2018: An economic outlook

The Dutch economy has finally emerged from the crisis, but international risks should not be discounted.

After years of catch-up growth the Dutch economy has finally emerged from the crisis. GDP will grow by 2.8 percent in 2018 and by 2.2 percent in 2019. Household consumption is a strong driver of growth and exports are also contributing. The unemployment rate will decline to 3.8 percent in 2019, with over a half million jobs having been created since 2014.

"The Dutch economy is firing on all cylinders, but international risks should not be discounted."

The Dutch economy is firing on all cylinders, but international risks should not be discounted. The Netherlands has an open economy, with major financial exposures to regions with geopolitical tensions. An escalation of the simmering conflict between Saudi-Arabia and Iran could lead to a spike in oil prices, which would shave 3 percent off of Dutch GDP by the end of 2020 compared to current forecasts. And Dutch FDI and portfolio investments in Southeast Asia add up to over 140 billion dollars. In this economically important region, geopolitical tensions exist between China and neighboring countries over control of the South China Sea. The impact of an actual geopolitical event in this area could be substantial. Economic theory suggests that even the risk of a geopolitical event can harm economic growth. Current growth could have been 0.5 percent higher without the current elevated level of geopolitical risk.

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Rates stay low

The global economy will grow by 3.8 percent in 2018 and by 3.7 percent in 2019. Sentiment indicators are at a high level and in most countries unemployment is declining. Still wage increases have not been forthcoming. Economic growth in the Eurozone will be 2.2 percent in 2018 and 1.8 percent in 2019. Because inflation is still below the target set by the European Central Bank (ECB), rates are expected to stay low for longer.

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RaboResearch is Rabobank's knowledge center. It consists of three teams that focus on (1) Dutch regional, sectoral and macro economics, (2) global macro economics and financial markets and (3) Dutch and global food & agribusiness. We follow, analyze and predict national and international (macro) economic, political and financial developments. More information: economie.rabobank.com