The Netherlands is in a protracted recession mainly owing to private and public sector deleveraging. Declining real house prices, falling real incomes and growing unemployment are holding back household consumption while overstretched balance sheets of banks and heightened risk have led to tight credit conditions. Sizeable fiscal retrenchment has further weakened activity. Growth is projected to resume only gradually, and inflation is expected to recede significantly owing to the substantial economic slack.
Fiscal consolidation is assumed as planned by the authorities, with net discretionary measures of about 2% of GDP in 2014 and 1% of GDP in 2015. However, the government should allow the automatic stabilisers to work fully in the event growth proves weaker than expected. Banking sector recapitalisation is needed to underpin financial stability and ease credit constraints.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.