Spring Projections 2025

Economic growth in the Netherlands is being slowed by geopolitical and international trade tensions. These tensions are causing increased economic uncertainty and slower growth of world trade. In particular, business investment and exports fall as a result. This depresses economic growth, which accelerated last year. Following gross domestic product (GDP) growth of 1.1% this year, it is expected to remain at around the 1% level in both 2026 and 2027. GDP growth is supported by private consumption and government spending (Figure 1). As the economy cools, an equilibrium will be struck between demand for products and services and production capacity next year. The current excess demand will thus dissipate from the economy.

Two scenarios

Using two scenarios, we take into account the high uncertainty surrounding the projections. The projections have been prepared based on United States trade tariffs as announced on 9 April 2025. The assumption is that the 10% US import tariffs on most foreign goods announced at the time will remain, with higher tariffs on imports from China. Our projections assume no retaliation by the European Union (EU), which is in line with the European Central Bank (ECB) and the other central banks in the Eurosystem. The same applies to the two alternative scenarios, one mild and one severe, in which we take into account the high uncertainty surrounding trade tariffs. In the mild scenario, import tariffs and uncertainty are lower, resulting is slightly higher GDP growth in the Netherlands. In the severe scenario, we assume that the high US tariffs as announced on 2 April take effect and that affected countries respond with the same tariffs on imports of US goods. GDP growth in the Netherlands then falls sharply (see the alternative scenarios later in these Spring Projections). The last time we presented two alternative scenarios in our projections was during the COVID-19 pandemic. The decision to do so now underscores the high level of uncertainty we are once again facing.

Export

The high level of uncertainty in the international context is having an impact on the Dutch economy. Import tariffs and the high uncertainty surrounding them are distorting international trade flows. Lower world trade growth is hitting Dutch exports due to reduced market access abroad. In addition, relatively robust wage growth and the appreciation of the euro are affecting the competitiveness of exporters. The euro has appreciated against other currencies (including the US dollar) since March this year due to uncertainty over US economic policy. One measure of uncertainty indicates that uncertainty in the Netherlands is also historically high (Figure 2). In an uncertain economic environment, firms are more reluctant to invest, as they find it more difficult to estimate their costs and future returns. Accordingly, business investment is falling in 2025.

Savings

Households continue to save substantially. Private consumption growth continues thanks to ongoing growth in real income. Concurrently, households are saving a higher portion of their income, including for home purchases. Private savings are often necessary as only one in three Dutch households has enough income to finance a home with a mortgage alone (taking into account own money needed for purchase costs). Higher savings are also associated with elevated uncertainty and lower consumer confidence.

Wages

Nominal wage growth gradually declines. This is partly because labour market supply and demand are becoming more balanced. While the supply of labour continues to rise, so does demand, albeit slightly less so. As a result, unemployment is expected to rise to 4.4% by 2027. Wage growth continues to decline gradually but remains higher than inflation over the projection horizon, resulting in an increase in real wages.

Inflation

Inflation in the Netherlands is projected to fall below 3% in 2025. This is linked to the global growth slowdown, which leads to lower energy demand and hence lower energy prices, among other effects. Over time, the appreciation of the euro also depresses inflation, as imports of goods and services become cheaper. Lower inflation is also caused by domestic factors, such as the cooling economy and slowing wage growth. The projections still assume a freeze on rents in the social housing sector. Now that this legislative proposal has been withdrawn (after finalisation of the projections), inflation is expected to be slightly higher in 2025 and 2026.

Budget deficit

The budget deficit is set to widen faster than anticipated in the Autumn Projections. This is because economic growth is slowing down, which depresses tax revenues, while spending on social security and healthcare continues to rise. As a result, the deficit is expected come perilously close to the 3% limit in 2025, exceeding it in 2026. The government is thus sailing very close to the fiscal wind. It is essential that the government complies with European fiscal rules.