By Anthony Deutsch

The Dutch economy contracted by 1.7% in the first quarter of 2020 as the coronavirus outbreak began to bite, led by the largest drop in consumer spending on record, Statistics Netherlands said on Friday.

Preliminary figures showed gross domestic product falling sharply from 1.6% growth in the last quarter of 2019 and dipping 0.5% year-on-year, the CBS said.

The drop was largely recorded in the second half of March, when the Dutch government imposed lockdown measures to curb the pandemic, it said.

"This was the largest contraction since the first quarter of 2009" during the global financial crisis, the CBS said in a statement. It ended 23 consecutive quarters of growth in the European Union's fifth largest economy.

Household spending plunged 2.7% in the first three months of the year, the largest fall on record since measurements began in 1987. Imports and exports of goods and services fell 3% and 3.5% respectively, the CBS said.

ING, the largest Dutch bank, noted that while the contraction appeared steep at face value, the "economic impact of the coronavirus was mild, at least in international comparison".

It said the "intelligent lockdown" under Dutch Prime Minister Mark Rutte "has paid off economically thus far, although the second quarter is likely to be much worse."

A series of other economic indicators released in the Netherlands on Friday also pointed to an unprecedented slump in business activity and a weak second half of 2020.

A leading indicator of business confidence in the non-financial sector, measured by the Chamber of Commerce and several industry groups, fell at the fastest pace on record in a poll taken in April.

"Businesses have never been so pessimistic," the CBS said in a statement. The indicator swung from +6.4 in the first quarter to -37.2 in April, it said.

Another measurement of the sudden drop in economic activity came from the Netherlands Bureau for Economic Policy Analysis, a leading think-tank, which said the average number of working hours fell 13% in March, the steepest decline on record.

While unemployment benefit applications rose a sharp 40% in March, unemployment held steady at 2.9%.

The CPB attributed this largely to the government's swift emergency financial support to businesses, which enabled them to retain 1.7 million workers.

"This means that roughly 20% of the country's 9.5 million workers are being supported by the government," the CPB said.

(Reporting by Anthony Deutsch; editing by Nick Macfie and Peter Graff)