Rabobank Predicts Modest Growth for Dutch Economy in 2024
Rabobank’s RaboResearch forecasts a 0.4% growth for the Dutch economy in 2024, with a stronger recovery of 1.3% expected in 2025, despite a recent contraction.
Economic Resilience Amid Contraction
The Dutch economy showed signs of resilience despite a contraction of 0.1% in the first quarter of 2024. This unexpected downturn has not deterred Rabobank economists from maintaining a cautiously optimistic outlook. The projected 0.4% growth for 2024 indicates a modest but steady recovery, driven by various factors including government spending and household consumption.
Impact of the New Coalition Agreement
The new coalition agreement presented by political parties PVV, VVD, NSC, and BBB is also expected to influence the economic trajectory. While the coalition’s outlined policies, such as adjustments in income tax, will provide a small increase in purchasing power across all income groups, they are not anticipated to significantly alter the growth figures for 2024 and 2025. Instead, lower income groups will benefit more due to higher social benefits, which could help in slowing down the increase in poverty rates.
Inflation and Fiscal Policy
Inflation is projected to continue its upward trend, reaching 2.2% in 2025 and 2.5% in 2026. This is a slight increase from previous expectations of 2.0% and 2.1%, respectively. Factors contributing to this rise include potential American import duties and the planned increase in value-added tax by the new coalition. This tax hike would notably affect cultural goods and services, increasing the sales tax rate from 9% to 21%.
Challenges Ahead
Rabobank’s report also highlights potential challenges such as cuts to education and innovation funds, including the abolition of the National Growth Fund. These cuts could constrain the future growth capacity of the Dutch economy. Additionally, international developments, such as geopolitical tensions and potential trade policies under a re-elected Donald Trump, pose risks to Dutch industries, particularly in the transport and manufacturing sectors.
Long-term Outlook
Despite these challenges, the long-term outlook remains cautiously optimistic. The Chief Economists Outlook for May 2024, published by the World Economic Forum, reflects a global sentiment of cautious optimism tempered by geopolitical uncertainties. This aligns with Rabobank’s projections, suggesting that while short-term hurdles exist, the Dutch economy has robust mechanisms to navigate through them. The anticipated growth of 1.3% in 2025 underscores this resilience, driven by improved consumer confidence and strategic government policies.