Netherlands Economic Outlook 2025: Domestic Strength Meets Global Challenges

Economic Resilience in Challenging Times

The Dutch economy is projected to grow by 1.1% in 2025, with growth expected to remain around 1% in the following years. However, inflation continues to be higher than in other euro area countries.

Domestic Growth Drivers

The economy’s main growth engines are government spending and household consumption. Dutch households maintain a prudent approach, saving approximately 5% of their income for financial security, mortgage payments, or future home purchases.

Wage growth has exceeded 6% in 2024 and is expected to remain robust in 2025, leading to a projected improvement in households’ real disposable income by more than 3% in 2025.

Government Initiatives and Challenges

The government has implemented an ambitious public investment agenda focusing on defence, green transition, and the housing market. However, while the new government is focusing on boosting household purchasing power through income tax cuts, there are concerns about the lack of long-term investments, particularly in education and innovation. The government’s plans for increasing housing supply, reforming the tax system, and meeting international climate goals are ambitious but face funding constraints.

External Challenges and Trade Tensions

The accelerating growth faces threats from geopolitical uncertainty. As a trading nation, the Netherlands remains vulnerable to international developments, including Middle East unrest and the Ukraine conflict. The situation is further complicated by the threat of a trade war with high reciprocal import tariffs, particularly following Donald Trump’s election as US President. These factors could significantly impact the Netherlands’ economic growth.

Future Outlook

The Dutch economy is currently operating at capacity with elevated inflation and facing constraints in several areas including the labor market, housing, emissions space, and electricity grid. To ensure sustainable growth, policymakers must address these bottlenecks and develop strategies aligned with long-term economic vision.