| AMSTERDAM, June 10
AMSTERDAM, June 10 The Dutch economy will
continue to recover but underperform trend growth levels in 2015
and 2016 as a dip in natural gas production persists, the
central bank said in a semi-annual forecast published on
The economy shrank by an unexpectedly sharp 1.4 percent in
the first quarter of 2014 when unseasonably warm weather hit
demand for natural gas, which is a major contributor to Dutch
The central bank forecast the economy will expand by 0.2
percent in 2014 after two years of contraction, with growth
picking up to 1.6 percent in 2015 and 2016 as domestic spending
recovers. Six months ago, the central bank had expected growth
of only 0.9 percent next year.
In its December forecast, prepared before the impact of the
fall in gas production was known, the bank had expected 2014
growth of 0.5 percent.
"Consumer and producer confidence are coming back - there
are truly unmistakeable signs of recovery," said Job Swank,
monetary affairs and financial stability director at the central
bank, although he cautioned of a "bumpy road" ahead.
Swank warned that political instability in eastern Europe
could hit growth in the Netherlands, in particular if tensions
between Russia and the European Union over Ukraine were to lead
to a trade war.
"The Dutch economy is still not running on all cylinders,"
the central bank said in its forecasts, citing high unemployment
and industry that is operating below its long-term average
output. The output gap will fall from 4.5 percent this year to
3.5 percent in 2016.
It said inflation will remain low, reaching 1 percent in two
years' time. It expects inflation of 0.5 percent in 2014.
The Netherlands was among the core euro zone countries hit
hardest by the bloc's debt crisis. Home prices have tumbled 20
percent since 2008, which has eroded consumer spending, but now
appear to have stabilised.
Unemployment remains high, hovering at 8.7 percent in March
and April, but Swank said that the labour market had almost
"bottomed out" and was likely to begin to recover.
The surprise contraction in the first quarter, largely
caused by low demand for gas during the mild winter, will dampen
growth in 2014, the bank said.
That dip in gas production is set to continue after gas
extraction led to a series of minor earthquakes in the province
of Groningen, prompting the government to limit production.
The reduction in the volume of gas production, to 63 billion
cubic metres in 2015, down from 80 billion last year, would
"weigh on real GDP and thereby also on the output gap", the
central bank said.
The budget deficit will remain comfortably below the
European Union's 3 percent target, falling to 1.8 per cent of
economic output in 2016. Public sector debt will fall from 74.3
percent of GDP this year to 73.6 percent in two years.
(Reporting by Thomas Escritt; Editing by Anthony Deutsch and