IMF forecasts gloomy prospects for the Dutch economy, slow recovery

The International Monetary Fund (IMF) is lowering its growth forecasts for the Netherlands and other European countries. According to the Fund's experts, the economy performed significantly worse than expected in the final months of 2023. As a result, the economic recovery will also be slower both this year and next.

In its last major estimate in October, the IMF still assumed that the Netherlands would show 0.6 percent growth last year. In a new estimate, however, the fund now only expects growth of 0.2 percent in 2023. The original estimate for 2024 was 1.1 percent growth, but this has now been lowered to 0.7 percent. The Dutch economy is then expected to grow by 1.3 percent next year. But even that is somewhat gloomier than previously thought possible, according to the IMF.

The forecast for other European countries is more or less similar. The estimates for France and Germany have also been revised downwards. According to the IMF, the eurozone was still struggling with the consequences of the earlier sharp rise in energy prices last year. In addition, consumer confidence was very weak, and industrial production and investment suffered from rising interest rates.

IMF chief economist Pierre-Olivier Gourinchas speaks of a "difficult year 2023" for the eurozone, but expects a "slight recovery in activity". In other parts of the world, the IMF has even raised its estimates. The US economy, for example, is developing better than previously forecast. The same applies to Russia, India, and China.

According to the latest figures, the global economy as a whole grew by 3.1 percent last year, and will grow at the same rate this year and global growth is expected to rise to 3.2 percent next year. This represents an improvement of several percentage points compared to the October estimates. Gourinchas argues that inflation is also moving back in the right direction. It has been falling faster than expected.

The decline in inflation could be even faster, says Gourinchas. "Especially if the tension on the labor market continues to ease." However, additional government spending could only lead to inflation rising again. Gourinchas also points to the war in the Middle East, which has also led to new problems in the transportation sector. Many ships are avoiding the Red Sea for fear of attacks by the Houthi rebels and are therefore traveling much longer. "Even though the disruption has been limited so far, the situation remains unstable."