Finance & Stock Market News

By Ben Berkowitz and Aaron Gray-Block

AMSTERDAM, May 15 (Reuters) - The Dutch economy shrank at

the fastest rate since World War Two in the first quarter,

driven by double-digit contractions in business investments,

exports and imports.

Gross domestic product (GDP) declined at a rate of 4.5

percent in the first quarter over a year earlier, Statistics

Netherlands (CBS) said on Friday, worse than the consensus

forecast of 3 percent and the low-end forecast of 3.8 percent in

a Reuters poll.

Quarter-on-quarter, GDP declined 2.8 percent, a record

decline for the country, the euro zone's 5th-largest economy.

The consensus forecast was -1.5 percent and the low-end forecast

was a contraction of -2.5 percent in a Reuters poll.

Leading up to the report, economists had said a decline of 2

percent would not surprise them, but that a greater decline

would.

'It's very very bad. It's pretty awful,' said Charles

Kalshoven, chief economist for ING's retail unit in the

Netherlands. 'Basically every component is contributing to the

negative growth.'

Business investment declined at a rate of more than 12

percent in the quarter, while exports of goods and services fell

nearly 12 percent. Only government investment and government

consumption moved higher in the period.

The statistics bureau also said the 2.4 percent year-on-year

decline in private consumption was the first in four years.

Sales of durable goods were significantly lower, especially

purchases of cars.

Contraction in the fourth quarter was revised lower, to 1.2

percent from 1 percent, while the third quarter's rate of

contraction was revised down to 0.5 percent from 0.3 percent.

It was far from the only negative surprise in Europe on

Friday. Germany's economy shrank at a rate of 3.8 percent in the

first quarter, its worst performance since reunification.

Meanwhile the euro zone as a whole contracted at a rate of

2.5 percent, compared with a consensus forecast of -2.0 percent

and a worst-case forecast of -2.5 percent in a Reuters poll.

Aline Schuiling, senior economist at Fortis Bank Nederland,

said she expected the first quarter to be the trough for both

the Netherlands and the euro zone economy in general.

'I think in Q2 we will still have a contraction in GDP but

significantly less sharp than in Q1,' she said.

Keywords: DUTCH ECONOMY/GDP

(Amsterdam newsroom +31 20 504 5000; fax +31 20 504 5040; amsterdam.newsroom@news.reuters.com; Editing by Victoria Main)

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