The fourth quarter of 2018 saw the Dutch economy growing by 0.5% relative to the previous quarter (qoq). This growth rate was quite a bit higher than in the third quarter, as well as being more substantial than average eurozone growth (0.2% qoq). Overall, the Dutch economy grew by 2.5% in 2018, considerably less than the growth rate of 3% that was achieved in 2017.
Increase in consumption and investments
At 0.5% qoq, gross domestic product (GDP) expanded stronger in the fourth quarter of 2018 than it did in the third quarter (+0.1% qoq). This was mainly attributable to domestic spending. Both private consumption and investment returned to growth, which had halted in the summer quarter when investment in housing even showed signs of slight contraction. At the time, this seemed to mark the end of a period of strong recovery. But these investments too had increased again by the end of 2018.
Government consumption rose as well, while there was hardly any growth to be seen in the previous two quarters, despite the impetus that was predicted in the Coalition Agreement. Overall, the rise in government consumption lagged behind initial expectations throughout 2018.
Greater fall in import growth than in export growth
Both imports and exports contracted (qoq) in the fourth quarter. This was probably due to the growth deceleration in world trade. Statistics Netherlands has also pointed out, however, that the figures were depressed by an enterprise that moved some of its operations away from the Netherlands (for accounting purposes). But this is said not to have an effect on the trade balance. Without this adjustment, exports would probably have seen a slight increase.
Given that the fall in imports was greater than the fall in exports, the contribution to GDP of net exports (exports minus imports) was clearly more positive than in the summer quarter.
Stockbuilding was lower than in the previous quarter, which considerably weighed down growth.
Further cut in growth forecasts for 2019 – to just under 1.5%
All in all, economic growth in the second half of 2018 was lower than in the first half of the year. This development was not unexpected given that various economic indicators had started to drop in the course of 2018. Confidence indicators in the eurozone and in the Netherlands showed a further decline at the end of 2018 and the beginning of 2019. That is why we recently lowered our growth forecasts for the eurozone, to 0.8%. That said, we do not expect a recession. Economic headwinds in the rest of the world will also affect the Dutch economy. One indicator of this is the Purchasing Managers’ Index (PMI) for export orders, which plummeted in January. Although exports continue to rise, the growth rate is lower than what we had expected earlier. Flagging sales prospects outside the Netherlands will also have an adverse effect on investment. We have lowered our growth forecast for the Dutch economy from 2% to just under 1.5%.