Rabobank expects “modest” growth in the Dutch economy for 2024

The Dutch economy will experience “modest” growth this year and will pick up in 2025, according to RaboResarch, the research agency from Rabobank. The Dutch economy unexpectedly contracted by 0.1 percent in the first quarter.

Yet Rabobank economists expect a modest growth of 0.4 percent in 2024. They expect a more robust recovery in 2025, with a growth of 1.3 percent.

The new coalition agreement presented by political parties PVV, VVD, NSC and BBB will have a limited impact on the figures for this year and next, according to the researchers. But the announced adjustments in income tax will provide a small increase in purchasing power for all income groups, they said. Lower income groups will see relatively more improvement, in part due to higher social benefits.

The increase in the number of people living in poverty will start to slow down, RaboResearch expects. Purchasing power should improve under the proposed plans for the new Cabinet.

The Rabobank economists expect inflation to continue to rise in the coming years, by 2.2 percent in 2025 and 2.5 percent in 2026. Previously they expected 2.0 and 2.1 percent respectively. The increase is partly due to possible American import duties, and the coalition’s planned increase on value added tax. This would boost the sales tax rate applied to cultural goods and services, which would jump from 9 percent to 21 percent.

The cuts to education and innovation announced by the new coalition parties, such as the abolition of the remainder of the National Growth Fund. This could put pressure on the future growth capacity of the economy, RaboResearch warned.

There is also uncertainty due to international developments. The economists speculated that a possible re-election of Donald Trump as the U.S. president would have a negative effect on the Dutch industry and transport sectors.