After strong GDP growth of 4.9% in 2021, fuelled by the gradual lifting of COVID-19 restrictions, the Dutch economy is facing new headwinds. Russia’s invasion of Ukraine has resulted in further increases in commodity prices and additional supply chain disruptions. Annual growth for 2022 is revised down compared to the Commission’s Spring Forecast, to 3.0%. The economy grew by 0.4% q-o-q in the first quarter, but growth in the remaining quarters is expected to be weaker, with the annual growth forecast being driven to a large extent by a substantial carry-over from 2021 (2.2%). The growth forecast for 2023 is revised down to 1.0%, with high inflation rates and geopolitical tensions continuing to hold back economic activity.
Last update : Summer 2022 Economic Forecast (14/07/2022)
|GDP growth (%, yoy)||-3,9||4,9||3,0||1,0|
|Inflation (%, yoy)||1,1||2,8||9,4||3,3|
Surging inflation rates are expected to erode households’ purchasing power in 2022, negatively affecting private consumption growth especially in the second half of the year. This negative impact is, however, somewhat cushioned by a strong labour market, with a historically low unemployment rate. Investment growth is also projected to be subdued as supply chain disruptions have worsened while labour shortages and tightening financial conditions hamper business investment. The slowdown of economic growth is expected to persist in 2023 with weak private consumption growth and a negative contribution from net trade. Conversely, the government’s ambitious spending plans (focused on, among others, the green transition, housing, defence and education) are expected to result in a gradual pick-up of government consumption and investment in 2023.
Consumer price inflation reached 11.7% y-o-y in March with only a gradual decrease since, coming in at 9.9% in May. While the surge in energy prices remains the main driver of inflation, there is a clear broadening to other price categories, with food prices standing out. Inflation rates are projected to remain elevated throughout 2022, with average inflation over the whole year coming in at 9.4%. Energy prices are expected to show a more pronounced decrease in the course of 2023, which is set to bring down the annual inflation rate to 3.3%. As a result of the tight labour market and increasing inflation, wage growth is clearly picking up from low levels, a trend which is expected to continue this year and next.