As year 2025 comes to an end, this article aims to give the latest update on the economic forecast for the Netherlands in the upcoming year. The Dutch economy is expected to navigate 2026 with moderate growth, persistent inflationary pressures, and a widening fiscal deficit as both domestic and global uncertainties weigh on performance. While strong household income and steady government spending continue to support activity, structural challenges (ranging from trade headwinds to investment bottlenecks) are expected to constrain momentum in the year ahead.

Growth Slows as Uncertainty Persists

Real GDP growth in the Netherlands is projected to ease from an estimated 1.7% in 2025 to 1.3% in 2026. The deceleration reflects a combination of subdued private investment, continued global economic uncertainty, and domestic constraints, including nitrogen-related regulations and congestion in the electricity grid.

Despite these challenges, household spending is expected to remain the primary engine of growth. Nominal wages, which grew by more than 6% in 2024, are set to remain elevated throughout the forecast period, supporting real disposable income. Private consumption is forecast to grow by 1.6% in 2025 and continue underpinning activity in 2026. However, low consumer confidence is prompting households to increase precautionary savings, keeping spending growth below income growth.

Public investment (particularly in defence, housing, and the green transition) remains a stabilising force for the economy. Private investment, by contrast, is likely to stay muted outside of the construction sector, reflecting ongoing uncertainties in global markets and persistent domestic bottlenecks.

Trade Headwinds and Competitiveness Pressures

Although US tariffs have not directly hit the Dutch economy (only 5% of Dutch goods exports go to the United States) the Netherlands still feels the impact of weaker global trade. The broader slowdown in international demand is expected to weigh on exports in 2025–26.

At the same time, domestic cost pressures are beginning to erode competitiveness. Strong wage growth and high energy prices have not been matched by corresponding productivity gains, putting upward pressure on unit labour costs. With domestic demand expected to remain robust, imports are forecast to outpace exports over the next two years, resulting in a negative contribution from net trade.

A gradual improvement in global conditions and lower interest rates are expected to help lift GDP growth back to 1.7% in 2027.

Labour Market: Still Tight, but Softening

The Dutch labour market, one of the tightest in Europe, is showing early signs of easing. The unemployment rate rose to 4.0% by September 2025, up from 3.6% in mid-2024. The increase is driven more by rising labour supply than by job losses.

Employment growth is likely to slow further, pushing unemployment up to 4.1% in 2026 and 4.3% in 2027. Even so, labour shortages are expected to persist, helping sustain wage growth—albeit at a gradually declining pace. Nominal wages are forecast to rise by 5.2% in 2025, 3.8% in 2026, and 3.1% in 2027.

Inflation Remains Elevated

Inflation remains a key concern heading into 2026. HICP inflation averaged 3.3% in the first half of 2025, driven by rising costs in services and processed food. Strong wage increases, higher rents, and excise duty hikes have kept price pressures elevated.

Inflation is expected to moderate gradually as wage growth cools, though new cost pressures are set to emerge. A higher VAT rate on accommodation services, effective January 2026, will push services prices upward. As a result, inflation is projected at 3.0% in 2025, softening to 2.5% in 2026 and reaching 2.1% only by 2027.

Fiscal Position: Deficit Widens Before Improving

The Dutch government faces a period of fiscal pressure in the mid-2020s. The budget deficit is expected to rise to 1.9% of GDP in 2025, up from 0.9% in 2024, largely due to structural personal income tax cuts.

In 2026, the deficit is forecast to widen further to 2.7%. This increase is driven in part by a one-off transfer (equivalent to around 0.7% of GDP) associated with a reform of the military pension system. Additional spending on defence, from 1.7% of GDP in 2025 to 1.8% in 2026, will also weigh on the budget.

Although higher VAT revenues and modest adjustments to income tax brackets will boost revenue in 2026, they will not fully offset the rise in expenditure. By 2027, however, the deficit is expected to narrow to 2.1% as the temporary impact of the pension reform fades.

Fiscal policy is expected to be slightly expansionary in 2025 before turning broadly neutral in 2026–27.

Public Debt Gradually Rises

Public debt, which stood at 43.7% of GDP in 2024, is projected to rise steadily due to persistent deficits. Debt is expected to increase to 45.2% in 2025, reach 47.9% in 2026, and stabilise at around 48.1% in 2027—still well below the EU’s 60% benchmark.

References 

European Commission. (2025, November 17). Economic forecast for Netherlands. Retrieved from European Commission: https://economy-finance.ec.europa.eu/economic-surveillance-eu-member-states/country-pages/netherlands/economic-forecast-netherlands_en

Photo:
https://tse2.mm.bing.net/th/id/OIP.QFTdKhiD4D-GQrqS5xyNgAHaE7?cb=ucfimg2&ucfimg=1&rs=1&pid=ImgDetMain&o=7&rm=3