Real GDP growth in the Netherlands is forecast to pick up to 1.3% in 2025, driven by domestic demand and despite the US tariffs weighing on trade. Substantial wage growth and the resulting expansion of real disposable income is expected to drive a strong increase in private consumption. The US tariffs on the other hand are projected to reduce export growth. In 2026, GDP growth is set to come down to 1.2% as the negative impact of decreased trade and high uncertainty persists. Growth in domestic demand is set to moderate because of the increased uncertainty and somewhat lower real wage growth. The government deficit is forecast to increase to 2.1% in 2025 and to widen further in 2026.
| Indicators | 2024 | 2025 | 2026 |
|---|---|---|---|
| GDP growth (%, yoy) | 1,0 | 1,3 | 1,2 |
| Inflation (%, yoy) | 3,2 | 3,0 | 2,0 |
| Unemployment (%) | 3,7 | 3,9 | 4,0 |
| General government balance (% of GDP) | -0,9 | -2,1 | -2,7 |
| Gross public debt (% of GDP) | 43,3 | 45,0 | 47,8 |
| Current account balance (% of GDP) | 10,0 | 10,2 | 10,6 |
Domestic demand to drive economic growth
Wage growth in the Netherlands accelerated to well above 6% in 2024 and is forecast to remain robust in 2025. This is set to improve households’ real disposable income by more than 3% in 2025 and drive strong growth in private consumption. Domestic demand is further supported by an ambitious public investment agenda in, among others, the areas of defence, the green transition and the housing market. At the same time, economic uncertainty has increased substantially because of the US tariffs and the potential retaliatory actions by trading partners. This uncertainty is expected to affect business investment spending while consumers are assumed to slightly increase their precautionary savings.
The imposition of US tariffs is also projected to lower both export and import growth in 2025. With about 5% of total Dutch goods exports going to the US, the negative impact of the tariffs on total trade is estimated to be relatively small. However, certain sectors, such as the (relatively large) steel industry and the machinery and vehicle sectors, are set to be disproportionately affected. Overall, real GDP growth in 2025 is forecast at 1.3%.
In 2026, real GDP growth is forecast to come down to 1.2% as the negative impact from the tariffs and increased uncertainty persist while growth in domestic demand slows down somewhat.
Labour market tightness is easing somewhat
The number of vacancies well exceeded the number of unemployed in the past three years, but this ratio has gradually become more balanced and reached parity in the first quarter of 2025. Employment growth has been slowing down in recent months, and the unemployment rate has increased from 3.6% in mid-2024 to 3.8% in early 2025. Going forward, the slowdown in employment growth is set to result in a marginal pick up in unemployment from 3.7% in 2024 to 3.9% in 2025 and 4.0% in 2026. Nominal wage growth reached 6.4% in 2024 and is expected to remain elevated going forward, though slowly easing to 5.1% in 2025 and 3.7% in 2026.
Inflation remains relatively high
HICP inflation in the first quarter of 2025 was 3.3%, higher than a year earlier (3%). The relatively high inflation in the Netherlands is caused by high services and processed food inflation. Strong growth in nominal wages and rental prices drove the increase in services inflation, while an increase in excise duties on (among others) tobacco led to a surge in processed food price inflation. As wage growth remains substantial in 2025, services inflation is projected to only come down gradually. At the same time, processed food inflation is also expected to remain elevated, only coming down more substantially as of mid-2025 when the effects of last year’s tax increase dissipate. At the same time, energy price futures signal a decrease in oil, gas and electricity prices. Overall, annual HICP inflation is forecast at 3.0% in 2025 and 2.0% in 2026.
Government deficit to widen on the back of tax cuts and increased spending
The general government deficit increased to 0.9% of GDP in 2024, up from 0.4% in 2023. The general government balance was affected by compensation payments to taxpayers following a court ruling invalidating the wealth tax based on assumed rather than actual returns.
In 2025, the deficit is set to increase to 2.1%. On the revenue side, this is driven by structural cuts in personal income taxation, with a budgetary impact of 0.3% of GDP as of 2025. At the same time, expenditure is projected to grow as public investments are expected to further increase. Higher-than-expected spending due to wage and price increases as well as social benefits also increase the deficit while the shifting of funds that are likely not spent in 2025 to later years has the opposite effect.
The government balance in 2026 is set to be temporarily affected by a reform of the military pension system that requires a transfer of approximately 0.7% of GDP from the government to a private pension fund. Increases of the VAT rates for accommodation services as well as limiting the indexation of personal income tax brackets are expected to contribute to a moderate increase in revenue in 2026, although not sufficient to compensate for the increase in spending. The deficit for 2026 is forecast to reach 2.7%.
The general government debt continued its downward trend and fell to 43.3% of GDP in 2024. However, higher deficits thereafter are expected to increase the debt ratio to 45.0% in 2025 and 47.8% in 2026, still below the euro area average.