Real GDP growth in the Netherlands in ---- will be driven mainly by domestic demand, bolstered by a fiscal stimulus package, and a sus- tained recovery in the housing market. Net exports will make only a modest contribution to growth due to stagnating external demand from the eurozone and lower gas export volumes. ...Having averaged just -.- y-o-y in ----, inflation in the Netherlands will average -.- y-o-y in ----, according to our projections, despite further monetary easing by the ECB. A sustained recovery in house prices will boost perceptions of wealth and spending, especially given the fact that following the country s financial and economic collapse in ---- around -- of households remain in negative equity. However, the impact of these positive factors will be capped by the high level of indebtedness of the Dutch household sector, which is among the highest in Western Europe, at nearly --- of GDP as of ----. Dutch households debt servicing costs are likewise among the highest among developed market peers, at --.- of income as of June ----. While the authorities have - Business Monitor International Ltd www.bmiresearch.com
...Source: Statistics Netherlands, Bloomberg embarked on a tax system overhaul designed to disincentivise debt accumulation, the overhaul will be a politically contested process and will take long to bear fruit. As such, the household sector will remain overleveraged in the coming quarters, keep- ing a lid on the pace of expansion in private consumption. ...Stagnating demand from the eurozone will cap busi- nesses incentive to invest, as reflected in the weaker Manufacturing Purchasing Managers Index (PMI) readings in the beginning of ----, most prominently in the export orders component. Stagnating demand from the eurozone � the Netherlands biggest trading partner � and reduced production at the Groningen gas field in ---- will cap export growth, as reflected in our forecast for exports to expand by -.- in ---- from an estimated -.- in ----. Gas exports comprise the bulk of total Dutch exports, at nearly -- as of ---- before reduced production was mandated by the government due to the side effects of minor earthquakes caused during the production process. ...Nevertheless, slower export growth in ---- will not dent the Netherlands massive trade surpluses. Exports remain the big- gest component of GDP by expenditure, and will average -- of GDP in the coming years, while imports will average -- , translating into net exports accounting for around -- of GDP on average over the coming years.
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