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Outlook for Dutch economy is positive, says IMF11 April 2014, by Alexandra Gowling
The latest forecasts by the International Monetary Fund (IMF) sees the Dutch economy growing by 0,8 per cent this year, possibly growing to 1,6 per cent in 2015.
This forecast is much less gloomy than that of November 2013, which predicted that growth in the Netherlands would only be 0,3 per cent for 2014. This recent prognosis is more in line with that of the Dutch Central Planning Board.
According to experts, the revised forecast is mainly due to serious growth in the last quarter of 2013 when compared to the previous quarter. This growth came mainly from increased car sales, as many people decided to use tax provisions expiring at the end of 2013.
These predictions reflect the feelings of many Dutch people, who in a recent survey showed they were much more positive about the future economically than they had been even three months before.
Smaller budget deficit
The IMF also predicted that the budget deficit of the Dutch government would be considerably smaller in coming years.
Currently, the IMF expects the deficit to drop from 3,1 to 3,0 per cent of GDP in 2014, with an improvement of a decrease to 2,0 per cent in 2015. Further estimates have it shrinking to 1,0 per cent in 2018 and just 0,6 per cent in 2019.
This is in stark contrast to the previous November forecast, which predicted that the Dutch deficit would shoot up to nearly 5 per cent this year. This is because the IMF did not take into account the effect of additional cuts that were being negotiated at the time.
National debt decreasing slowly
Also, the IMF predicts that national debt will slowly drop next year, from its current peak of 75 per cent of GDP, down to 74,4 per cent in 2015 and finally to 70 per cent in 2019.
According to EU budget rulings, member states much reduce their deficit to 3,0 per cent of GDP and national debt should be limited at 60 per cent.
Inflation very low
The first quarter of 2014 saw inflation in the Netherlands fall to its lowest level in nearly four years, hitting just 0,8 per cent in March, according to the latest figures from CBS.
Inflation fell in particular due to changes in the price of tobacco through a tax increase of 8,6 per cent in February. Also, changes in the price clothing, food, alcohol and identity documents all had an effect: clothing, food and alcohol were all cheaper, while identity documents rose in price along with their extended length of validity.
Prices for housing, water and energy rose by 0,2 per cent in March and accounted for more than a quarter of total spending. Prices for communication fell the most, by 5,5 per cent.
According to calculations from Eurostat using the European harmonised method, Dutch inflation fell in March to 0,1 per cent, the lowest level since September 2009. Inflation in the Eurozone in March was 0,5 percent.