IMF predicts that Dutch economy could be in trouble

The International Monetary Fund said on Wednesday that the Dutch economy faced downside risks, even though its recovery appears on track.

"Notwithstanding encouraging near-term prospects, (IMF) directors considered that the risks to the economic outlook remain skewed to the downside," the fund said in a statement outlining an IMF board discussion on the Dutch economy.

An IMF staff forecast released as part of the fund's annual review of the Netherlands' economy projects real GDP expanding by 1.9 percent this year, a slight pick up from last year's 1.8 percent advance. Consumer prices are seen increasing 2.3 percent, after gaining just 0.9 percent in 2010.

[caption id="attachment_29888" align="alignleft" width="380" caption="Is the Dutch economy going to end up as the next Greece? Peter Dejong/AP "][/caption]

The IMF said slack in the economy was dampening price pressures from this year's sharp run up in commodity costs.

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The fund said it supported the Dutch government's budget-tightening plans but warned that fiscal "risks" could mount as the population ages.

Still, it said many of its directors believed the government should show flexibility in its fiscal consolidation effort if outside forces were to significantly slow the recovery.

It said measures to broaden the tax base or reduce the impact an ageing population would have on public spending would need to be part of the Netherlands' budget plans.

Reuters