AMSTERDAM, Dec 10 (Reuters) - The Dutch central bank joined a chorus of weak projections for the local economy on Wednesday, saying that the Netherlands will fall into its first full-year recession since 1982 next year.
In its quarterly report, the Dutch central bank said it expected Dutch gross domestic product (GDP) to shrink by 0.5 percent next year as business investment drops sharply, household consumption falls and export growth slows.
The central bank's projections are broadly in line with those of the government's macro-economic think tank CPB, which on Monday forecast a 0.75 percent dip for next year. [ID:nL8121370] The OECD is also expecting a contraction.
Assuming that the world economy recovers quickly, the Netherlands could return to growth in 2010 with a 0.5 percent expansion, but if world trade does not recover, banks remain reluctant to extend credit and consumers stay frugal, it could contract again by 0.8 percent, the bank said.
The bank had in June forecast growth of 1.5 pct for next year and 2.1 pct for 2010.
It also trimmed its forecast for 2008 and now expects growth of 2.1 percent rather than the 2.4 percent projection issued in June.
An easing labour market and lower energy prices are expected to limit inflation to 2.1 percent in 2008 and 2 percent in 2009, the central bank said.
The expected drop in consumer spending is only partly due to the developments in disposable income as the wealth effects of the credit crisis are large, and house prices -- which have held up so far -- remain a risk.
"An abrupt turnabout on the housing market cannot be ruled out, certainly if mortgage lenders see themselves forced to ration credit and tighten their lending standards," the central bank said. (Reporting by Niclas Mika; Editing by Victoria Main)