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UPDATE 1-IMF staff expects Dutch economic growth around 2 pct in 2016, 2017
December 8, 2016 / 11:58 AM / 9 months ago

UPDATE 1-IMF staff expects Dutch economic growth around 2 pct in 2016, 2017

(Updates with details)

AMSTERDAM, Dec 8 (Reuters) - The Dutch economy will grow around 2 percent this year and next year, International Monetary Fund experts said on Thursday.

IMF Netherlands Mission Chief Thomas Dorsey said at a news conference after a visit that external risks to the trade-dependent Dutch economy were balanced by strong domestic demand that may not be fully accounted for by most models.

The most recent projections by the CPB, the forecasting office of the Dutch government, include GDP growth of 1.7 percent 2016 and 2017.

Amid a largely favourable review, Dorsey said that high household debt -- largely resulting from generous rules on deducting mortgage interest -- present one risk to the Dutch economy.

The effect is doubled because of the three big Dutch banks, ING, ABN Amro and Rabobank, all have large exposure to mortgage debt. In the event the Basel committee settles on higher risk weightings for mortgages, equity at the banks could be hit.

However, the review also noted that unemployment is falling, credit is growing, personal savings levels are high, and companies and banks have also been strengthening their cash buffers.

Dorsey said the Dutch government has room to either increase spending on infrastructure or to cut taxes, while remaining comfortably within European budgetary rules.

He said the government’s deficit is set to fall to 0.7 percent of GDP in 2017, and debt-to-GDP will be around 61 percent by the end of the year. (Reporting by Toby Sterling, editing by Larry King)

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