The Dutch economy

Economic outlook uncertain amidst record-breaking inflation

By early 2022, the economy had hardly recovered from the COVID-19 pandemic when the war in Ukraine increased uncertainty in the world. The prices of gas, oil, and wheat increased strongly, driving up inflation rates across Europe and in the Netherlands specifically. Economic growth slowed down during 2022 to an estimated 4.2%. In Q4 of 2022, the year-over-year growth was only 2.0%. There is a high likelihood of a recession in the second half of 2023; economic growth is estimated at 0.4% for the year (ING, 2022).

Inflation reached 10.0% in 2022, compared to 2.7% in 2021 (CBS, 2023). At its peak in September, inflation reached 14.5%. In December, inflation was down to 9.6% as a result of decreasing energy prices. The rising interest rates are predicted to bring down inflation to 4.3% in 2023 (CPB, August 2022). The ECB increased interest rates by a total of 250bps between July 2022 and December 2022 from -0.5% to 2.0%. Given the persistant high inflation, it is expected that the ECB will further increase interest rates in the quarters to come. This increase is likely to be substantial again.

As a result of these developments, consumer confidence reached a historic low in 2022. The lowest point was reached in September 2022 at -59. By December, consumer confidence had improved slightly to -52. The unemployment rate remained very low at 3.6%. The labour market is characterised by a large number of vacancies and a shortage of people to fill those vacancies. According to the CPB, the unemployment rate will increase slightly going forward. 

On January 1, 2023, the transfer tax for real estate investors increased from 8% to 10.4%, which will have a negative effect on the value of real estate. The majority of the increase in transfer tax will be discounted into the price of real estate.

Figure 7: Macro economic indicators

^{In percentage (left axis) / Index (right axis)}

^{Source: CBS, Q4 2022; ING, Q4 2022}