a positive spike in the first quarter, the economic outlook for this year has slightly improved. DNB now expects the Netherlands to post GDP growth of 2.2%, whereas at the end of last year it had anticipated growth of 1.6%. In parallel to the moderate international economic activity, economic conditions in the Netherlands are also expected to weaken, slowing the pace of growth in 2012 to 1.7%. This reflects the balance sheet recovery that is a priority for both households and the government for the moment. Not until 2013, when the domestic recovery becomes more solidified, will growth cautiously pick up to 2.1%.

Economic growth in the industrialised world will continue, but will be more sluggish than in earlier expansionary periods. In emerging markets growth is much higher and the threat of overheating has been looming for some time. This divergence in the international picture harbours significant risks for Dutch economic prospects. A deterioration in the European debt crisis – or the persistent uncertainty about it – could feed through to the real economy of the euro area via the financial markets. In other industrialised countries too, such as the US, the risk is present that the economic recovery may be slower than currently expected.

The danger of overheating in emerging markets may manifest itself in higher export prices and hence – given unchanged monetary policy – lead to higher inflation worldwide.

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