At the end of last year, the Dutch economy turned out to be stronger than expected. In the last three months of 2022, the economy grew by 0.6 percent, after a small contraction in the previous quarter. “Growth is everywhere,” says CBS economist Peter Hein van Mulligen. Since the economy has not contracted for two quarters in a row, a recession has not materialised.
In recent months, there have been many fears of a recession, which would indicate that companies and consumers will earn less for a longer period of time. Because the economy contracted by 0.2 percent in the third quarter of 2022 and inflation rose to above 10 percent in the fall.
“That made the Dutch insecure. The fact that the 0.6 percent growth in the last quarter has now averted the recession helps against that uncertainty,” says Van Mulligen. According to him, many things contributed to the good growth figure. “Construction, exports and consumer spending,” sums up the chief economist.
“We even seemed to save a little less and therefore also spend more.” This was especially noticeable in December. In that month alone, consumers spent 9.9 percent more than a year earlier. “And that’s adjusted for inflation.” The economist thinks that purchasing power support measures and energy compensation from the government have “undoubtedly helped”.
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Two strong years in a row
“We don’t have to gloom,” says Van Mulligen. Over the whole of 2022, the economy grew by 4.5 percent. After it had already grown by 4.9 percent in 2021. “Such strong growth two years in a row, you don’t see that often.” These are therefore the highest figures since the turn of the century.
The economist also points out that the Dutch growth figure of 0.6 percent is a lot more positive than the 0.1 percent growth in Belgium and France and the contraction of 0.2 percent in Germany.
Inflation will remain high
The extra spending and extra demand may well keep inflation higher. Van Mulligen: “Because the classic economic idea is that you have to accept a recession in order to lower inflation. Declining demand puts less pressure on prices. But inflation will remain just as high for the time being due to the indirect effect of higher energy prices .”
Inflation was already 7.6 percent in January 2023. The percentage is a lot lower than in the last months of 2022, but still very high.
Favorable labor market inspires confidence
De Nederlandsche Bank (DNB) recently forecast economic growth of 0.8 percent in 2023. The central bank expects the economy to stabilize, supported by government policy to compensate households for high energy prices.
Whether the fear of economic contraction is completely off the table? “The biggest fear is over, but an accident is in a small corner. What gives confidence is that the labor market is in very good shape,” Van Mulligen refers to the tightness and low unemployment.
Kaag: ‘No recession is reassuring’
Minister of Finance Sigrid Kaag calls the growth figures “reassuring” in a response. The fact that the Netherlands scores slightly better than neighboring countries is due to government policy, she says. “I deduce from that that the government has also contributed.”
There is “not just sunshine” remarks Kaag. “Inflation remains high and interest rates have risen,” she cites as an example. “We now have to start thinking carefully about phasing out the support measures,” she refers to purchasing power support and the price ceiling for gas and electricity.