Spending to dip, economic recovery in 2006

22nd March 2005, Comments 0 comments

22 March 2005, AMSTERDAM — Moderate economic growth of 1 percent is forecast for this year, but the economic recovery will accelerate next year to 2.25 percent, the Central Planning Bureau (CPB) said on Tuesday.

22 March 2005

AMSTERDAM — Moderate economic growth of 1 percent is forecast for this year, but the economic recovery will accelerate next year to 2.25 percent, the Central Planning Bureau (CPB) said on Tuesday.

Recovering from a recession in 2003, growth of 1.3 percent was recorded in 2004, but the CPB said the fragile recovery will falter this year before finding firmer ground in 2006.

In its '2005 Central Economic Plan', the CPB also said purchasing power will contract this year by an average of 1.25 percent. This will turn around to 0.5 percent growth in 2006.

Unemployment is expected to peak at 6.75 percent this year, before declining to 6.25 percent next year. Investment will also improve next year, the CPB said.

The budget deficit is expected to be 2 percent of national income in 2005, falling to 1.7 percent of Gross Domestic Product (GDP) next year. On the inflation front, average price rises will fall to 0.25 percent in 2006, down from an average 1.25 percent this year.

The figures were leaked to the media mid-February when the CPB sent its forecasts to the Cabinet, which uses the report to determine the 2006 Budget. The budget will be presented to the Parliament in September.

The economic recovery next year is exactly what the government had hoped following two years of stringent cost-cutting. Households have been hard hit by the cuts, but this is expected to change as consumption recovers from a slight fall this year to growth of 1 percent or more next year.

The commercial sector will also benefit from the international economic recovery with improving production growth, rising exports and profit recovery, newspaper 'De Telegraaf' reported.

But global economic growth will be hindered this year due to the high price of oil, averaging at about USD 40.25 per barrel. A fall in price to USD 35 is expected in 2006. Strong global economic growth of 5 percent last year will fall to 4 percent this year before rising to 4.5 percent in 2006.

The CPB warned against possible setbacks, such as the strength of the euro and a stubbornly high price of oil. If oil remains at USD 45 per barrel, Dutch economic growth could be just 0.3 percent in both 2005 and 2006.
 
On the other hand, the European economic recovery could also be underestimated, the CPB said. If Dutch and other European consumers spend more than expected, domestic economic figures could also improve.

[Copyright Expatica News 2005]

Subject: Dutch news

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