The Netherlands - Solid domestic demand fuels growth

In the fourth quarter, the Dutch economy grew by 0.4% q/q, following robust growth of 1.1% and 0.8% in the previous quarters, respectively. This performance marks a solid year for the Dutch economy, with an overall growth rate of 0.9% y/y, standing out compared to other eurozone countries. All GDP components contributed positively to the Q4 growth figure, with internal demand being the primary driver. Firstly, investment rose by 3% q/q, particularly in transport such as cargo vans, likely coinciding with the changed tax regulations in 2025. Investment remained strong throughout 2024, which is remarkable given high interest rates, (geo)political uncertainty, a weak German economy, and a tight labour market. Secondly, household consumption increased by 0.9% q/q. Despite initial household hesitance and a preference for saving and deleveraging, rising real incomes have translated into increased consumption in recent quarters. This uptick in consumption occurs despite strong pessimism among households. Notably, towards the end of 2024 purchases of durable goods surged, likely driven by government policy changes in 2025 regarding subsidies for electric cars and heat pumps. Thirdly, the Dutch government’s expansionary fiscal policy continued to contribute to growth, with a 0.9% q/q increase in Q4, particularly fuelled by higher healthcare spending.

The trade balance also contributed significantly to Q4 growth, as exports rose by 0.4% q/q while imports declined by 0.6%. The reduction in imports is likely linked to developments in the gas markets. Despite falling gas stocks, less gas was imported, possibly due to changes in European gas supply. However, the faster drawdown of gas inventories due to colder weather offset the trade balance’s positive contribution to GDP, reducing growth by 1.6pp. As gas inventories continue to deplete in Q1, this will likely weigh on the growth figure.

Looking ahead to 2025, growth is expected to recover further. Households continue to benefit from higher real incomes, supporting consumption. The government is also contributing to growth through spending on healthcare, public administration, defence, and public investment, along with indirect support via the purchasing power package announced on ‘Prinsjesdag’. Foreign demand is expected to pick up due to increasing growth in the eurozone. In our forecasts we assume Trump’s import tariffs will take effect in the second half of 2025, possibly leading to a short-term ‘frontloaded’ surge in exports to the US as companies avoid the tariffs. While there is some anecdotal evidence of this, we are yet to see it in the macroeconomic figures. Once tariffs are implemented, they will dampen foreign demand for Dutch exports. Overall, we project GDP growth to rise to 1.8% y/y in 2025 before slowing to 1.0% in 2026.

The Dutch labour market continues to be a bottleneck. Companies continue to report that labour market tightness is their primary challenge. Although the unemployment rate has climbed to a two-year high of 3.8%, it remains historically low. As cyclical pressures fade, the labour market is expected to gain some breathing space. Still, given high labour demand, limited labour supply, and a greying population, we think the unemployment rate will remain low, averaging 3.8% in 2025 and 4.1% in 2026, up from 3.7% in 2024.