ECONOMIC SURVEY THE NETHERLANDS (Special quarterly edition)

March 12th 1996

Economic Research Department, Domestic Economic research, Rabobank Nederland, tel: 31-30902661

Key economic indicators                            '95-III      '95-IV      1995      1996      1997
Production and spending volume                                  (annual change in %, unless specified otherwise)
Gross Domestic Product                               2.2          1.6        2.4       2         2╛  
Private consumption                                  2.2           _         2.1       2╜        2╝
Gross fixed capital formation (including dwellings)  2.6           _         5.2       2╛        5╝ 
Government investment                                4.2           _         3.2       2╝        2 
Exports of goods en services                         3.8           _         5.9       4╜        5
Imports of goods en services                         5.0           _         6.5       4╛        5 
Manufacturing production                             2.2          0.7        2.6       1╝        2╜ 
					
Wages and prices					
Hourly wages private sector                           _            _         1╝        2╝        2╛
Consumer price index                                 1.6          1.5        2.0       2╝        2╝
					
Other indicators
Registered unemployment (% working force)            6.9          6.9        7.0       6╛        6╛ 
Government budget deficit (% GDP, EMU-definition)     _            _         3.6       3╝        3
Current account surplus (NLG billion)                 _            _        23        22        23

Source: Dutch government and own forecasts

Notes

• The Dutch economy reached a mid-cycle peak in the first half of 1995. GDP growth decelerated from 3.4% (y-o-y) in the first quarter to 1.6% in last yearÆs final quarter. This year we expect real GDP growth to slow down to an average of 2%, with an acceleration in the second half of the year.
• Despite the strong guilder, exports increased impressively in the first half of 1995. In the second half of 1995 export growth decelerated because of declining economic growth of our most prominent trading partners.
• The growth of business investment is expected to slack in the first half of this year, due to a less favourable international economic climate. However, when producer and consumer confidence are restored in the course of the year, large profits in 1994 and 1995 and current low finance costs will help business investments to accelerate again in the second half of 1996.
• Inflation went down substantially from 2.4% in January 1995 to 1.3% in October, mainly due to low import prices (strong guilder). Since then inflation has increased because of governmental measures. In the course of 1996 increasing unit labour costs may lift consumer prices further from 1.8% in February to almost 2╜% at the end of the year.
• Private consumption growth will slightly accelerate this year, owing to a -moderate- increase of purchasing power and a firm growth of employment.
• Nevertheless, unemployment reduction will be very modest, as labour supply increases sharply due to demographic factors and (re)entering on the labour market of women and formerly disabled workers.
• The 1996 government budget deficit will probably end up higher than the EMU-cap of 3%. The government debt ratio is expected to fall only very slightly from 79.1% of GDP in 1994 to somewhat above 78% GDP this year. An additional debt ratio reduction would be desirable to make EMU-participation more certain.
• Summary: The pace of economic growth is declining, but there is no danger of a substantial slowdown. In 1997 a revival of economic growth is expected.