Dutch economy to grow 1.7% in 2025; Central bank says Cabinet must act to sustain it

A new Cabinet could keep economic growth in the Netherlands at a solid level in the coming years if it immediately addresses bottlenecks such as nitrogen restrictions and the overloaded power grid, De Nederlandsche Bank (DNB) said in its economic forecast on Friday.

DNB forecasts the Dutch economy to grow by 1.7 percent this year, “remarkably higher” than the 1.1 percent that had been forecast this spring, as the trade dispute’s impact proved milder than expected.

However, growth is expected to slow to 1.2 percent in 2026 and 1.1 percent in 2027, largely due to persistent global uncertainties. “We are, so to speak, in a world divided into several blocks, and that division is only becoming more pronounced,” DNB President Olaf Sleijpen said.

Despite this, Sleijpen believes it is realistic that the new Cabinet could have an immediate impact if it tackles major policy issues. In an alternative scenario calculated by DNB, annual growth would stay at 1.6 percent for both the next year and the following year.

“I would say: address the nitrogen problem properly, it’s a major issue, especially regarding permit approvals,” Sleijpen told journalists. “Tackle the electricity grid congestion. Take action on the housing market. Seriously reduce regulatory burdens.”

The DNB chief realizes that it is unlikely all of this can be accomplished within a single Cabinet term. However, he says that even taking initial steps will yield immediate effects.

“Policy clarity is crucial,” Sleijpen emphasized. “A business owner recently told me: even bad policy is still policy, but at least it gives me certainty.”

Sleijpen stressed that the new Cabinet needs to carefully manage public finances, ensuring that any extra expenditures are properly funded. “A euro can only be spent once,” he said.

DNB notes that the planned budget will remain elevated, at 1.9 percent this year and 2.9 percent next year. While this is within the EU threshold, it is very close to the 3 percent limit.

Sleijpen pointed out that government expenditures are still driving inflation. Although inflation is starting to ease, helped by slower wage growth, it is projected to stay above 2 percent in the coming years, maintaining a relatively high level.