Dutch growth slows

The Dutch economy expanded at a much weaker pace in the first quarter of this year compared to the fourth quarter of 2025 (0.5% QonQ). This was in line with our forecast, as monthly figures had already shown indications of fading momentum. That was especially visible in exports, particularly of machinery and transport equipment. The contribution of net exports (exports minus imports) to economic growth in the first quarter was considerably negative (-0.5pp). While merchandise trade fell by a considerable 1.2%, service trade expanded by 0.8%. Imports stagnated overall.

Household consumption was weak in the first quarter, as it stagnated. Gains in purchasing power were ongoing, with wages outpacing inflation and a large number of pensioners benefiting from higher pension benefits, which was facilitated by the first pension funds moving from the defined benefit system to the defined contribution system. At the same time, consumer sentiment fell at the end of the quarter in response to the war in the Middle East and harsh winter weather limited purchases earlier in the quarter.

Government consumption continued to expand while decelerating its pace to 0.5%, as expected. Yet again, the number of hours worked expanded in public administration and healthcare, as the reduction in public sector employment set out by the new government is not expected to kick in before 2027.

Investment growth was a positive surprise. Expenditures in the machinery category were up, in part likely due to more purchases of military equipment. Also, investment in infrastructure, transport equipment (which may also include military purchases) and intangibles (which include expenditures such as R&D, intellectual property and exploration for new gas fields) increased. Commercial real estate, ICT hardware and housing investment contracted. Inventories fell somewhat, but since the contraction was smaller than in the fourth quarter, the contribution to quarterly GDP growth was positive in the first quarter.

All in all, the results were as we had expected for the first quarter: not buoyant, but positive. Looking ahead, the economy remains somewhat resilient, due to high wage growth and more public spending, especially on defence and healthcare. But the outlook is worsened, compared to a few months ago, by persistent energy market pressures, pushing up inflation, dampening consumption growth and holding back investment in 2026. That means moderate growth.

For now, government policy is not going to change that very much. The Dutch government recently announced a support package of gross €774m (0.06% of GDP) for 2026 and €469m (0.04% of GDP) for 2027, which was – with some amendments – accepted by parliament.

The package contains a lot of small measures. Income support is provided directly via allowances for low incomes and tax-free allowances for commuting costs, but also indirectly via cheap public transport tickets, lower road taxes for vans and trucks and subsidies for replacing old, fuel cars with electric cars. There are also plans for (higher) subsidies for insulation, greening home heating and energy/fertiliser savings for firms and households, and extensions of existing guarantee schemes for solvent firms. Financing measures include (structural) indexation of alcohol taxes, lower tax deductions for working costs (such as employer-financed gym subscriptions) and for self-employed startups, and the use of envelopes of budgeted expenditures that were still unassigned.

While the support package is partially targeted at vulnerable groups such as low-income households that might spend most of the extra money, it also includes higher taxes, cuts to other expenditures and shifts of expenditures planned for later years. This means the net economic impact is probably only slightly positive for 2026. Parliament seems willing to do more, such as lowering the VAT on energy. But for now, the government has signalled that it is not eager to provide more support until conditions worsen.