NETHERLANDS

The Dutch economy has been recovering from the pandemic, with GDP at the end of the first quarter of 2022 5.5% above pre-Covid levels (Q4 2019). Output expanded by +2.6% q/q in Q2. Investments (+5.4%) and the balance of trade contributed the most to economic growth as exports grew more than imports (+3.1% and +2.2%, respectively). Household consumption also made a positive contribution, growing by +0.9%. The solid carry-over will provide some support to the 2022 outlook that is clouded by surging energy prices, supply-chain disruptions and deteriorated trade conditions. Indeed, we expect activity to enter a recession at the end of this year. In particular, we expect private consumption to suffer due to elevated uncertainty and surging inflation eroding household and corporate consumption behavior. Net trade should also experience a slowdown as demand is weakening.

Inflation pressures in the Netherlands have been very strong, with the rate being one of the highest in the Eurozone. Price growth reached 14.5% in September 2022, mostly due to continued upward pressures on energy prices. The government has implemented measures to shield households and firms from rising energy prices, allocating around EUR23bn (2.7% of GDP). Consumer confidence dropped further in September to an all-time low, and well below its long-term average over the past two decades. Business sentiment also deteriorated over the month but remained above its long-term average.

We expect GDP growth to grow around +4.5% in 2022, thanks to the strong H1 carry over but we expect activity to slow down through the end of the year. The Netherlands will experience a recession in H1 2023, leading to an overall GDP contraction of -0.3% next year.

The Netherlands is one of the most open economies in the world and among the best countries in terms of technology and innovation. It is a very attractive business location, thanks to its excellent infrastructure (including the largest port in Europe), a competitive business climate and a well-educated workforce. The tax system includes several incentives to stimulate innovation and business activities, and to attract a foreign workforce and international business investment.

In early 2022, the new coalition government announced a plan to be make the Netherlands climate neutral by 2050. The government said it would adjust domestic climate goals to at least 55% CO2 reduction by 2030. The 2019 National Climate Agreement contains policy measures to achieve climate goals through agreements with various economic sectors on specific actions.  The participating sectors include electricity, industry, “built environment,” traffic and transport and agriculture.