Our forecasts

Macro economy

Global economic forecasts as of 28 August 2024

Group Economics writes daily about developments in the macro economy. Here are our latest forecasts on interest rate and currency developments, prices in commodity markets and the economic trend in developed and emerging markets.

Wilma SchelvisMarloes Dekker-Kok(+1)29/08/2024
Macro economy

Eurozone - The recovery needs more from consumers

Services continues to drive the recovery for the time being, helped by strong tourist inflows and, more recently, a host of summer cultural events. This is helping to offset weakness in manufacturin. Services inflation remains on the high side, but falling wage growth comes as a welcome relief. The slowing in negotiated wages gives the ECB the green light to restart rate cuts in September.

Jan-Paul van de KerkeBill Diviney(+1)29/08/2024

What Trump tariffs would mean for Europe

Macro economy

China - A tale of Trump risks, tariffs, and trade diversion

New trade tariffs under a potential Trump 2.0 are a risk to exports, currently a key engine of growth. Still, trade diversion (through countries like Vietnam/Mexico) mitigates effects of trade tariffs over time. Meanwhile, domestic demand remains weak; we cut our 2024 growth forecast to 4.9% (from 5.1%).

Arjen van Dijkhuizen29/08/2024
Macro economy

US - Fasten your seatbelt, prepare for landing

The Fed is ready to start the easing cycle. The economy is still resilient, allowing for data-dependent and steady rate cuts. We therefore expect a 25bps cut in September.

Rogier Quaedvlieg29/08/2024
Macro economy

The Netherlands - Disinflation takes longer due to rents and wages

The Dutch economy unexpectedly grew by 1% q/q in Q2, primarily driven by increasing exports. We expect continued but below trend growth for the second half of 2024, with an annual growth of 0.6% for 2024 and 1.3% for 2025. Rent indexation and realised wage growth lead to uptick in our inflation forecasts. Inflation (HICP) is expected to average 3.1% in 2024 and 2.8% in 2025.

Aggie van HuisselingJan-Paul van de Kerke(+1)29/08/2024
Macro economy

Global Monthly - What Trump tariffs would mean for Europe

Despite the rise of Harris in the polls, a Trump victory in the November election is still essentially 50-50. Trump’s most economically consequential plan is for a 10% universal tariff on all US imports. Eurozone industry is already struggling to recover from recent shocks. Tariffs would cause a collapse in exports to the US, with trade-oriented Germany and the Netherlands likely to be particularly hard hit. The policy would also drive a significant divergence in Fed & ECB monetary policy, weighing on the euro. In a scenario where the EU negotiates a European exemption, the eurozone will still see an initial hit to growth, but might ultimately benefit from the diversion of US trade from tariff-hit countries.

Bill DivineyJan-Paul van de Kerke(+1)29/08/2024

Sustainability

Sustainability

Carbon Market Strategist - Geopolitical risks drive market volatility

Geopolitical risks put upward pressure on EUA prices through their impact on energy markets. EUA demand from main sectors remains low as emissions from power generation retain its downward trend, while Eurozone PMI composite shows weak signs of industrial recovery . As we approach the surrender date in September, we expect a limited increase in demand. The bearish sentiment is still dominating the market, though markets remain responsive to unusual weather conditions and geopolitical tensions. Our outlook for the EUA price to is to range between 67 and 73 €/tCO2 during August and September.

Moutaz Altaghlibi12/08/2024
Sustainability

ESG Economist - The impact of a Green LTRO on the energy transition

Given the sharp rise of interest rates since 2022, the cost of capital has become an important factor in the energy transition. Higher interest rates are adding to the forces slowing down the energy transition as they impact the profitability of the investments in renewable energy relatively hard. Capital expenditures for such investments represent a higher share relative to operating expenditures. This is because, after initial development and construction costs, operating costs are low as no or reduced fuel input is required. The cost of capital is therefore an important element of the total costs of the energy transition making these investments more sensitive to changes in interest rates. An unfortunate externality of the ECB’s restrictive monetary policy is the rise in transition costs.

Moutaz Altaghlibi18/07/2024
Sustainability

ESG - At least 16% of Article 8 and 9 funds currently in breach of the new ESMA guidelines

As investors show increasing interest in sustainability matters, there has been an increasing inflow of money towards funds that portray a sustainability focus. As a result, some funds have adopted sustainability-related terms in their names, as a way of promoting and attracting more attention. Although investors should consider more than a funds’ name when deciding in what to invest, the name of a fund acts as an efficient marketing tool. This might ultimately create the wrong incentives for funds that, despite not investing in sustainable companies, misuse sustainability-terms in their names.

