The impact of the Middle East war on the Dutch economy is largely uncertain: CPB
The Centraal Planbureau (CPB – Netherlands Bureau for Economic Policy Analysis) has warned that the impact of the Middle East war on the Dutch economy remains highly uncertain and could place additional pressure on household spending power in the coming years.
In its spring economic forecast, the CPB said the Dutch economy is expected to continue growing, but at a slower pace. Ongoing geopolitical tensions, including the conflict in the Middle East, could pose significant risks to both inflation and economic growth.
The agency predicts economic growth of 1.4 percent this year, with the purchasing power of an average household also expected to increase by about 1.4 percent. Wages are forecast to rise slightly faster than prices, providing households with a modest improvement in spending power.
However, the outlook becomes weaker next year. The CPB expects no growth in household purchasing power in 2027, and only minimal improvement of around 0.1 percent per year on average until 2030, based on the current economic policies of the coalition government. The agency also expects unemployment to increase during this period.
Limited growth is partly due to higher taxes and rising household costs. These include increases in income tax and higher personal contributions for healthcare, measures introduced to help finance increased government spending on defence.
Public spending is also projected to grow faster than government income, which could push the national budget deficit to more than two percent by the end of the decade.
The CPB stressed that its forecasts do not fully account for geopolitical risks. The ongoing war in the Middle East could drive up global oil and gas prices, which would lead to higher inflation in the Netherlands.
If energy prices rise significantly, inflation this year could reach 2.9 percent instead of the expected 2.3 percent, reducing the already small increase in household purchasing power. In a more severe scenario, inflation could rise by an additional 1.5 percentage points, eliminating the expected improvement in spending power.
The CPB warned that the economic outlook remains highly uncertain and will largely depend on how long the conflict continues and how severely it disrupts supply chains and infrastructure. A prolonged war could increase prices, weaken economic confidence, and further slow the Dutch economy.