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Spring Budget raises deficits but sticks to fiscal rules
Discussions on the Spring Budget are completed and the coalition published their plans. The new plans include various measures to boost household purchasing power on the short term, while structural investments appear to lack. The coalition lost their majority according to the latest polls. Despite pressure from other coalition parties for larger deficits, the VVD upheld budgetary rules . Next year, the funding need for the Dutch state will increase because of the higher deficit, higher redemptions and a one-off payment for the pensions of the defence personnel.
The Week Ahead - 28 April - 2 May 2025
These are the Key Macro Events for the upcoming week.
The Netherlands - Revised growth forecasts in response to the US tariffs
We have revised our growth forecasts to 1.4% for 2025 (from 1.8%) and 1.3% for 2026 (from 1.0%). Discussions on the Spring Memorandum have ended and the coalition has published their plans. They likely provide a short term boost to households’ purchasing power, but structural investments lack.
Global Monthly - The only certainty is uncertainty
US policy has been erratic, to put it mildly. Tariffs were announced, paused, and then focused on China, but with key exemptions. It is unclear what the Trump administration actually wants. This makes predicting outcomes even harder. With uncertainty the only real certainty, the global – especially the US – economy is the main casualty. But so, increasingly, is the US’s leadership of the global financial system. Spotlight: The US dollar is facing testing times, but the real test is still to come. Despite the pressures it is facing, we still see no viable alternative.
Key views Global Monthly April 25
US tariffs surprised even our pessimistic expectations, and despite the 90 day reprieve for the biggest rises, significant tariffs remain in place. The US has focused chiefly on China, as we had long expected, but the eurozone (and the rest of the world) are still hard hit – by both tariffs and the policy uncertainty. Interest rate cuts and other forms of policy support are a cushioning factor in the eurozone and China, while in the eurozone specifically, defence spending, and in Germany new infrastructure spending will support growth in 2026. Global trade and growth are also initially benefiting from a frontloading of US imports ahead of tariff rises. Still, the nascent recoveries in domestic demand in the eurozone and China face downside risks from weaker confidence, while in the US, demand will be hit by the tariff shock to real incomes. Inflation in the US is expected to reaccelerate, but to fall below target in the eurozone. This is likely to drive a divergence in Fed & ECB policy, with Fed policy staying on hold until late 2026, and the ECB continuing to cut rates.
Dovish ECB tone suggests more cuts to come
The ECB cut its key policy rates by 25bp as was widely expected.
The Week Ahead - 14 - 18 April 2025
These are the Key Macro Events for the upcoming week.
One week later - Reversal Day
Reciprocal tariff pause limits downside risks, but growth shock still significant
ECB to cut rates at next four successive meetings
We expect the ECB to cut its key policy rates by 25bp at next week’s Governing Council meeting.
Tariffs risk recession - a forecast update
President Trump announced sweeping ‘reciprocal’ tariffs based on the size of the bilateral trade deficit. We expect both the US and the eurozone to slow sharply and only just skirt a recession, while the US will also have to deal with higher inflation. Monetary policy divergence is likely to re-emerge as a theme, with the ECB cutting rates further but the Fed remaining on hold. Fiscal stimulus should help drive a eurozone recovery in 2026, but growth improvement in the US next year will be more tepid.