Dutch economy will continue to flourish this year, despite international uncertainties
After a strong 2016, the Dutch economy continues to flourish this year. Dutch GDP is forecast to grow by 2.2 percent in 2017, and 1.9 per cent next year. There are still significant geopolitical and political risks around the world, but so far the Netherlands seem relatively unaffected: exports are rising steadily. Housing investment and household consumption are driving economic growth in the Netherlands this year. The labour market continues to improve considerably, with unemployment expected to hit 4.5 percent in 2018. After 2018 however, the economic catch-up growth will likely be over. This is the message Rabobank economists published in their Economic Quarterly Report today.
Despite positive labour market figures, long-term development of disposable income in the Netherlands is cause for concern. Rabobank economist Nic Vrieselaar: “Many Dutch people experienced a drop in income during the crisis. Incomes have now been rising only modestly for quite some time, despite the fact that unemployment is falling rapidly. Wage increases in real terms have actually been much lower recently than in the first months of 2016. This could partly be because of a relatively large gap between unemployment and underemployment, as is the case in other European countries. Furthermore disposable incomes and the functioning of the labour market would benefit from a reduction in the gap between net wages and taxes on employers.”
Global economy: slightly more political stability
Global economic growth is expected to slightly outpace that of 2016. Rabobank economist Daniël van Schoot: “We have downwardly adjusted our forecast for the US and UK, but we expect the eurozone and China to grow faster than previously thought. We are also seeing a global recovery in commodity prices, which is mainly benefiting commodity exporters such as Russia and Brazil.”
But there are still serious international concerns. Van Schoot: “These are now mostly geopolitical in nature. The protectionist stance of the US seems to have softened somewhat, but policies delayed don’t necessarily mean policies denied. The developments with respect to North Korea and the influence of China could have huge consequences for US-China relations. This means that a trade war between these countries is certainly not yet off the agenda.
Apart from these geopolitical concerns, the global economy appears to have stabilised, although this is largely a cyclical phenomenon. Much of the current growth is catch-up growth, which is why policymakers need to tackle global imbalances more in order to limit their braking effect on growth. By global imbalances, we specifically mean the differences in national current account balances. These differences were a major contributor to the creation of the financial crisis.”