Country Report Netherlands September 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 severe, with net exports subtracting strongly from growth. Unemployment is set to rise considerably in the forecast period.
• GDP grew by 2% in 2008 and is forecast to contract by a steep 4.1% in 2009, before growing by just 0.4% in 2010. Export demand and investment will be particularly weak.
• Inflation (national measure) was 2.5% in 2008, but should drop substantially, to 0.7% in 2009 and to 0.2% 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 leader of the far-right, populist PVV, Geert Wilders, has stated his party's intention of largely ignoring the municipal elections in 2010, except for two major cities, citing the party's lack of structural capacity to compete.
• Ahead of a commission publishing its thoughts on alternatives to raising the retirement age, unions and employers have been publicly debating the options for fixing structural fiscal deficits related to demographic ageing.
• A new law permitting the financial market regulators to levy higher fines than in the past came into force at the beginning of August 2009.
• The Dutch economy continued to contract in the second quarter of 2009, shrinking by 0.9% quarter on quarter and by 4.9% year on year, a slower decline than the 2.7% quarter-on-quarter fall in the first quarter.
• ??? Private consumption showed ongoing weakness in the second quarter, falling by 2.6% year on year, but there were signs of a quarter-on-quarter stabilisation of exports, although these were still down by 11% year on year.
• Inflation dropped steeply between June and July, to 0.2% in July, following the biannual energy cost adjustment, bringing it closer to the euro area average.

This report covers the following industry codes:
SIC Code: 49;10;37;53;60;2834;80;48;59
NAICS Code: 22;212;336;44;52;3254;62;517