News Rabobank
'Economy will continue to muddle through for another two years'
It will continue to muddle through with the economy for the next two years. Rabobank economists expect very limited growth of 0,6% next year and 1% in 2024, according to the Economic Quarterly Bulletin published today (December 5).
The slight contraction of the economy in the third quarter will continue into the last quarter of 2022, according to economists. According to the bank, economic growth this year will amount to 4,2%. RaboResearch economist Nic Vrieselaar says in a statement about the limited growth: "There is a shortage of personnel and materials almost everywhere, production capacity is at its maximum. That leaves little room for further growth. At the same time, high inflation and increased interest rates are putting pressure on the spending by consumers and businesses, both in the Netherlands and at major trading partners. Contraction is therefore on the horizon, but the government actually wants to stimulate the economy. Due to these opposing forces, we expect that the Dutch economy will end up in a 'muddling through' position, with neither strong contraction nor strong growth."
Inflation in 2022 to 11,6%
Inflation for 2022 is expected to be 11,6%. For 2023, the bank forecasts an inflation rate of 4,2%. The price cap will reduce the contribution of energy prices to next year's inflation figure, but the prices of other products and services are expected to continue to rise relatively quickly. Vrieselaar: "Producers also saw their costs rise sharply. Not only did they spend more on energy, but also on materials and wages. They pass those costs on to the consumer to a greater or lesser extent." For 2024, the Rabo economists expect inflation to be higher again at 5,9%, partly because the government will probably partially reduce the energy ceiling by then.
In October, the unemployment rate was 3,7%, slightly higher than the record low of 3,2% in April. Unemployment is expected to rise further in the coming years, to a still historically low 4,1% in 2023 and 4,5% in 2024, according to RaboResearch.
Fall in consumer spending expected
Spending rose slightly in the third quarter, but economists expect private consumption to be 0,2% lower on average next year than this year. "The low unemployment ensures that consumers are not too tight on their purse strings." Business investment is higher this year than in 2021, but RaboResearch forecasts a contraction of 2023% in 0,3, followed by a recovery in 2024 with an increase of 0,8%.
RaboResearch also expects a short-lived economic downturn in important trading partners, such as Germany, the United States and France, in many cases somewhat greater than ours. The high inflation there also restricts consumer and business spending, which has an impact on their demand for Dutch goods and services. Dutch exports are therefore expected to grow less rapidly in the next two years than in recent years: 2023% growth in exports is expected in 1,4 and 2024% in 2,4.
Government consumption is expected to increase strongly by 2023% in 2,3 and by 2024% in 2,6. Nevertheless, the Rabo economist is wary: "The government is also suffering from the shortage on the labor market. The nitrogen dossier can also be an obstacle for infrastructure projects and the rising interest rates may mean that the state has less room to spend than expected." The economic contraction in the third quarter was largely due to a 2,4% decline in investments in the construction and renovation of houses. Due to the rise in interest rates, falling house prices and the declining number of home sales, housing construction is falling and, according to the Rabo economists, this will continue to put the brakes on economic growth. Housing investment is expected to fall by 2023% in 5,5 and by 2024% in 4,5.
Linda van Eekeres
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