The Dutch economy officially entered into a recession after posting two straight falls in quarterly gross domestic product figures. GDP volume fell by 0.4 percent in the first quarter of the year, followed by a dip of 0.3 percent in the second quarter, according to the national data office Statistics Netherlands (CBS).
“The Dutch contraction of 0.3 percent is striking compared to the economic development in neighboring countries. In France and Belgium, the economy grew by 0.5 and 0.2 percent respectively in the second quarter of 2023 compared to the previous quarter,” CBS said. In Germany, GDP data was flat, the same as the European Union as a whole. “However, compared to the fourth quarter of 2019, before the coronavirus pandemic, the Dutch economic recovery is stronger than that of neighboring countries and the EU average.”
The contraction is mainly due to fewer exports and lower household consumption, the stats office said. The export of goods and services dropped by 0.7 percent in the second quarter compared to quarter one of 2023. The import of goods and services increased by 0.5 percent. “As a result, the trade balance made the most negative contribution to the contraction in the second quarter,” CBS said. Household consumption fell by 1.6 percent.
Investments in fixed assets increased by 1.3 percent in the second quarter, primarily due to more investments in means of transport and machinery. Residential investment fell. Government consumption grew by 0.7 percent.
Over half of Dutch industries saw the added value – the difference between production and consumption of energy, materials, and services – fall in the second quarter of 2023 compared to the first quarter. The decline was most substantial in mineral extraction, but the trade, catering, transport, and storage sector made the largest negative contribution to the economic development. Energy companies’ added value increased the most.
The Dutch economy has now fallen for three of the last four quarters. A 0.2 percent contraction was reported in the third quarter of 2022, but the economy grew by 0.6 percent in the last three months of the year thanks to consumer spending.
Many economists thought the Netherlands could avoid falling into a recession, with experts at various banks reaffirming that position this week. Overall, the country’s economy has been considered to be both struggling and resilient, analysts said at various times this year.
The Dutch economy fell into a significant recession during the first half of 2020 following the outbreak of the coronavirus, with a record-breaking quarterly contraction of 8.5 percent between April and June. Prior to that, the last major recession started in 2008 and lasted for six straight quarters. There were also minor recessions in 2011 and 2012.
Caretaker Minister Mickey Adriaansens of Economic Affairs said that the mild recession would require the Cabinet to make the right decisions in the run-up to Budget Day. “At the same time, as a Cabinet, we must ensure sufficient purchasing power for consumers and a stable business climate,” she told NOS. “Stability and predictability are now vital, so we must be careful not to disrupt the economy and also with increasing taxes.”
Adriaansens wants to continue focusing on tackling the tight labor market and invest in improving the Netherlands’ international competitive position. She is also looking at intervening in “unnecessary price increases,” according to the broadcaster.
The caretaker Rutte IV Cabinet will meet on Friday for the first time after the summer break.