Marta Teixeira17/07/2024
Sustainability

ESG Strategist - ECB expands climate reporting to other monetary portfolios

The ECB’s climate-related financial disclosure reporting no longer focuses only on corporate bonds, and has now been expanded to other asset classes, such as sovereign and covered bonds. With regards to corporate bonds, the higher availability of data also allowed the ECB to make adjustments to its tilting framework methodology. This resulted in the share of issuers with a ‘good’ climate score decreasing, while there was also a slight increase in the share of issuers with a ‘bad’ climate score. Over the years, the corporate bond portfolio shows a steady decarbonization path, although partially driven by inflationary pressures. The ECB claims its tilting strategy remains adequate and delivering the desired results, but admits that “if deviations from the desired trajectory are identified, remedial actions will be assessed”, which opens the door for a potential active reshuffling in the coming year(s). With regards to sovereign bonds, carbon emissions – which have a two-year lag – are compared to the most-recent data on economic activity, which makes meaningful conclusions around these indicators hard. With regards to covered bonds, the ECB relies on issuer-level data, rather than the emissions related to the covered-pool. This may lead to an underestimation of the effect that climate risks can have in the pricing of these instruments. Issuer-level data also excludes financed emissions, which is the primary element in banks' carbon footprint and a key climate risk indicator at the issuer level.

Larissa de Barros Fritz11/07/2024
Sustainability

ESG Economist - Geoengineering radiation management: not so fast

The goal of policymakers is to reduce emissions to net zero by 2050 and at a sufficient pace to stay within the carbon budget corresponding to a pathway to stay below 2°C and pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels. There are several ways to achieve this goal. First, limiting and mitigating CO2 and other greenhouse gas emissions. Second, capture emissions from combustion. Third, capture CO2 and other emissions from the atmosphere. Fourth, other ways to manage radiation and to influence temperature rise. Removing CO2 from the atmosphere and radiation management fall into the category of geoengineering. To reach our climate goals, a combination of these ways is necessary. In our previous report*, we explained what geoengineering is and we focussed on carbon sequestration technologies. This report focuses on the radiation management technologies and what they can do to help fighting temperature rise. We end with a conclusion.

Georgette Boele04/07/2024
Macro economy

ESG Economist - What are the main trends in Dutch climate investments?

The analysis of the main climate sectors reveals distinct trends across various technologies. In the building sector, there has been an uptick in investments in new buildings with a significant rise in air-to-water heat pumps from 2020 onwards. Medium renovations in existing buildings are also on the rise in the past decade.

Moutaz Altaghlibi03/07/2024
Macro economy

Carbon Market Strategist - EUA prices show signs of stabilization as we enter summer period

Carbon prices leveled out after the decision on Total Number of Allowance in Circulation (TNAC) was announced Early June. They further manifested a downward trend as EUA prices decouple from European gas prices.

Moutaz Altaghlibi02/07/2024
Sustainability

ESG Economist - Could carbon sequestration technologies help to reach net-zero?

The goal is to reach net zero by 2050, to stay within the carbon budget for a pathway to stay below 2°C and pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels. There are several ways to achieve this goal. First, limiting and mitigating CO2 and other greenhouse gas emissions. Second, capture emissions from combustion (CCS). Third, capture CO2 and other emissions from the atmosphere if despite all the efforts there are still rest-emissions. Fourth other ways to manage radiation and to influence temperature rise. To reach the goal a combination of these ways is necessary. Removing CO2 from the atmosphere and radiation management fall into the category of geoengineering. In this report, we explain what geoengineering is. Then we focus on the carbon sequestration technologies and what they can do to help limit temperature rise. We end with a conclusion. In our next report we will focus on the other category of geoengineering, namely radiation management.

Georgette Boele26/06/2024

Flagship Publications

Sustainability

ESG Economist - 2030 climate target within reach for many Dutch sectors

In this publication, we answer the question of what the path of the Dutch economy and its sectors towards the ultimate 2050 climate-neutral goal might look like. In particular, we look here at the impact that low-carbon technologies can have on reducing greenhouse gases for 21 sectors in our so-called Sector Technology Pathways. What sectors are the heavyweights in the transition, where is reducing greenhouse gases most challenging and what are bottlenecks we need to overcome in the transition?

