Netherlands Economic Forecast

GDP declined again in sequential terms in Q2. Contractions in private consumption and exports, coupled with a slowdown in fixed investment, more than offset an acceleration in public spending. Still-high inflation and weakening global demand weighed on output. Turning to Q3, our panelists expect a rebound. Wage growth was above inflation for the first time in two years in July, supporting real incomes. That said, weak PMI and business confidence readings during the same month point to significant headwinds. Moreover, in July–August, consumer sentiment worsened slightly. In other news, following a legal battle with environmental activists, the country’s highest court ruled in favor of the construction of a major carbon capture project in August. This could play a key role in the country’s reduction of CO2 emissions. In politics, snap elections are due on 22 November.

Harmonized inflation decelerated to 5.3% in July (June: 6.4%) due to softer price pressures for food and a sharp decline in housing and utilities prices. Inflation will more than halve this year from 2022 due to slower demand growth and lower energy prices. Higher-than-expected commodity prices and labor market tightness pose upside risks.