Update
Economic growth up in the Netherlands, policy-light Budget Day ahead of elections
Dutch GDP grew slightly more than initially estimated in Q2 2025, driven by household consumption and investments. Despite this upward revision, the economic outlook remains unchanged. With elections approaching, the 2026 Budget Memorandum introduces few new policies. The budget deficit is projected to range between 2.7% and 2.9% of GDP.
Summary
Higher GDP growth in the second quarter
According to the second estimate by Statistics Netherlands (CBS), GDP grew by 0.2% in Q2 2025 relative to Q1. This is 0.1 percentage point higher than the initial estimate. The previous two quarters were also revised upward, although the changes were not visible when rounded to one decimal place.
The upward revision is mainly due to growth in household consumption (+0.1% instead of -0.4%) and increased investments (+1.8% instead of +1.4%). The revision of private consumption figures did not come as a surprise. The earlier reported contraction was difficult to reconcile with the tight labor market and significant purchasing power gains in 2024.
A notable revision was seen in housing investments, which were adjusted upward not only for Q2 2025 (-0.5% instead of -1.5%) but also for the three preceding quarters. Furthermore, government investments showed a striking increase of 10.2% QOQ. In contrast, growth in government consumption, exports, and imports in Q2 2025 has been revised downward. Inventory formation also contributed less to growth than previously estimated.
Based on the new CBS figures, all expenditure components contributed positively to GDP growth in Q2 2025, except for net trade (see figure 1). The strong inventory buildup and high net imports are likely closely linked to anticipation of US import tariffs.
Stronger growth in construction and manufacturing
On the production side of the economy, construction sector growth has been revised upward (see figure 2). This is in line with increased housing investment. However, the sector still shows a contraction of -0.5% QOQ. Value-added growth in the manufacturing industry has also been significantly revised upward – from 1.2% to 1.6% QOQ. More detailed data is now available for this industry. In Q2 2025, the main drivers were the machinery industry, the chemical and pharmaceutical sectors (particularly pharmaceuticals), and the food industry. In contrast, value-added growth in the IT sector has been revised downward, from 0.9% to 0.6% QOQ.
Figure 1: Most expenditure components contribute positively to Q2 2025 GDP growth
Figure 2: Revised growth in Q2 2025 for selected sectors
Impact on the economic outlook
We have published our latest quarterly economic repor t mid-September. As the overall picture has not changed substantially, we are keeping our forecast unchanged. The Dutch economy is expected to grow by 1.5% this year and 1.0% in 2026 (see table 1). Household consumption continues to benefit from a persistently tight labor market and rising real wages. In the coming years, government spending will remain an important driver of economic growth. In contrast, business investments and exports are expected to lag due to geopolitical uncertainty and trade tensions.
Table 1: Economic forecast Netherlands
Limited policy measures in pre-election budget
On Budget Day (known as Prinsjesdag) 2025, the Dutch caretaker cabinet presented the 2026 Budget Memorandum. Due to the political vacuum ahead of the October 29 elections, the budget contains few new policy measures. The cabinet projects the budget deficit for 2026 at 2.9% of GDP, slightly below the 3.0% forecast in the Spring Memorandum, mainly due to underutilization of funds. The Netherlands Bureau for Economic Policy Analysis (CPB) expects an even lower deficit of 2.7% (see figure 3). In subsequent years, the deficit is expected to remain lower, staying well within the limits set by the Economic and Monetary Union (EMU) of the European Union. The same applies to public debt (see figure 4).
Figure 3: Budget deficit remains within EMU limits...
Figure 4: ...and so does public debt
The most significant policy measure announced is the extension of the reduction of excise duties on fuels through 2026, with an estimated cost of EUR 1.7bn. Minor policy changes in the housing and labor markets aim to ease shortages somewhat, but major reforms are left to the next cabinet. Other notable measures include 1) an increase in Box 3 taxation (wealth tax), 2) a higher air passenger tax in 2026, with distance-based rates from 2027, and 3) a VAT increase on overnight accommodation, including hotels and holiday parks, from 9% to 21%.
Future policies remain uncertain
In early September, the government published a Productivity Agenda aimed at boosting digitalization, encouraging innovation among SMEs, and reducing regulatory burdens. However, the budget does not include a dedicated financial allocation for these initiatives – nor for the increased defense spending agreed under NATO commitments.
Political parties show broad consensus in their election programs on key economic themes, such as strengthening competitiveness, fostering innovation, addressing housing market challenges, and increasing broad well-being. However, their approaches to implementation vary significantly.