Global Outlook 2026 - The Netherlands: Bottlenecks keep a lid on the economy

Co-author: Anne de Clercq Zubli

Developments on the international front remain volatile

The Dutch economy has grown by a below-trend 0.3% q/q over the past quarters on average, while remaining more resilient than expected, given US tariffs and (inter)national uncertainty. On the international front, the trade agreement between the US and the EU has reduced but not eliminated uncertainty for exporting companies. Now, US-China tensions have shifted from tariffs to chokepoints, predominantly over rare earths and semiconductors, and the Netherlands is caught in the crossfire. Allegedly, pressure from the US led the Netherlands to remove the CEO of Nexperia, a Netherlands-based chip manufacturer, which led to escalating Netherlands-China relations. Furthermore, as a result of international uncertainty, Dutch companies report that they are responding by holding larger inventories or seeking alternative export destinations. Trade shifts might mitigate the impact of tariffs, but they will not entirely eliminate the shock. As the trade war continues, these chokepoints might appear more frequently.

2026: New coalition reduces policy uncertainty, continues expansive fiscal stance, and raises defence spending …

On the domestic front, the fall of the Dutch cabinet in June of this year increased policy uncertainty at a time where bottlenecks, such as the overloaded electricity grid, housing shortages, and the nitrogen impasse, are increasingly constraining potential growth. If not addressed, the costs of these obstacles rises, and come on top of other major challenges awaiting the Dutch economy, such as the ageing workforce and climate change. The prospect of a new coalition after the elections held on the 29th of October is therefore welcome. As highlighted in the global chapter, an arduous and lengthy formation process can be expected, but will ultimately create more policy certainty – potentially also on tackling the aforementioned bottlenecks. For the Dutch growth outlook it is also relevant that calculations by the CPB show there seems to be a consensus among the potential coalition parties for significant deficits and continued support for the economy, even though this appears to be at odds with an economy running at capacity and elevated inflation. This confirms the expansive fiscal stance also going forward. Finally, despite minor differences in overall spending levels and funding approaches, the major political parties intend to make substantial investments in defence to meet the NATO target, which provides further stimulus to economic growth.

… and international developments contribute to an improving outlook for 2026 …

International factors also contribute to an improving outlook for 2026. Firstly, recent rate cuts by the ECB are expected to provide support in 2026. Secondly, public spending across Europe is set to increase, driven by commitments to higher defence spending and infrastructure. Main trading partner Germany will significantly invest in infrastructure and defence, which boosts the growth outlook. According to our calculations, this will spill over to the Dutch economy: roughly equivalent to an additional quarter of growth over the coming two years. Finally, a recovery in global trade will bolster external demand; however, the Netherlands faces a reduced market share, partly due to a loss of competitiveness, driven by factors such as high labour and energy costs.

… but domestic factors remain the largest drivers of growth

In 2025, household and government spending are the largest growth drivers. For 2026, we also expect their contribution to be substantial. Household purchasing power is set to continue to rise in 2026, according to forecasts by the CPB, driven by strong (albeit slowing) wage growth, gradually easing inflation, and government policies implemented by the caretaker cabinet. Our calculations also show that household incomes have generally improved relative to essential spending such as fixed costs and groceries, leaving household balance sheets in a strong position. Although labour market tightness is slightly easing, households continue to benefit, with a large number of people working. Nonetheless, sentiment remains subdued as reflected by low consumer confidence, and the elevated savings rate indicates that households still prioritize saving over spending. As uncertainty gradually recedes and real incomes improve further, we expect the savings rate to normalize somewhat, creating room for consumption.

Despite an easing labour market, bottlenecks constraining potential growth remain

In recent months, the unemployment rate has been on the rise, reaching a 4-year high of 4.0% in September. The increase is primarily driven by more people entering the job market, reflecting an increase in labour supply. In the third quarter, labour market pressure eased further as the number of employed surpassed the number of vacancies for the first time in four years. In line with slower economic growth and the continued normalization of bankruptcy rates, we expect labour demand to cool slightly. Still, we do not anticipate a significant rise in layoffs. Labour shortages remain the biggest constraint for businesses, and while the unemployment rate is expected to edge up, it will remain low by historical standards. Greying means that growth of the population aged 20-65 becomes stagnant from 2027 onwards and starts declining in 2029, limiting the number of working people and increasing the number of inactive. As a result the lack of labour supply weighs on potential growth from 2027 onwards, alongside other capacity constraints such as the housing market, electricity grid congestion, and the nitrogen gridlock. Growth will therefore stay below trend in 2026 and 2027.

Inflation to stay above 2% in the years ahead

Dutch inflation has stood well above the eurozone average in recent years, primarily driven by higher services inflation on the back of stronger increases in unit labour costs and wage-linked rent adjustments. Dutch food inflation has also deviated from the eurozone trend, which was partly due to higher excise taxes on tobacco, alcohol and the ‘sugar tax’. Even excluding these tax changes – which have now also dropped from the inflation figure due to base effects– food prices in the Netherlands have risen faster, likely driven by stronger labour cost increases. Climate factors have also played a role in the recent rise in food prices, as hot summers disrupt supply. We recently calculated that Dutch inflation could increase by 0.15–0.3 percentage points due to the impact of climate change on food prices. We therefore forecast somewhat higher food inflation compared to the 2010-19 average. Looking ahead, we expect Dutch inflation to gradually decrease, but stay above the eurozone average. Slowing wage growth alleviates pipeline pressure on services inflation, while a combination of strong demand and anticipation on the tax increase on overnight stays from 2026 keeps services inflation elevated. The lower fuel excise tax was extended by one year into 2026, which postpones the upward impact to 2027; coming in at the same time as the impact of EU ETS2, both of which will exert upward pressure on inflation. As illustrated by the extended lower fuel excise tax, policy changes from the new government could have a large impact on the inflation figure.