Country Report Netherlands June 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, CDA and PvdA, will continue to suffer serious disputes, posing the threat of a government crisis. The popularity of the far-right Freedom Party (PVV) will discourage them from causing a government collapse.
• The Economist Intelligence Unit expects the budget to move strongly into deficit in both 2009 and 2010, as the economic slowdown brings fiscal stabilisers into play (reduced revenue and higher spending on benefits).
• 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 4.5% in 2009 and 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 0.9% in 2009 and 0.8% 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 high court in Amsterdam has cleared the final procedural hurdle to the prosecution for inciting discrimination and hatred of Geert Wilders, the outspoken and controversial leader of the far-right PVV.
• Mr Wilders' prosecution may work in his favour politically, as the PVV has gained in polls whenever he is under attack. The party is currently the most popular, making PVV participation in the next government more plausible.
• The government has continued to address the severe economic downturn by proposing a support package for the hard-hit construction industry.
• Long public debate over regulating bonuses in the financial sector has only resulted in guidelines, not legislation, on appropriate incentive policies.
• A plan to integrate ABN Amro and Fortis, two nationalised banks, envisages some forced job cuts and a capital injection, which is controversial.
• Dutch GDP shrank by 2.8% quarter on quarter and 4.5% year on year in the first quarter of 2009, led lower by weak private consumption, a steep decline in fixed investment and a collapse in exports and imports.
• Unemployment rose to 4.4% in February-April, but is still below its 2005 peak.

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52