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UPDATE 1-Dutch economy seen growing at fastest pace in a decade - central bank
June 12, 2017 / 12:18 PM / in 2 months

UPDATE 1-Dutch economy seen growing at fastest pace in a decade - central bank

(Adds quotes from central banker, details on government financing)

By Bart H. Meijer

AMSTERDAM, June 12 (Reuters) - The Dutch central bank on Monday raised its 2017 forecast for economic growth in the Netherlands to 2.5 percent, saying strong international trade and corporate investments will bring the strongest expansion in a decade. The DNB in January had forecast 2.3 percent growth for this year.

"Things are going very well at the moment," DNB director Job Swank told journalists. "Although our economy remains dependent on sometimes turbulent developments elsewhere, optimism prevails."

The fifth-largest economy in the euro zone will maintain "strong momentum" in the coming years, but a slowing of world trade and the housing market in the Netherlands will ease the pace of expansion to around 2 percent in 2018 and 2019, it said.

Unemployment in the Netherlands, one of the top economic performers in the euro zone, will drop to its lowest level since 2010 this year at 5 percent and will continue declining in the coming years, putting upward pressure on wages.

Higher income and rising house prices will further stimulate consumer spending, while inflation will remain modest, with projected rates of just over 1 percent until 2019.

Investments by companies, meanwhile, will reach the highest level in 40 years, measured as a share of GDP, helped by profit growth and easing financial constraints.

The strong economy will also strengthen government finances, with the budget surplus estimated to reach 1.1 percent of GDP in 2019, up from 0.4 percent in 2016.

Swank called this a "healthy buffer" that will help the next Dutch government. "With a surplus of around 1 percent you don't have to hit the brakes so hard during bad times," he said.

After nearly three months of negotiations, the main Dutch political parties have yet to form a coalition government.

Although domestic spending has played a significant part in the recovery of the Dutch economy after the financial crisis, exports will contribute almost half of total GDP growth in 2017.

The DNB warned that a rising wave of trade protectionism globally could pose a serious threat to the relatively small and open economy of the Netherlands.

Trade restrictions imposed by the United States and other countries could potentially reduce Dutch economic growth to slightly above 1.5 percent in 2018-2019, it said. (Editing by Anthony Deutsch and Hugh Lawson)

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