Ukraine war could cause recession in Netherlands: Planning Office

The Russian war in Ukraine could mean a recession for the Dutch economy, the central planning office CPB said in new calculations on Wednesday. If energy- and raw material prices remain high and world trade is affected by the war and sanctions against Russia, the Dutch economy could shrink for two quarters in a row this year, the CPB said, NOS reports.

Last week the CPB published its latest forecasts for the Dutch economy. It outlined various scenarios, but the Dutch economy grew in each one. Now it published an even bleaker scenario than last week's worse one, in which a recession is possible.

In the new scenario, raw material prices will continue to rise. The CPB assumes an oil price of $140 per barrel for the coming months. The oil price is currently just over $100 a barrel. World trade will decrease, and Dutch businesses and households will spend less due to the uncertainty. All this would result in inflation rising to 8 percent and purchasing power dropping by 5 percent. The Dutch economy will grow 1.9 percent over the entire 2022, thanks to a solid first quarter. Next year the growth will be 0 percent.

The CPB stressed that it does not consider this a worst-case scenario. "Other scenarios are also conceivable, particularly one in which the supply of oil and gas from Russia is limited. In such a scenario, the economy could be hit harder." The CPB added that many uncertainties surround the economy this year.

Its middle scenario assumes that inflation will rise to 5.2 percent this year, purchasing power will fall by 2.7 percent, but the economy will continue to grow.