Dutch banks lower economic growth predictions after first quarter contraction

The Dutch economy will grow by 0.6 percent this year and 0.9 percent next year. Rabobank expects this after the first quarter of 2023 recorded a surprising economic contraction due to the weakening of world trade. ABN Amro economists have also become less optimistic and expect 0.7 percent growth this year and 1 percent in 2024.

The Rabobank economists predict that Staff shortages will limit economic growth while the demand for goods and services remains stable due to household and government spending. That will increase inflation, but less than last year. Rabobank also assumes that unemployment will rise slightly but remain low due to the continuing shortage of personnel.

According to RaboResearch’s chief economist Ester Barendregt, the economic slowdown started faster than expected. “Lower exports and the reduction of stock, in particular, were to blame for the contraction in the first quarter. We still foresee a slight cooling down for the rest of the year. Although the number of bankruptcies is considerably higher than last year, it’s still low from a historical perspective,” said Barendregt. “And although the purchasing power of households is under pressure due to high inflation, wages are now rising sharply, a record number of Dutch people have paid work, and the government supports income. Consumer demand, therefore, remains stable.”

ABN Amro does not think that the Netherlands will end up in a severe recession because the economy is very resilient. “For example, the persistently tight labor market supports expenditure. Furthermore, companies and households have considerable buffers, partly as a result of which the negative turn on the housing market remains limited. According to them, lower growth is “welcome” because there are signs that the economy is overheating.

On Wednesday, the Organization for Economic Cooperation and Development (OECD) reported that it estimates economic growth in the Netherlands for this year at 0.9 percent. For next year, the think tank in Paris expects growth of 1.4 percent.

The Central Planning Office (CPB) warned at the end of last month that the Dutch economy could still end up in recession. The latest economic forecast by the CPB dates from March. At that time, the institute assumed growth of 1.6 and 1.4 percent for this year and next year, respectively.