DNB calls for stronger Netherlands and resilient Europe

The DNB Executive Board's outlook highlights the urgent need to strengthen the Dutch economy and a more resilient European Union amidst global uncertainties.

Scenarios prepared by DNB indicate that, assuming unchanged policies, a sharp climb in gas and oil prices due to the war in the Middle East could significantly increase inflation in the Netherlands, though less severely than during the 2022 energy crisis.

Economic growth could considerably slow down in a severe scenario.

Higher energy prices would also negatively impact disposable incomes, with lower-income households being hit hardest.

The economic impact on the Netherlands heavily depends on the duration of the conflict and damage to production infrastructure and exports in the Middle East.

Persistently elevated energy prices risk second-round effects, leading to more persistent high inflation.

Should such effects threaten the ECB's 2% medium-term inflation target, the ECB stands ready to raise its policy interest rates to prevent this, demonstrating its commitment to price stability.

Strengthening the Dutch economy's resilience requires a robust European economy.

The EU single market, a vital engine and buffer, remains incomplete after 33 years, hindering economic expansion.

Member States could significantly benefit from removing unnecessary regulatory and administrative burdens and trade barriers.

Much of the EU's potential remains untapped due to differing national regulations, such as varied requirements for supermarket labels.

A larger, integrated market for venture capital is also crucial, as fragmented financial markets cause promising young companies to leave the EU despite substantial household savings.

This underscores the need for enhanced cooperation.