ABN Amro lowers growth expectations for the Dutch economy due to the war in the Middle East. According to the bank, the war and sharply increased energy prices are causing pessimism among consumers and reluctance to spend money. Business confidence is also affected by the conflict.
ABN Amro now expects growth of 0.9 percent this year. Previously, growth of 1.5 percent was expected. For next year, the bank now predicts an increase in gross domestic product (GDP) of 1.1 percent. That was previously 1.2 percent. According to ABN Amro, there was a weak start to the year for the Dutch economy. On a quarterly basis, this was a plus of only 0.1 percent. According to the bank, this, together with high energy prices, leads to the downward adjustments.
Energy prices will remain high for some time
ABN Amro further says that energy prices will remain high for some time to come, even if the Strait of Hormuz is quickly reopened to shipping. According to the bank, it will take time before energy production and logistics chains are fully restored and supply and demand on the energy market are back in balance.
Inflation expectations are actually being raised. Inflation would now average 3.1 percent this year and 2.7 percent next year. This was previously expected to be 2.9 and 2.2 percent respectively. The higher energy prices are already reflected in sales prices, which means that price pressure is increasing.
Due to higher inflation, the European Central Bank (ECB) will increase interest rates, the bank said. ABN Amro anticipates an increase of a quarter of a percentage point to 2.25 percent at the upcoming ECB meeting next Thursday. Another interest rate increase is expected in July to 2.50 percent.
According to the bank’s economists, the Dutch economy remains resilient, including low unemployment. According to ABN Amro, most households and companies are also financially resilient.