Casper Burgering13/02/2024
Macro economy

Stacking climate risks and financial resilience in the housing market

Climate change creates greater risks that are more frequent and cause more damage to Dutch homes. This study addresses the question of which districts can be deemed ‘climate-vulnerable districts’, i.e. those in which the risks of climate change, but also the costs of energy efficiency measures, may be too much for homeowners or properties to bear.

Bram VendelSandra Phlippen(+1)15/01/2024
Macro economy

ESG Economist - Transition check: are renewables in crisis?

The energy transition is an economy wide process where a development in one part affects, directly or indirectly, other parts. Bottlenecks or costs challenges could harm an effective energy transition. The effect of today’s bottlenecks on the transition, such as the limited grid capacity, is magnified because of the mismatch in the timeframe for deploying grid extensions versus what is needed for electrification or renewable deployments.

Larissa de Barros FritzMoutaz Altaghlibi(+1)06/12/2023
Macro economy

Ripple effects - Exploring the impact of low Rhine water levels on the Dutch economy

The Rhine, the busiest river in Europe, is of great economic importance. Due to drought, both in 2018 and 2022, there have been episodes where the water level in the Rhine has dropped to critical levels, severely limiting inland shipping. According to the Kiel Institute for the World Economy, in November 2018, low water levels led to a drop in industrial production by 1.5 percent, causing a decline of German GDP by 0.4 percent. 1)

Amit KaraJeannine van Reeken-van Wee(+1)02/11/2023
Sustainability

ESG Strategist - How exposed are companies and banks to biodiversity risks?

Biodiversity stands for biological diversity. The loss of biodiversity translates into the loss of services provided by ecosystems to the real economy. There are two types of risks associated with biodiversity: physical and transitions risks. Physical risks stem from the loss of biodiversity (for instance, disappearance of animal pollinators, like bees), and transition risks stem from regulations/policies introduced by regulators to mitigate biodiversity loss (such as the introduction of a tax on fertilizers or the implementation of Natura 2000). Physical risks are captured by how much a sector depends on biodiversity (e.g. agriculture depends a lot on animal pollinators, like bees). And transition risks are captured by how much a sector impacts biodiversity (i.e. the more damage a firm causes, the more likely it is to be hit by policies acting against it). The ENCORE database provides qualitative assessments for each sector and sub-sector on their exposure to biodiversity risks and we use these to calculate quantitative biodiversity sector exposure scores. As per existing regulation, banks are required to report their loan book exposure per sector, according to the NACE categorisation. Hence, by combining banks’ loan book exposure per sector and sector scores on biodiversity dependence and impact, we were able to calculate individual banks’ exposure to biodiversity loss risks. Furthermore, we used Natural Language Processing to assess a bank’s awareness of its balance sheet exposure to biodiversity risks.

Marta Teixeira31/10/2023
Sustainability

Is flood risk already affecting house prices?

Lessons learned from an impact assessment study in the Netherlands. Global warming increases the probability of flooding. If this risk is not reflected in house prices this raises concerns about a sudden risk re-pricing that may prove financially destabilizing. Our research findings are inconclusive but point towards current flood risks being not (fully) priced in to house valuations. The key methodological challenge in providing a robust estimate of flooding risk on house prices is finding comparable houses for the exercise, while still keeping the sample size sufficiently large.

Jeannine van Reeken-van WeeSandra Phlippen(+1)14/02/2022
Sustainability

IN DUTCH: Industrial CO2 reduction targets in precarious balance with investment and

This report is in Dutch Only: In Nederland is het gat tussen het niveau van de totale CO2 uitstoot in 2019 en het doel in 2030 nog zo’n 52%. Om het reductiedoel te halen moet tot en met 2030 nog circa 100.504 miljoen kg CO2 worden gereduceerd. Dit betekent een reductie van 9.137 miljoen kg CO2 per jaar. Het terugdringen van fossiele energie richting 2030 en verder zal veel investeringen vragen. Een bio-based en low-carbon economie is een vergezicht dat met stevige langjarige investeringen is te bereiken, vergezeld met de nodige ambitie in zowel de private als de publieke sector.

Casper Burgering23/11/2021

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