AMSTERDAM Dec 10 The Dutch economy is in worse
condition than originally believed, the country's central bank
said on Monday, forecasting that it will now shrink over the
The budget deficit will also exceed the European Union's 3
percent limit in 2013, according to the bank.
Both forecasts pose a challenge to Prime Minister Mark
Rutte's newly elected government, which is imposing nearly 30
billion euros of austerity measures agreed earlier this year.
The bank said in its semi-annual economic outlook the
deficit is expected to fall to 3.5 percent of gross domestic
product next year from 4.1 percent this year. This was an
increase from previous forecasts of 2.9 percent, however.
Similarly, it chopped its forecast for economic growth in
2013 to -0.6 percent from +0.6 percent.
Growth is expected to resume in 2014, with an expansion of 1
percent, it said, although again this was a cut in forecast from
The Netherlands is the euro zone's fifth-largest economy.
Although part of the core, it is suffering from a drop in house
prices, a building slump, falling consumer spending and
investments, government austerity measures, lower exports, and
the euro zone debt crisis.
It contracted 1.1 percent in the third quarter compared with
the preceding period, worse than the economies of Spain,
Portugal, and Italy in that period, Eurostat data showed last
month, while unemployment has risen to a 15-year high.
The Liberal-Labour coalition government has fallen in
popularity since announcing a 16 billion euro ($20.7 billion)
austerity package in October.
It has led to a rise in opinion polls for both the
anti-establishment Freedom Party, led by anti-Islam politician
Geert Wilders, and for the far-left Socialist Party.
The central bank said the euro zone's debt crisis remained a
major threat for the Netherlands.
"The European debt crisis is far from resolved and still
poses the biggest downside risk to the economic outlook," the it
Rating agency Moody's has warned of potential downgrades for
the triple-A rated Netherlands, Germany and Luxembourg because
of the debt crisis. It singled out the weak economic outlook,
and high mortgage debts in the Netherlands.
The central bank expected house prices to be more than 21
percent lower in 2014 compared with a peak in 2008. House prices
have already fallen more than 16 percent since the peak.