Netherlands: Domestic demand drives growth in the first quarter
May 15, 2018
A preliminary reading of economic growth in the first quarter of 2018 showed that the economy lost some steam, with quarter-on-quarter growth coming in at 0.5%, down slightly from the 0.7% expansion recorded in the prior quarter. Growth came chiefly on the back of domestic demand.
Private consumption shifted into a significantly higher gear in the first quarter, clocking a growth rate of 1.7% quarter-on-quarter, a strong acceleration from the flat reading in the prior quarter. Fixed investment also grew at a robust pace of 2.3% over the previous quarter, which was up from the meager 0.3% quarter-on-quarter reading in the fourth quarter of last year. Government consumption growth, however, slowed from 0.3% in Q4 to 0.1% in Q1 2018. The external sector, meanwhile, dragged on growth, as exports contracted 0.1% (Q4 2017: +1.3% quarter-on-quarter), while import growth remained robust at 0.9% (Q4: +1.1% qoq).
A year-on-year comparison showed that the economy decelerated marginally, expanding a working-day adjusted 3.0% in the first quarter compared to the 3.1% logged in the prior quarter. The annual result was also driven by domestic demand, particularly private consumption; private consumption growth more than tripled in Q1 compared to Q4. The external sector, however, dragged on growth as export growth was outpaced by import growth.
Looking ahead, the Dutch economy should be broadly driven by the same forces that were in place last year. Moreover, a more fiscally expansionary government following four years of austerity measures should buttress private consumption due the income tax system overhaul. However, risks remain, namely Brexit and increasing geopolitical and trade tensions across the globe.
More complete data will be released on 22 June.
Netherlands GDP Forecast
The government now expects the economy to grow 3.2% in 2018 and 2.7% in 2019. FocusEconomics Consensus Forecast panelists, however, see GDP growing at a softer pace of 2.7% in 2018, which is down 0.1 percentage points from last month’s projection. For 2019, the panel expects the economy to expand 2.2%.
Author: Jan Lammersen, Economist