Rabobank: Dutch economy set to lead eurozone recovery, but growth will slow without more investment

2017 is an exceptionally good year for the Dutch economy, due to rising exports, increased investment in housing and strong consumption. Gross domestic product (GDP) is forecast to grow by 3.3 per cent. This puts the Netherlands among the best performers in the eurozone, where average economic growth is 2.1 per cent. The Netherlands is expected to outpace many other euro countries in 2018 as well. And if there is investment in areas such as education and innovation, the Netherlands can maintain its place at the forefront for longer, say Rabobank economists today in their Economic Quarterly Report.

The rosy figures for this year do not presage continuing prosperity after 2018, says Rabobank economist Jesse Groenewegen: ‘After a long crisis, the economy is now close to its potential level of production, so the years of high catch-up growth that we are now seeing will soon be over. The economy may continue to grow above its potential for a while, but ultimately its structural growth potential will prevail.’ According to Groenewegen, this is estimated at a meagre 1.2 per cent per year. ‘By investing in increasing labour productivity for instance, we could maintain the growth momentum we have today,’ he says. ‘And by reducing the costs of employment, we could ensure that more people benefit from that growth.’ The Rabobank economist also believes that the new cabinet has a clear duty to ensure that economic growth is environmentally sustainable, for example by committing to climate legislation.
 
World economy: International concerns are not (as yet) hampering global growth
Economies around the world have performed better than expected in the first half of 2017. Rabobank economist Maartje Wijffelaars: ‘We have slightly upgraded our growth estimate for the global economy in 2017 to 3.5 per cent. This is a faster rate than in 2016, when the global economy grew by 3.2 per cent.’ Wijffelaars says that the economy is improving in both emerging and developed countries, with the exception of China, the United Kingdom and India. ‘The Indian government withdrew widely used rupee notes from circulation in an attempt to curb the black economy. But since the country depends to a significant extent on the cash transactions, the measure has had a severe effect on domestic consumption.’ Rabobank expects global growth of 3.6 per cent in 2018, slightly more than this year, but Wijffelaars notes that international unrest has not disappeared, due among other things to the tensions between the United States, China and North Korea.
 
The full text of the Economic Quarterly Report is available at: www.rabobank.com/economics

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