Dutch economy "can take a hit," ABN Amro says

The Dutch economy will grow more slowly due to the Iran war, but “can withstand a shock,” economists at ABN AMRO write in a new report, in which they also warn of higher inflation.

Economists now project Dutch economic growth at 1.5 percent for this year, slightly below the previous forecast of 1.6 percent. For 2027, GDP is expected to rise by 1.2 percent, down from the pre-war estimate of 1.4 percent.

The economists’ lower growth outlook reflects the impact of rising prices on Dutch households, which reduces consumption. Prior to the outbreak of hostilities in Iran and the Gulf, ABN AMRO had expected that increased consumer spending would help sustain economic growth.

The growth downgrade is modest because the Netherlands entered the energy crisis from a strong position, according to the economists. Households hold relatively large savings, the labor market remains tight, and both private individuals and businesses have lowered their debts in recent years.

Economists at ABN AMRO now anticipate average inflation of 2.9 percent this year, well above the earlier forecast of 2.3 percent. They caution that the Netherlands could be at greater risk of second-round effects, where higher energy costs feed through into wages and other prices, sustaining elevated inflation.

Even before the war began, inflation in the Netherlands was higher than in neighboring countries, and wages in collective bargaining agreements were still rising strongly. ABN AMRO notes, “The economy is still in the final stage of adjusting to the previous energy price shock and is now being hit by a new one,” referencing the inflation spike of 2022 following Russia’s invasion of Ukraine.