Dutch Economy in Focus
Group Economics
Economy is catching up 11 September 2015
Dutch economy is catching up After seven years of below-trend growth, the Dutch economy is now growing robustly, starting to make up for earlier losses. The economy is doing well and is growing faster than last year. In the first half of the year gross domestic product (GDP) gathered further pace, accelerating to a year-on-year average of 2¼%. Growth is also more broadly based than before. Apart from exports, which continued to increase in the recent lean years, investment and subsequently consumption have also been driving GDP growth for some time now. Ongoing recovery in key export markets can help to maintain this momentum: we foresee a slight quickening of growth both in the US and the eurozone in the second half of the year. Our baseline scenario does not assume a hard landing of the Chinese economy. However, downside risks to the growth outlook of China and other emerging markets have increased. With the lower oil price and cheaper euro providing added buoyancy, GDP could rise by some 2¼% this year. Actually, the picture is even better, as growth is currently being depressed by around ½% point due to the significant reduction in gas extraction in Groningen. Lower gas production dampened GDP growth in the second quarter by ½% point (quarter on quarter). Excluding this factor, the economy maintained the growth rate of the first quarter. Thanks to the tax cuts worth EUR 5 billion, growth in 2016 could be slightly higher than this year. We have therefore increased our GDP estimate to 2½%. In view of the recent improvements in the labour market and the (still) favourable outlook for the economy, we have pared down our unemployment estimates for this and next year. We have somewhat lowered our inflation forecast for 2016. This is because of the reduced oil price projection for 2016 and our slightly altered dollar forecast. Nevertheless, average inflation next year will work out higher than this year. One reason is the continued strengthening of the dollar, another is the still slightly higher oil price than in 2015.