Still mildly optimistic despite inflation and supply chain headwinds
As the 1Q22 figure for GDP was more or less in line with our projections, substantial revisions to our 2022 forecast (2.7%) do not seem necessary for now. Surprisingly, business sentiment has been largely untouched by the Ukraine war, as shown by the survey from the European Commission. In fact, sentiment in commercial services increased significantly in April. Although future declines in business confidence and some wait-and-see behaviour in investment cannot be fully excluded, given the high uncertainty and price pressure surrounding the Ukraine war, the current levels of confidence bode well for a decent expansion of economic activity in the near future.
Consumer confidence, however, has reached a record low, in line with high (energy) inflation expectations that are expected to erode real incomes. This may be the cause of one or several quarters of declining private consumption, as we forecast in our base case. Although this and continuing worldwide supply chain issues might translate into an occasional negative quarterly GDP figure, we do not currently forecast an outright, long-lasting recession for the Dutch economy. For that, demand still simply seems too strong.
Tags The Netherlands Investment GDP Exports Consumption
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