The Dutch economy is expected to grow more slowly due to the war in Iran, although it is expected to withstand the impact. This is the conclusion of a new report by economists at ABN AMRO, who also warn of higher inflation.
ABN AMRO now estimates economic growth of 1.5 per cent this year, down from a previous forecast of 1.6 per cent. For 2027, the bank expects gross domestic product to grow by 1.2 per cent, compared with an earlier projection of 1.4 per cent.
The economists are less optimistic because rising prices are likely to reduce household spending power. This would weigh on consumption. Before the outbreak of fighting in Iran and the Gulf region, ABN AMRO expected consumers to support economic growth through additional spending.
Higher inflation
The downgrade remains limited, according to the report. This is because the Netherlands was in a relatively strong position before the new energy crisis began. Households hold comparatively high savings, and the labour market remains tight. In recent years, both individuals and businesses have reduced their debt levels.
ABN AMRO also expects inflation to rise more sharply. The average inflation rate this year is now forecast at 2.9 per cent. This is up from a previous estimate of 2.3 per cent.
The economists warn that the Netherlands faces an increased risk of so-called second-round effects. In such a scenario, higher energy prices feed through into increased wages and higher prices for other goods, leading to persistently elevated inflation.
Inflation in the Netherlands was already higher than in neighbouring countries before the war began. At the same time, wage growth under collective labour agreements remained strong. “The economy is actually still in the final phase of the adjustment process following the previous energy price shock and is facing a new shock,” ABN AMRO writes, referring to the surge in inflation in 2022 after Russia’s invasion of Ukraine.
@anp | NEWS BRAINPORT
