Fitch maintains 0.6% expansion forecast for Dutch economy in 2024

The contraction followed an expansion of 0.3 per cent in Q4 2023, and marked a return to the negative growth seen in the first three quarters last year.

On a quarterly basis, growth was primarily driven by private consumption and the first positive gross fixed capital formation print after two consecutive quarters of contraction, while net trade made a small negative contribution.

Notably, headline growth has also been negatively affected by the reduction in inventories equal to 0.7 per cent of gross domestic product (GDP). This reduction is a temporary phenomenon likely brought about by the combination of the sizable contraction in industrial production by 3.8 per cent QoQ and strong demand from the relatively robust private consumption, Fitch said in a release. 

Fitch maintains its view that the gradual recovery of private consumption will be the main driver of growth this year.

Despite the weak economic growth last year, the Dutch labour market remains relatively tight with unemployment consistently printing below its 10-year average of 5 per cent and most recently at 3.6 per cent in March. 

The positive impact of the consistent labour market tightness is further reinforced by favourable developments in the inflation outlook, Fitch noted.

The company maintains its forecast for net exports to emerge as an overall drag on headline growth in 2024. It expects the backdrop for Dutch exports to improve but nevertheless remain challenging this year.

The risks to our growth outlook are broadly balanced. The risks stem largely from the high level of uncertainty on the Dutch political scene following the November 2023 general election.

Fibre2Fashion News Desk (DS)