Dutch economy to grow slowly in 2025 and 2026 due to household and government spending

The Dutch economy is expected to grow slightly this year and next, despite ongoing domestic and international uncertainties. Economists at Rabobank say the growth is mainly driven by household consumption and government spending. The bank forecasts GDP growth of 1.5 percent in 2025 and 1 percent in 2026.

Households are seeing their purchasing power increase due to the tight labor market and rising wages. This boosts consumption and is expected to continue contributing significantly to economic growth, according to senior economist Frank van Es.

The government is also expected to remain an important driver of growth in the coming years. “Despite the fall of the cabinet, we expect government consumption and investments to continue growing for the time being.”

However, corporate investments are lagging significantly due to uncertainties around the trade war, electricity grid congestion, nitrogen issues, and the fall of the cabinet, Van Es notes.

Residential construction investments are expected to grow in 2025 and 2026, but the economist does not foresee sustained growth. Uncertainty over the canceled rent freeze and competition from the many homes currently being sold by investors are restraining new construction and investments. Lower permit issuance and relatively few construction starts also point to weaker housing investments.

Housing investments, along with household and government spending, have helped the Dutch economy grow relatively strongly in recent years compared with other European countries. In contrast, export and corporate investment growth have lagged. Exports are struggling due to U.S. import tariffs and a strong euro, Van Es explains.

According to the Rabobank economist, below-average export growth may also be due to slower productivity growth. This reduces the competitiveness of the export sector and causes it to lose market share. “Lagging investments and a weakening competitive position of the export sector could weigh on the future earning capacity of the Dutch economy,” he warns.