De Nederlandsche Bank urges targeting Netherlands defence spending increase at dual-use technologies and European specialisation

De Nederlandsche Bank published an analysis of how the Netherlands’ planned rise in defence spending could affect the economy, arguing that additional outlays should be directed to areas where the country already has an edge and aligned with European-level coordination. It also warns that, in the short term, increased defence spending is likely to result mainly in higher imports and rising labour costs, limiting any immediate growth effects and increasing inflation risks given the tight labour market. The Netherlands has pledged to spend at least 3.5% of gross domestic product on defence until 2035, ramping up annually towards an additional EUR 19 billion by 2035. The analysis concludes the Netherlands is less well placed to manufacture defence goods with no civilian application, such as tanks and ammunition, and would contribute more efficiently by focusing on “dual-use” domains where it is strong, including semiconductors and certain types of microscopes, and by leveraging expertise such as in the maritime sector to reduce import dependence. Trade data cited also indicate that sectors supporting defence production rely heavily on foreign components, meaning domestic procurement would still channel spending abroad unless supply chains are relocated, reinforcing that expanding European defence production is a long-term effort and requires predictable demand from government as a customer.