ABN AMRO warn of growth limits amid infrastructure strains and trade uncertainty

The Dutch economy is losing momentum after a strong start to 2025, due in part to ongoing global uncertainty and the impact of new American import tariffs. Nevertheless, the economy remains resilient, according to ABN AMRO economist Jan-Paul van de Kerke, despite risks such as the unpredictable trade policy of U.S. President Donald Trump and geopolitical tensions, including the conflict between Israel and Iran.

Van de Kerke sees promising signs on the domestic front, particularly for household consumption. He notes that Dutch households continue to benefit from a tight labor market, strong job prospects, and rising wages. After better-than-expected growth in the first quarter, ABN AMRO has raised its forecast for Dutch GDP growth in 2025 to 1.6 percent, up from an earlier estimate of 1.4 percent.

The bank is also optimistic about 2026, projecting growth of 1.3 percent. That year, the German economy, which has experienced a prolonged period of stagnation, is expected to return to growth. This improvement would positively affect the Netherlands, thanks in part to large-scale investment plans by Germany's new chancellor, Friedrich Merz.

Further tailwinds include a substantial increase in defense spending by NATO countries and interest rate cuts by the European Central Bank (ECB), which are expected to boost lending, investment, and overall economic activity.

In making its projections, ABN AMRO assumed that the European Union and the United States will reach a trade agreement, with a general tariff of around 10 percent on European goods. However, Van de Kerke stressed that the precise rates for key products, such as cars, semiconductors, chipmaking machines, and pharmaceuticals, will be especially important, and remain uncertain.

Meanwhile, the Dutch economy continues to face structural constraints, including an overstretched electricity grid, environmental restrictions related to nitrogen emissions, and severe housing shortages. These factors limit the growth potential of businesses and the economy at large. Addressing these bottlenecks will require clear decisions from the next Dutch government, Van de Kerke emphasized.