Country Report Netherlands July 2009

Outlook for 2009-10

• The government is showing competence in addressing the financial crisis and has reached agreement on a framework package that provides for a spending boost in 2009-10 and fiscal austerity measures when the economy recovers.
• The two main coalition parties, the CDA and PvdA, will continue to have serious disputes, posing the threat of a government crisis. The popularity of the far-right Freedom Party will discourage them from forcing a new election.
• The Economist Intelligence Unit expects the budget to move strongly into deficit in both 2009 and 2010, as the economic slowdown reduces revenue and increases spending.
• Consumer and producer confidence are weak, and the economic downturn in 2009-10 is expected to be severe, with net exports subtracting strongly from growth. Unemployment is set to rise considerably in the forecast period.
• GDP grew by 2.1% in 2008 and is forecast to contract by 4.7% in 2009 and by 0.3% in 2010. Export demand and investment will be particularly weak.
• Inflation (national measure) was 2.5% in 2008, but should drop substantially, to 1.4% in 2009 and to 0.3% in 2010, as price pressures fall sharply.
• The euro is expected to be stronger against the US dollar in 2009-10 than in 2008, but to remain volatile. The current-account surplus is forecast to shrink.

Monthly review

• The far-right Freedom Party was the big winner of the European Parliament elections in the Netherlands on June 9th, securing four seats in the new legislature compared with none previously.
• The main coalition parties, the CDA and PvdA, fared less well, losing two and four seats, respectively, out of the 25 allocated to the Netherlands. Turnout was the lowest-ever for such an election.
• The government has modified the temporary unemployment scheme, used to reduce the level of corporate redundancies, to allow the programme to take into account overtime worked when making payments.
• The government has tabled a legislative proposal that will help to stabilise the volatile budget contributions from the state's natural-gas proceeds.
• Average daily production in the manufacturing industry continued to decline in April, falling by 13% year on year, the same rate as registered in the three previous months. Retail sales have also shown continued weakness.
• The Dutch current-account surplus declined steeply in the first quarter of 2009, dropping to 4.1% of quarterly GDP, from 8.8% of GDP a year earlier.

Source: Country Report

This report covers the following industry codes:
SIC Code: 37;60;49;39
NAICS Code: 336;52;22;31