Netherlands Economic Forecast

After accelerating in Q4 last year, activity should have contracted mildly in Q1. In January–February, industrial activity fell at a steeper rate than in Q4, while retail sales plunged into contraction. That said, decelerating inflation and stronger wage growth over the quarter likely reduced pressure on private consumption. Moreover, consumers and businesses became more optimistic over the same period, boding well for activity. In politics, the government survived a no-confidence vote in April and has temporarily halted its plan to reduce nitrogen emissions, after the success of the Farmer-Citizen Movement (BBB) in March’s provincial elections. Meanwhile, the Netherlands and the UK will build Europe’s biggest cross-border electricity link connected to an offshore wind farm, boosting energy security ahead.

Harmonized inflation decelerated sharply to 4.5% in March (February: 8.9%) due to falling prices for energy and motor fuel. A tougher base effect and capped energy prices will lead inflation to more than halve this year. A key factor to watch is the planned permanent shutdown of the Groningen gas field in October. Rising commodity prices are an upside risk.