Dutch economy contracts by 0.7 percent in the first quarter, despite slight EU growth

Gross domestic product in the Netherlands fell by 0.7 percent in the first quarter of 2023 compared to the previous quarter. The contraction took place despite 0.3 percent GDP growth in the European Union as a whole. Statistics Netherlands (CBS) largely attributed the contraction to a fall in the trade balance and an increase in the use of natural gas held in reserves.

Exports of goods and services fell by 1.8 percent compared to the fourth quarter of 2022. The loss was entirely due to a reduction in the exports of goods, as service exports rose slightly, CBS stated on Tuesday. “Imports of goods and services also fell, but by 1.3 percent less than exports,” CBS said. The figures show “the trade balance, therefore, made a negative contribution to economic development in the first quarter. Furthermore, the withdrawal of gas from stocks was greater. That also contributed to the shrinkage.”

Meanwhile, investments in fixed assets grew by 1.1 percent, primarily because of investments made in construction, passenger vehicles, aircraft, and machinery, CBS stated. Household consumption remained flat, and government consumption grew by 0.5 percent.

The biggest hit to the economy came from the 1.1 percent contraction in the sector including trade, hotels, hospitality, catering, transport, and storage. In fact, over half of the industry sectors showed contraction last quarter, with the sharpest drop coming from a 28 percent fall in mineral extraction caused by the overall reduction in gas extraction. There was a 4.5 percent fall in cultural activities, sports, recreation, and other services, and a 1.9 percent drop in information and communication.

The biggest gains equaled 2.4 percent in the construction industry, 1.6 percent for energy companies, 1 percent growth in agriculture, forestry, and fishing, and a 1 percent boost to the property rental and real estate trade. “Construction also made the most positive contribution to economic development.”

Because there was a lockdown due to the coronavirus pandemic that lasted until January 25, 2022, and some restrictions remained for weeks later, the Dutch economy actually rose by 1.9 percent when compared to the first quarter of 2022. Although trade balance was negative compared to a year earlier, the increase was due to investments, rising household consumption, and government consumption levels.

The Dutch economy performed worse than its neighbors in the past quarter. The economy in Belgium grew by 0.4 percent, France by 0.2 percent, and the United Kingdom by 0.1 percent. The German economy achieved zero growth but didn’t contract either.

The figures about the Dutch economy will be refined over the next six weeks, with final data released on June 23. Typically, these figures are adjusted by an average of 0.1 percentage point, the CBS said.