Dutch economy to start contracting by end of year, Rabobank says

Economists at Rabobank expect inflation to trigger an economic contraction in the Netherlands by the end of this year, which will last until next year. Higher prices, especially for energy and food, mean consumers will spend less, according to a report by NU.nl.

With strong economic growth so far this year, Rabobank expects 2022 to end with +4.7%. Next year will start with a contraction, but it will turn to a slight recovery. Therefore, the economist forecasts 2023 economic growth for him at 0.2%.

Declining purchasing power is the main cause of the sharp decline in economic growth. Rabobank economists expect inflation to hit 11.4% this year and next year he will hit 4.9%. Consumers spend less because most wages don’t rise any higher than that.

Companies are also coping with rising energy and raw material prices. That means companies will have to pass it on at higher prices or cut their profit margins.

Rabobank expects the economic downturn to continue for a long time. “We don’t expect a short-term negative shock as the damage from inflation is slowly permeating the economy. Rather, we think growth will effectively come to a halt in the longer term,” said economist Frank Van Es. said Mr.

The bank emphasized that the forecast is uncertain. For example, it is difficult to estimate the impact of high inflation over time. “While it is clear that many households will have to adjust their spending patterns or even face financial difficulties, it is unclear how much this will ultimately weigh on economic growth.”

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