RaboResearch - Economic Research

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The Netherlands: weakness abounds

Economic Update


Dutch economic activity over the past years turned out to be lower than previously reported. In the latest figures, GDP has been contracting since 11Q2 with the exception of 12Q2. The recession probably continued into 13Q2. Domestic demand is set to decline further. A rather worrying development has been the continued decline in the export volume. Export growth was the only bright spot in the Dutch economy but now seems set to decline in the second quarter as a whole. Unemployment has continued to rise, albeit at a more modest pace. The government budget was in surplus in 13Q1 thanks to one-off income. But additional austerity is still needed to ensure a deficit of below 3%-GDP next year.

Year-on-year change (%)

Source: Statistics Netherlands, Rabobank

Economy weaker than previously thought

In the second estimate of the GDP volume in the first quarter of 2013, Statistics Netherlands calculated a 0.4% q-o-q contraction versus the 0.1% decline that was previously reported. Since we do not see any reason to adjust our quarterly forecasts for the rest of the year, this revision has resulted in a technical lowering of our forecast for economic growth in 2013 from -1% to -1.3%. Revisions to the national accounts for the past years have re¬sulted in further downward adjustments in the path of Dutch output. The level of real GDP in the first quarter of 2013 is now 0.7% below what was previously reported. For nominal GDP, the difference was limited to 0.3%.

Dutch GDP-volume, % difference with 08Q1, published series before and after 28 June 2013

Source: Statistics Netherlands

Exports continue to fall

The volume of goods exports fell by 1.3% m-o-m in April. This is the third month this year that the monthly contraction exceeded 1%. The import volume rose by 1.4% on the month. As a result, the negative momentum of exports was bigger in April than it was for imports. Developments up to April point to a probable contraction of exports in the second quarter of the year, after having vir­tually stagnated in 13Q1. This suggest that net exports will not be very supportive of growth. For the second half of the year, export growth should pick up as we expect the recession in the eurozone to end and economic growth elsewhere in the world to increase. 

Imports and exports

Source: Statistics Netherlands, Rabobank

Consumption falls back

The volume of household consumption fell by 1.1% m-o-m in April. With that, the 1% monthly rise of March has been undone. This was to be expected since consumer spending was elevated in March due to higher consumption of natural gas on the back of unseasonably cold weather. With temperatures remaining below their long run average in the second quarter, gas consump-tion will probably continue to temporarily support household spending. But we expect this effect to be smaller than in the first quarter. As a result, private consumption is set to fall back significantly in the second quarter while the underlying trend will also remain very weak.

Consumption volume

Source: Statistics Netherlands, Rabobank

Unemployment rises further

The unemployment rate rose to 6.6% in May. This was the second consecutive month that the rise in unemployment was limited to 0.1%-points while in the first quarter monthly gains of 0.2%-points were observed. The fall in employment was somewhat more modest compared to the previous months. But next to that, a slight fall in the labour force was an important factor behind the more modest rise of the unemployment rate. The absence of economic growth and continued public sector retrenchment is expected to further push up job losses both this year and next. Against this backdrop, we foresee a rise in the unemployment rate to 7½% on average in 2014 from 6¾% this year.

Unemployment rate

Source: Statistics Netherlands

Windfall revenue creates government budget surplus

The government budget balance was in surplus in 13Q1 for the first time since 2008. This result was driven primarily by one-off revenue from telecom frequency auctions while, contrary to expectations, the cost of nationalising SNS REAAL was not counted as government spending. On top of that, the Dutch central bank paid out EUR 1.2bn more dividend than last year and income from the extraction of natural gas was boosted to a record high due to the cold weather. As a result, the budget deficit is likely to improve to 2¾% of GDP this year. But with the underlying balance having improved only modestly, additional budget cuts are still needed to keep the deficit below 3% next year.

Government income and expenditure, government net-lending/borrowing

Source: Statistics Netherlands

Tim Legierse
RaboResearch Netherlands Rabobank KEO
+31 88 726 7864

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