GDP grows at softest pace since Q1 2024 in the first quarter

Momentum softens in Q1: GDP growth ebbed to 0.1% on a seasonally adjusted quarter-on-quarter basis in the first quarter from 0.3% in the fourth quarter of last year, disappointing markets and marking the slowest expansion since Q1 2024. On an annual basis, economic growth gathered momentum, picking up to 2.0% in Q1, following the previous quarter's 1.9% expansion.

Broad-based deceleration: Domestically, the downturn reflected contractions in private consumption and fixed investment plus weaker public spending growth. Household spending contracted 0.2% in Q1, marking the worst result since Q2 2024 (Q4 2024: +1.0% s.a. qoq), dented by smaller wage gains and a higher unemployment rate. Moreover, public consumption growth was the slowest since Q4 2023, expanding 0.5% (Q4 2024: +0.8% s.a. qoq). In addition, fixed investment contracted 2.2% in Q1, marking the worst result since Q4 2023 (Q4 2024: +2.8% s.a. qoq). The fall was driven by declines in outlays on passenger cars and vans, stemming from the introduction of tax changes on 1 January 2025 and changes to rules on environmental zones in multiple cities; investment in such products had risen markedly in late 2024 in anticipation of the new policies. On the external front, exports of goods and services contracted 0.8% in Q1, marking the worst reading since Q1 2024 (Q4 2024: +0.4% s.a. qoq), dented by weaker exports of industrial goods. Conversely, imports of goods and services fell at a milder rate of 0.1% in Q1 (Q4 2024: -0.4% s.a. qoq).

GDP growth to strengthen this year: GDP growth is seen accelerating in 2025 from 2024 as ECB rate cuts boost private spending and fixed investment. Moreover, exports growth is still expected to strengthen in the year as a whole in spite of ongoing EU trade disputes with the U.S. The evolution of trade ties between the two is the main factor to monitor, with a potential trade war posing a key downside risk to the Netherland’s economy; exports of goods and services accounted for a whopping 84% of Dutch GDP in 2024, which underscores the importance of international trade for the country’s economy.

Panelist insight: On trade, ING’s Marcel Klok said: “A moderately positive outlook remains in place for Dutch GDP. The most prominent risk to the Dutch economy is the uncertainty of the trade war. Trade barriers reduce efficiency while uncertainty hurts confidence, spending, and potentially affects financing costs and stability. A recession in the US would hurt global demand and Dutch exports and investment. If such a scenario were to play out severely, it could increase business closures, raise unemployment, and hit consumer spending in the Netherlands.”

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