IMF gloomy about stagnating Dutch economy; Prices continue to rise sharply

The International Monetary Fund (IMF) is gloomy about the Dutch economy, which will barely show growth next year, according to experts from the fund. The price ceiling for energy that the government is introducing in January cannot prevent life from continuing to become even more expensive across the board next year, the experts say. And although the Netherlands has sufficient energy reserves to keep the country running, it could just be that energy shortages elsewhere in the European Union will exacerbate the energy crisis in the Netherlands.

A delegation from the fund has conducted research into the Netherlands in recent days and presented their first results on Friday. The experts think that Dutch economic growth for 2022 will equal 4.2 percent, but that growth will almost come to a standstill next year at 0.6 percent. When the IMF published global estimates in October, the Netherlands was still counting on 4.5 percent this year, and 0.8 percent growth in 2023.

Since the Russian invasion of Ukraine, energy has become much more expensive and you spend much more on groceries in the supermarket. All in all, life is 11.8 percent more expensive this year, the IMF calculates. Due to the government measures, inflation will decrease considerably next year. But that does not alter the fact that the overall price level in 2023 is likely to increase by another 4.2 percent.

The IMF once again points out that while the government's support measures are mitigating the impact of high energy prices, the price cap for energy also makes it more difficult to bring inflation down. This is because the price ceiling is not aimed at households and companies that really need help, but everybody residing in the Netherlands actually benefits from it. The government is driving consumption, the IMF says, and that can cause prices to rise even more. It also reduces the incentive to conserve energy.

The IMF researchers also draw attention to the housing market, which has been cooling off. The recent fall in home sales prices could indicate that many homes in the Netherlands are actually overvalued. If house prices suddenly fall more sharply, some households could run into problems.

Contrarily, the IMF does note that the large share of fixed-rate mortgages and the long maturities of mortgages provide some reassurance in this area. As a result, unpleasant situations will not immediately arise for many people.