De Nederlandsche Bank’s Executive Board published an outlook alongside its Annual Report 2025 arguing that the Netherlands should strengthen its economy in tandem with a more resilient and autonomous European Union. It highlights that recent escalation of the war in the Middle East increases the risk of higher inflation and weaker growth in the Netherlands through higher gas and oil prices, while stressing the need for stable inflation and sound public finances. DNB scenario analysis, assuming policies remain unchanged, indicates that a sharp rise in energy prices could lift Dutch inflation significantly, though less than during the 2022 energy crisis, and that growth could slow considerably in a severe scenario. The impact depends on the duration of the conflict and damage to production infrastructure and regional oil and gas exports, with persistently higher energy prices feeding into other prices and wages and raising the risk of second-round effects and more persistent inflation. The scenarios are not projections and do not include a monetary policy response, but DNB notes that if second-round effects threaten the European Central Bank’s medium-term 2% inflation target, the ECB would respond by raising policy rates. On structural policy, the outlook calls for further deepening of the European Union single market by removing unnecessary regulatory and administrative burdens and trade barriers and reducing fragmentation in financial markets, including by expanding the market for venture capital, against the backdrop of EUR 10 trillion in household savings across Europe. For the Netherlands, it says labour productivity growth needs to rise to more than 1% per year on average from the current 0.5%, and points to bottlenecks including nitrogen pollution, an overloaded energy grid, housing market constraints, underinvestment in education and research, and an outdated tax and benefits system. On fiscal policy, it urges keeping the budget deficit below 3% of gross domestic product and cautions against treating remaining headroom under that limit as discretionary space, suggesting alternative funding such as re-evaluating criticised tax schemes if spending cuts are not feasible.
De Nederlandsche Bank 2026-03-24
De Nederlandsche Bank outlook urges a stronger EU single market and warns Middle East war could raise Dutch inflation and slow growth
De Nederlandsche Bank's Executive Board published an outlook with its Annual Report 2025, emphasizing the need for a stronger Dutch economy and a resilient European Union amid Middle East conflict risks. The report warns of potential inflation and growth impacts from rising energy prices and calls for structural reforms, including deepening the EU single market and boosting Dutch labour productivity. It advises maintaining fiscal discipline by keeping the budget deficit below 3% of GDP and reconsidering tax schemes if spending cuts are not viable.