Effect of Brexit 'relatively severe' for Dutch economy - government forecaster

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• published: 09 Jun 2016
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Effect of Brexit 'relatively severe' for Dutch economy - government forecaster. AMSTERDAM (Reuters) - Dutch exposure to a possible British exit from the European Union will be greater than for other members of the bloc and could trim 1.2 percent off the Netherlands' economy by 2030, the government's leading forecaster warned on Thursday. The Netherlands Bureau for Economic Policy Analysis (CPB) said the Dutch economy was tied more closely to Britain due to greater trade. "A Brexit will have a relatively severe effect on the economy of the Netherlands," it said. The CPB's analysis, which reviewed four other Brexit scenarios in the EU, provided the most negative outlook yet on the possible impact of a British exit for the Netherlands. The government and central bank have so far said the impact would be limited. Opinion polls in Britain show the rival "In" and "Out" camps in the June 23 referendum almost neck and neck with just over two weeks to go. The CPB's 15-page report came days after U.S. Federal Reserve and European Central Bank members cautioned that a Brexit would trigger short term global financial market turmoil. Brexit-related costs may reach 10 billion euros (7.87 billion pounds), or 1.2 percent of the Dutch economy, which is the sixth largest in the bloc. They could increase by as much as 65 percent to 2 percent of GDP, said the CPB, whose forecasts are used by the government to determine budget policy. Britain's withdrawal from the EU would take two years, while uncertainty about trade agreements between the EU and Britain would have an impact on investment in Britain, it said. Renegotiating trade agreements could take several years but even if completed successfully the Dutch economy would be worse off, the CPB said. "The economic damage caused by that uncertainty will be the greatest in the short term and can already be seen in the run-up to the UK referendum," it said. The worst-hit sectors of the Dutch economy would be chemicals, plastics and rubber, electronic equipment, motor vehicles and parts, the food processing industry and metals and minerals, the CPB said. Those sectors, which account for 12 percent of Dutch GDP, could suffer production losses of around 5 percent, it said. These losses could be reduced by 40 percent if a new free trade agreement were worked out. "It would not be able to completely restore the current full access to the internal market, however," the CPB said. The EU would face the dilemma of on the one hand wanting to discourage other members from following suit by making it expensive for Britain to leave, while on the other wanting to reduce the impact of Britain's departure on the EU itself. "Should there be a Brexit, this would set a risky precedent for the whole EU project," it said. (Reporting By Anthony Deutsch; Editing by Richard Balmforth)