Dutch economic growth projections slashed in revised European forecast

The European Commission has significantly lowered expectations for economic growth in the Netherlands this year. In its summer forecast, the executive body of the European Union now says it expects growth of just 0.5 percent for the Netherlands in 2023. A few months ago in the spring forecast, the Commission still predicted growth of 1.8 percent.

The Commission has scaled back the growth estimate for the entire eurozone, not just the Netherlands. The estimate was dragged down by Germany in particular, where the economy is expected to shrink by as much as 0.4 percent this year.

Overall, the eurozone is expected to grow 0.8 percent in 2023, and not 1.1 percent as the Commission previously projected. The expectation for next year was also lowered by three-tenths of a percentage point, to 1.3 percent. Roughly speaking, the same applies to the entire European Union.

The more pessimistic view of the Netherlands is mainly due to the first half of 2023. Residents of the country spent less money due to high inflation, and, at the same time, exports declined. Because many wages have now been significantly increased and inflation is gradually decreasing, consumption will not decline further in the second half of the year, the European Commission said. The decline in consumption is expected to be halted in part due to corrections of energy prices.

Inflation this year is expected to be 4.7 percent, and 3.0 percent in 2024.

Growth should pick up again next year because purchasing power will partly recover, and exports to the most important trading partners will increase again. The economy also benefited from government investments in defense and the transition to a sustainable economy, the European Commission said.

European economic growth is suffering from high inflation and interest rate increases by the European Central Bank that were intended to combat inflation, the Commission noted. High prices are taking a greater toll than expected, but companies are also finding it more difficult to obtain credit due to high interest rates, according to the report.

At the same time, unemployment is still exceptionally low, energy prices are falling and wages are rising. That is why the committee is counting on a “mild rebound” in growth next year.