ABN Amro expects the Dutch economy to grow slightly by 0.5 percent this year. The small contraction in the first two quarters of this year should be partly compensated by limited growth in the second half of the year.
The bank’s forecast is somewhat more gloomy than before because it previously expected a plus of 0.7 percent for this year. High inflation is slowing down the economy by putting pressure on consumer spending. Rising interest rates due to central bank interest rate increases also have a slowing effect because, for example, it makes borrowing more expensive. In addition, foreign demand is under pressure due to the weakening global economy.
For next year, the ABN Amro economists expect a slight increase in growth to 1 percent. That was previously expected to be 1.1 percent. According to the bank, higher interest rates will also cause headwinds in 2024, but inflation will weaken. In addition, the European Central Bank’s (ECB) target for inflation of 2 percent remains out of sight, according to ABN Amro.
The researchers further state that the Dutch labor market remains tight due to the high demand for personnel but that the first signs of relief are visible. Unemployment will rise slightly, the bank said. However, households’ purchasing power is improving due to wage growth, and the number of bankruptcies is relatively low, said ABN Amro.
“The Dutch economy has been in a technical recession since the start of this year, after two quarters of contraction. After a strong and turbulent recovery from the coronavirus crisis, the economy is only taking a step back,” the bank said in the report. However, the economy is at a good starting point, according to the study.
ABN Amro also pointed out various risks, especially if inflation remains persistent and the central banks have to continue raising interest rates. In addition, the government’s fall could cause significant delays in important policy files, delaying reforms.
Reporting by ANP