BUSINESS NEWS FROM THE NETHERLANDS
BUSINESS NEWS FROM THE NETHERLANDS
DNB Calls for Bolder Policy as Middle East War Squeezes Dutch Growth
Executive Board Member Bas ter Weel warns that structural reforms are taking too long, as fresh projections show growth nearly halving this year
DNB Calls for Bolder Policy as Middle East War Squeezes Dutch Growth
Executive Board Member Bas ter Weel warns that structural reforms are taking too long, as fresh projections show growth nearly halving this year
PUBLISHED June 28, 2026
Growth Set to Fall Well Below Pre-War Expectations
According to De Nederlandsche Bank, growth in the Dutch economy is expected to be significantly lower this year than in 2025, largely due to the war in the Middle East. Even before the war broke out, economic growth was already slowing, mainly due to a decline in global trade and stagnant consumption. While GDP growth in the Netherlands stood at 1.8% in 2025, DNB now projects growth of just 0.8% for this year — lower than the 1.2% projected back in December. Growth this year is being driven mainly by government spending rather than the private sector.
A Pointed Warning From the Central Bank’s Leadership
Executive Board Member of Monetary Affairs Bas ter Weel did not mince words in presenting the projections: the structural challenges facing the Dutch economy have been known for some time, yet policy measures to boost the economy’s growth potential are still taking too long to get off the ground. His remark frames the war as an aggravating factor rather than the root cause — the implicit message being that even without the Middle East shock, the Netherlands would still be grappling with a slowing growth trajectory that successive governments have been slow to address through prudent and predictable policy.
Inflation Rises, But the Comparison to 2022 Doesn’t Hold
DNB now projects inflation in the Netherlands at 2.7% for this year — higher than the 2.4% projected in December, but still lower than the actual 2025 figure of 3.0%. Current inflation trends are clearly different from those seen during the Russian invasion of Ukraine in 2022, when gas prices in particular soared and the economy was already overheating. At present, it is mainly oil prices that are rising, and while people feel this at the petrol pump, it has less of an impact on overall inflation, partly because households have been using energy more sparingly since 2022.
Global Trade Squeezed, But AI Demand Offers a Partial Offset
The war in the Middle East and broader geopolitical tensions are holding back world trade growth this year, which also puts a brake on Dutch export growth. However, strong demand for products and services related to artificial intelligence is providing a boost to world trade growth, from which the Netherlands is also benefiting — a notable counterweight that distinguishes this slowdown from a purely negative external shock, even as the net effect on Dutch exports remains constrained.
Global Trade Squeezed, But AI Demand Offers a Partial Offset
The war in the Middle East and broader geopolitical tensions are holding back world trade growth this year, which also puts a brake on Dutch export growth. However, strong demand for products and services related to artificial intelligence is providing a boost to world trade growth, from which the Netherlands is also benefiting — a notable counterweight that distinguishes this slowdown from a purely negative external shock, even as the net effect on Dutch exports remains constrained.
The Severe Scenario: Inflation Could Hit 4.6%
DNB’s two alternative scenarios quantify just how much worse things could get if the Strait of Hormuz remains closed and energy prices stay elevated for longer. In the adverse scenario, economic growth slows slightly, while in the severe scenario the decline is more pronounced, particularly in 2027. Inflation rises in both scenarios, with the greatest impact seen next year under the severe scenario, when inflation could reach 4.6% — significantly higher than the baseline projection. DNB notes, however, that in practice the ECB would likely respond by raising interest rates to ensure price stability, meaning actual inflation may turn out lower than these scenarios suggest.
Three Policy Recommendations for the Government
Alongside its projections, DNB issued a set of explicit policy recommendations. The first is to reduce the Netherlands’ vulnerability to supply chain disruptions, since dependence on fossil fuels remains too high and needs to come down in collaboration with other European countries. The second is to strengthen dynamics in the Dutch business sector, where capital and labour are comparatively often tied up in less productive firms rather than flowing toward more productive ones — phasing out ineffective tax breaks that have kept low-productivity firms afloat for too long is cited as one concrete lever.
A Warning on Fiscal Space
The third and perhaps most pointed recommendation concerns the budget. The public deficit has risen significantly in recent years, and in the coming years the distance to the European 3% public deficit limit will be small. DNB stresses that keeping sufficient distance from that limit is necessary to absorb economic shocks, and that the current geopolitical turmoil makes prudent fiscal policy more essential than ever. Phasing out ineffective tax schemes, the bank argues, would free up funds in the national budget that could in turn help ease the tax burden on labour — a recommendation that ties DNB’s near-term fiscal caution directly to its longer-standing concerns about labour market incentives.
The Severe Scenario: Inflation Could Hit 4.6%
DNB’s two alternative scenarios quantify just how much worse things could get if the Strait of Hormuz remains closed and energy prices stay elevated for longer. In the adverse scenario, economic growth slows slightly, while in the severe scenario the decline is more pronounced, particularly in 2027. Inflation rises in both scenarios, with the greatest impact seen next year under the severe scenario, when inflation could reach 4.6% — significantly higher than the baseline projection. DNB notes, however, that in practice the ECB would likely respond by raising interest rates to ensure price stability, meaning actual inflation may turn out lower than these scenarios suggest.
Three Policy Recommendations for the Government
Alongside its projections, DNB issued a set of explicit policy recommendations. The first is to reduce the Netherlands’ vulnerability to supply chain disruptions, since dependence on fossil fuels remains too high and needs to come down in collaboration with other European countries. The second is to strengthen dynamics in the Dutch business sector, where capital and labour are comparatively often tied up in less productive firms rather than flowing toward more productive ones — phasing out ineffective tax breaks that have kept low-productivity firms afloat for too long is cited as one concrete lever.
A Warning on Fiscal Space
The third and perhaps most pointed recommendation concerns the budget. The public deficit has risen significantly in recent years, and in the coming years the distance to the European 3% public deficit limit will be small. DNB stresses that keeping sufficient distance from that limit is necessary to absorb economic shocks, and that the current geopolitical turmoil makes prudent fiscal policy more essential than ever. Phasing out ineffective tax schemes, the bank argues, would free up funds in the national budget that could in turn help ease the tax burden on labour — a recommendation that ties DNB’s near-term fiscal caution directly to its longer-standing concerns about labour market incentives.
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