The Netherlands’ real GDP is projected to increase by 1.7% in 2025, due to strong domestic demand and despite global uncertainties such as US tariffs affecting trade. Higher wages are expected to boost private consumption, while government consumption growth stays high. HICP inflation continues to be elevated due to rising costs in services and processed food but is expected to gradually decrease in 2026. GDP growth is expected to decelerate to 1.3% as uncertainties persist, but to then recover to 1.7% in 2027. The government deficit is forecast to increase to 1.9% in 2025 and to widen further to 2.7% in 2026 before decreasing to 2.0% in 2027. Public debt is set to reach 48.1% of GDP in 2027.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 1.7 | 1.3 | 1.7 |
| Inflation (%, yoy) | 3.0 | 2.5 | 2.1 |
| Unemployment (%) | 3.9 | 4.1 | 4.3 |
| General government balance (% of GDP) | -1.9 | -2.7 | -2.1 |
| Gross public debt (% of GDP) | 45.2 | 47.9 | 48.1 |
| Current account balance (% of GDP) | 9.1 | 9.5 | 9.4 |
Strong domestic demand amid global uncertainties
Nominal wage growth in the Netherlands increased to over 6% in 2024 and is expected to remain robust over the forecast period. This is set to improve households’ real disposable income, raising growth in private consumption to 1.6% in 2025. However, consumer confidence remains low, prompting a further increase in precautionary savings, as consumption growth lags behind income growth. Investment will contribute only modestly to growth in 2025-26 mainly thanks to an public investment agenda, particularly in the areas of defence, the green transition and housing, while private investment, except in construction, remains subdued due to global economic uncertainties and domestic challenges related to excessive nitrogen deposition and electricity grid congestion.
While the Netherlands feels the impact of US trade policy indirectly through lower global trade growth, US tariffs haven’t yet significantly harmed the economy. Currently, only 5% of Dutch goods exports, including high-tech machinery less affected by tariffs, are sent to the US. However, the Netherlands also faces domestic competitiveness challenges like high wage growth and elevated energy prices not matched by productivity gains. As domestic demand remains robust, imports are expected to outgrow exports in 2025-26, leading to a negative impact from net exports on growth.
In 2026, real GDP growth is forecast to slow to 1.3% due to the aforementioned uncertainties and challenges affecting investments and exports. Growth will be mostly driven by private consumption and is predicted to recover to 1.7% in 2027 thanks to steady private consumption, substantial government consumption, increased growth in private investments spurred by lower interest rates, and better trade conditions.
The labour market is becoming less tight
The unemployment rate rose to 4.0% by September 2025, up from 3.6% in mid-2024, marking the highest rate in four years. This increase was mainly due to more people entering the labour market than the number of job losses. Looking ahead, slower employment growth and some job losses are expected to raise the unemployment rate from 3.9% in 2025 to 4.1% in 2026 and 4.3% in 2027. Despite this upward trend, the labour market is expected to remain tight, leading to higher wages over the forecast period. Nominal wage growth is projected at 5.2% in 2025 and, while remaining elevated, is predicted to gradually decrease to 3.8% in 2026 and 3.1% in 2027.
Inflation remains relatively high
HICP inflation was 3.3% in the first two quarters of 2025, up from 3% the previous year. The relatively high inflation in the Netherlands is due to rising costs in services and processed food. Strong growth in nominal wages and rental prices have increased services inflation, while higher excise duties on products like tobacco have led to a surge in the price of processed food. Substantial but gradually moderating wage growth, together with a higher VAT rate on overnight stays starting from 1 January 2026, is projected to keep services inflation elevated throughout 2025-26, with a decrease only anticipated in 2027. Overall, annual HICP inflation is forecast at 3.0% in 2025, gradually decreasing to 2.5% in 2026 and 2.1% in 2027.
Government deficit to widen on the back of tax cuts and increased spending
In 2025, the deficit is set to increase to 1.9%, up from 0.9% in 2024, largely due to structural cuts in personal income tax, impacting the budget by 0.3% of GDP.
The government balance in 2026 is set to be temporarily affected by a military pension system reform, requiring a transfer of approximately 0.7% of GDP to a private pension fund. While VAT rate increases for accommodation services and limited personal income tax bracket adjustments are expected to boost revenue in 2026, they won’t fully offset the increase in spending. Defence spending is expected to increase from 1.7% of GDP in 2025 to 1.8% in 2026. The deficit for 2026 is forecast to reach 2.7%.
The deficit in 2027 is expected to drop to 2.1%, mainly because the temporary impact of the military pension reform will taper off. The budget will be influenced by rising health care premiums due to a lower deductible (which will also increase expenditure) and an increase in excise duties on motor fuels. These measures, planned by the outgoing government, are included in the forecast but future changes under a new government are likely.
After a slightly expansionary fiscal stance in 2025, fiscal policy is set to be broadly neutral in 2026 and 2027.
The general government debt is expected to increase to 45.2% of GDP in 2025, up from 43.7% in 2024. Due to deficits in 2026 and 2027 public debt is expected to reach 47.9% and then 48.1%.