Dutch economy struggling but will likely dodge recession, experts say

The Dutch economy is not in great shape but will likely avoid a recession. This is the sentiment shared by economists in anticipation of economic figures that Statistics Netherlands (CBS) will release on Wednesday. "We are in a period of muddling through," said economist Hugo Erken of Rabobank.

In the first three months of the year, CBS reported a contraction of 0.3 percent. If the economy shrinks again in the second quarter, then by standard definitions, the Netherlands would technically enter a recession, marking two consecutive quarters of decline.

However, this time, Erken anticipates a few percentage points of growth. Similarly, ING economist Marcel Klok predicts a modest 0.1 percent increase. A survey by the financial news agency Bloomberg suggests that on average, economists are expecting a growth of 0.2 percent compared to the previous quarter.

Erken believes the apparent lack of significant economic growth can be attributed to high inflation and rising interest rates, which have curtailed investment. He stated that the economy is grappling with “overheating.” "The labor market is showing cracks," said the head of Dutch economy studies at RaboResearch.

Still, Erken predicts a slight growth in Gross Domestic Product (GDP) over the recent period. He attributes this growth primarily to the services sector, which includes the hospitality and leisure industries. "For example, restaurants are still doing well. People are spending in certain areas." He believes this likely offsets the "underperforming" industrial sector.

Klok is hesitant to label it as growth. "Call it stagnation," he suggested. He also pointed out that an economic contraction cannot be entirely ruled out. "Very negative industrial production figures indicate this, and both construction output and retail sales have declined." He expects a "flat trend, with GDP mostly hovering around zero."

Should the Netherlands fall into a recession, Erken believes it would not have a significant impact. "A real economic crisis is always accompanied by a labor market crisis. That's when many lose their jobs and face substantial losses in income. However, we don't foresee such a scenario in the near future. And even in the medium term, it seems unlikely,” he explained.