Dutch economic growth projected at 1.1% this year amid U.S. trade war, 1% next year
The Dutch central bank raised concerns about the ongoing trade war with the United States, which is dragging down economic growth in the Netherlands. This year, growth of 1.1 percent is expected, followed by two straight years of 1 percent growth, De Nederlandsche Bank (DNB) predicted. Housing prices could also rise by over 7 percent in the Netherlands this year, and will continue to grow in the years to follow.
The DNB put out two reports about the state of the Dutch economy on Friday. Its prediction for the economy is based on U.S. tariffs of 10 percent, and no retaliatory stance from the European Union. These predictions include strong warnings regarding the impact of the trade war, which could grind the Dutch economy to a halt.
Previously, the government policy advisory body CPB predicted 1.9 percent growth for 2025, and 1.5 percent growth in 2026. This was released in February, but full first quarter economic results wound up being disappointing.
"You can also think of scenarios that are even worse," said DNB Chief Economist Olaf Sleijpen, such as U.S. President Donald Trump following through with a threat of 50 percent tariffs. That would likely lead to a recession. "It shows how uncertain the situation is," he stated.
Any growth in the coming years will be fully dependant on the population continuing to spend money, though the DNB sees signs of people increasing their savings. But the trade war will dent government finances at a time when the country is likely to spend more on welfare and healthcare, and companies are being more cautious with their investments, as is common during periods of uncertainty.
"There is a lot of uncertainty," said DNB Chief Economist Olaf Sleijpen, noting not only the political situation in the Netherlands but the more consequential trade relationship with the U.S. He said the budget deficit needs to remain near Europe's three-percent norm, and next Cabinet has to do a better job of shoring up government finances and tackling long-running issues like the at-capacity electricity grid and the handling of nitrogen emissions, which also stalls construction projects.
The lack of housing availability is one issue forcing residential sales prices upwards, with the expected 7 percent increase this year to continue at about 4 percent in both 2026 and 2027. Recently, ABN Amro predicted housing prices would rise on average by about 10 percent before the end of 2026. Statistics Netherlands noted an average annual increase of 10 percent during the first quarter of this year.
The DNB noted that mortgage rates could increase slightly, which will reduce the amount home buyers can borrow from the bank. This could wind up slowing down the surging growth in home prices.
Owner-occupied homes will remain roughy about as affordable as they are now, and will neither worsen nor improve as housing supply remains limited and wages continue to grow. This could push the average price of home up to about 544,000 euros next year, which means an annual income of over 110,000 euros is needed to finance the entire purchase.
Only about a third of households will be able to obtain that level of financing, the DNB said. A decade ago, more than half of Dutch households could fully finance the purchase of a new home without help from parents or tapping into their savings, which will make the situation more dire for first-time buyers. Meanwhile, the supply of rental housing is also dwindling.
The DNB wants to see more homes built, and limits to the tax deduction allowed for the accrual of interest on mortgages. The DNB does not believe people should be allowed to borrow more, or beyond their means. Quite the contrary, as this could end up pushing the price of homes ever higher.
