Dutch Hold Tight to Purse Strings as Economy Shrinks

Dutch prime-minister Jan Peter Balkenende (C) addresses the `Tweede Kamer`, the House of Representatives in the Hague. Balkenende said he was ‘shocked’ by the shrinking of the Dutch economy. (Marcel Antonisse/AFP/Getty Images)

The Dutch Central Bureau for Statistics (CBS) announced Friday that the Dutch economy has shrunk by 4.5 percent in the first quarter of 2009 compared to the first quarter of last year.

The decline is already one percent higher than CBS estimated at the beginning of the year when the magnitude and impact of the financial crisis was just taking hold in the minds of the Dutch. This is the largest shrinkage since World War II.

Sharp declines have occurred in investments in fixed assets (10.1 percent), imports (10.9 percent) and exports (11.8 percent). Household spending has also decreased by 2.4 percent, despite the fact that the spending power of the Dutch people has not been affected thus far.

“Consumption is the greatest disappointment. Households keep their hands on the purse strings. They do have the money, and after all, wages will increase more than inflation this year. But everything is put away in the savings bank,” CBS chief economist Michiel Vergeer was quoted as saying by the Financieele Dagblad.

Despite the disappointing figures, the Dutch stock market remained unaffected; the AEX index was up by 1.64 percent at 5.30 pm on Friday. Some economists said this is because these losses had already been anticipated beforehand.

Dutch politicians on the other hand appeared taken aback with the news. “I am shocked by this,” Dutch Prime Minister Jan-Peter Balkenende was quoted as saying by Dutch media.