DUTCH GROWTH LIKELY TO SLOW, JOBLESS RISE IN 1987

  Leaks of a major Dutch official
  economic forecast due to be published on Monday indicate
  reduced economic growth and a renewed rise in unemployment this
  year, political and market sources say.
      Concern over an anticipated fall in Dutch competitiveness
  this year against a background of an average 2-1/2 pct wage
  increase, zero inflation and a firm guilder has triggered some
  calls for a change in monetary policy to help boost growth.
      But whatever the government's response, the central bank
  will stick to its policy of keeping the guilder firm, they say.
      The official forecasting agency Centraal Planbureau (CPB)
  publishes its 1987 outlook at the start of a week which will
  also see a key parliamentary debate on government finances and
  the economy.
      Merchant bank Pierson, Heldring en Pierson - in an estimate
  reflecting general sentiment - said last month that Dutch
  economic growth was now seen around one pct.
      Domestic consumer spending is not expected to offset the
  decline in export growth caused by slowing growth in West
  Germany, the main Dutch trading partner, and the lower dollar,
  Pierson said in its February economic outlook.
      The latest growth forecasts are well below a 1.5 to two pct
  growth figure seen by the CPB early last month and forecasts of
  2.5 pct economic growth in 1987 made last September.
      The fall in unemployment is bottoming out and the
  government has already admitted it will not meet its goal of
  reducing unemployment by an annual 50,000 from 1986 to 1990.
      Some analysts and industry leaders have questioned central
  bank policy of pegging the guilder firmly to the mark and if
  necessary keeping interest rates up to support the guilder.
      Employers federation NCW chairman Fred Lempers criticised
  the guilder's revaluation in line with the West German mark in
  last January's European Monetary System (EMS) realignment and
  expressed concern over its effect on competitiveness.
      But the employers federation VNO noted the Dutch economy
  had become more competitive since 1980 and the fall of the
  dollar was affecting this gain more than the EMS realignment.
      Some analysts also question the central bank's decision not
  to copy the latest Bundesbank discount rate cut and instead
  lower money market rates and abolish a credit quota surcharge.
      Central bank president Wim Duisenberg has defended the move
  saying the bank had adjusted the rates with the most impact on
  the money market, noting "the (4.5 pct) discount rate is at the
  moment not the most important Dutch rate because it is already
  far below the market rates."
      Central bank officials say the heavy dependence on trade of
  the Dutch economy requires a stable exchange rate, and interest
  rate policies serve that goal.
      Analysts noted a large capital outflow from the Netherlands
  recently as foreign investments in Dutch stock are being sold
  to take profits.
      Loosening the tie between the guilder and the mark would
  reduce international confidence in the guilder and make it more
  dificult to attract foreign capital, they said, noting Dutch
  interest rates rose sharply when the guilder was not revalued
  completely in line with the mark in a 1983 EMS realignment.
      Many Dutch banks have reacted favourably to the decision
  not to copy the last German discount rate cut, but Pierson
  warned it could actually add to uncertainty over the guilder.
      Some analysts noted friction between the Finance Ministry
  and the central bank, with Finance Minister Onno Ruding having
  said before the Bundesbank discount rate cut he favoured lower
  Dutch rates but that the Germans should move first.
      One analyst said Ruding wanted to bring interest rates down
  to reduce the government debt burden.
      A Finance Ministry spokesman said lower interest rates were
  needed but denied any suggestion of conflicting views between
  the ministry and the central bank. "The cabinet's policy is
  steady, the guilder has to stay with the mark," he said.
  

