Country Report Netherlands May 2009

Summary

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 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 0.8% in both 2009 and 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.

In April 2009 the government suffered another of its periodic near-crises over the purchase of new Joint Striker Fighter (JSF) jet planes for the air force.
The eventual compromise reached by the coalition partners delays a decision on purchasing a full complement of JSF fighter planes until after the next election and only commits to the purchase of two test planes.
A poll conducted by a government research department and released in May has indicated increased support for the presence of immigrants, a significant result as relations between immigrant and local communities are tense.
Public debt rose steeply in 2008, by over 12 percentage points as a share of GDP, as the financial bail-out raised borrowing.
Pension funds where the coverage ratio has sunk below the statutory 105% have presented their recovery plans to the authorities.
Industrial production fell further in the first quarter of 2009, having declined steeply in the previous quarter. Consumer spending is also showing weakness.
Producer price inflation was about -10% in the first quarter of 2009. House prices are falling at a more moderate rate of about 1% year on year.

Source: Country Report

This report covers the following industry codes:
SIC Code: 47;65
NAICS Code: 48;53