News Rabobank
'Ukraine war also affects Dutch economy'
The war in Ukraine also affects the Dutch economy. This will probably grow less rapidly this year and next, Rabobank states in its Economic Quarterly Bulletin. The banking economists expect economic growth of 3,1% in 2022 and 1,2% in 2023.
The slowdown in growth is partly due to the fact that the prices of food and energy continue to rise as a result of the war and also remain high for longer. Sanctions against Russia and voluntary boycotts of companies also slow the growth of Dutch exports. Strongly increased prices are expected to remain high for longer due to the war in Ukraine. This reduces the purchasing power of consumers and the investment opportunities of companies. For 2022, Rabobank assumes inflation of 5,5% and of 2,9% in 2023. Under more severe sanctions, this could rise to 7,5% in 2022 and 5% in 2023.
"Inflation also erodes consumers' purchasing power, leaving them with less to spend. The fear and economic uncertainty associated with the war and higher commodity prices can also seriously affect the willingness to buy and invest among individuals and companies," said RaboResearch. economist Nic Vrieselaar.
Developments in Eastern Europe can quickly catch up with these prospects, says Vrieselaar. Rabobank has taken into account higher energy prices for this estimate, but not energy shortages. Rabobank assumes that prices of grain, fertilizer, certain metals, oil and gas will rise sharply and that it will take at least several quarters before their prices fall again. For this estimate, the bank has assumed that strict corona measures will no longer be imposed.
RaboResearch economist Nic Vrieselaar: "Even stricter sanctions could cause trade with Russia and Ukraine to fall even more sharply and that the prices of oil, gas, grain and other commodities rise further than they already are. This will affect business investment first. and household consumption." In addition, the increased uncertainty is driving up risk premiums, putting further pressure on business investment. "Trade with foreign countries is also expected to suffer as a result, partly because consumers and companies in other countries are forced to be more frugal, causing the demand for Dutch goods and services to decrease. One scenario will stagnate in the coming quarters and even contract somewhat in the third quarter."
Household consumption main driver of the economy
The bank assumes that consumers will spend 4,9% more this year than in 2021, making household consumption the main driver of economic growth this year. For 2023, Rabobank expects consumption growth to moderate slightly and household spending will be 0,9% higher on average. In business investment, the bank expects an increase of 5,1% this year and 1,1% in 2023.
The bank considers a downward risk to consumer spending and business investment 'even higher price increases than we currently foresee, or even shortages of oil, gas and other commodities'. "For example, due to stricter sanctions against or from Russia or a persistent disruption of international supply chains. The country is a relatively small trading partner for the Netherlands, but for some raw materials and foodstuffs – such as oil, gas, grain and certain metals – are (one of) the most important suppliers. They are also goods that almost every consumer and producer needs."
Linda van Eekeres
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