Dutch Central Bank Declares Code Orange for the Economy
The DNB presented its annual report, stating that the Netherlands cannot weather the current economic storm alone and must invest in a stronger Europe. Lower-income households face the most pressure.
De Nederlandsche Bank (DNB), the Dutch central bank, has released its annual report with a clear warning about the pressures bearing down on the Dutch economy. The combination of the ongoing Iran war, rising energy prices and US trade tariffs is creating a level of economic uncertainty that DNB says requires a coordinated European response rather than solutions at the national level alone.
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What the DNB is saying
DNB described the current moment as the third time in quick succession that the world has been turned upside down, after the corona pandemic and the energy crisis. The two most urgent challenges it identifies are the threat of a global trade war and the European push to rapidly increase defence spending. DNB argues these are challenges that can only be addressed together within a stronger Europe, without closing off from the rest of the world.
Alongside these immediate pressures, longer-running vulnerabilities remain unresolved, including persistent inflation above target, domestic economic scarcity and lagging European growth.
Where the Dutch economy stands
The Dutch economy grew by 1.7 percent in 2025, stronger than expected. Households spent more thanks to higher wages, and government spending also increased. Despite higher US trade tariffs, world trade held up, partly because companies front-loaded international trade in anticipation of the tariffs.
However, DNB expects growth to slow to around 1.2 percent in 2026 and 1.1 percent in 2027. Inflation is projected to fall from 3.0 percent in 2025 to 2.4 percent in 2026 and 2.3 percent in 2027, but will remain above the European average. The main reason is domestic: demand for goods and services is pressing against the limits of production capacity, pushing prices up.
The government budget deficit is running close to the EU's 3 percent norm in 2026, at 2.9 percent. DNB says new spending must be structurally funded, as ageing will push up healthcare and pension costs while tax revenues from labour decline over time.
The Iran war adds a new layer of risk
The conflict that began on 28 February 2026 has sent energy prices sharply higher, adding a new external shock to an economy that was already navigating trade tensions and high domestic inflation. DNB has noted that the Iran war's disruption to the Strait of Hormuz is adding upward pressure on energy prices and threatening to push inflation higher again, complicating the projected gradual decline.
Who is hit hardest
The strain is not felt equally. In the lowest income group, an estimated quarter of households will be financially vulnerable to energy costs in 2026, defined as spending more than 10 percent of disposable income on energy. While this is an improvement on 30 percent this year and 55 percent during the 2022 energy crisis, energy costs remain a significant burden for lower-income households.
Housing affordability also continues to deteriorate. House prices are projected to rise by around 4 percent in 2026 and 2027. By 2027, only an estimated one in three households will have sufficient income to purchase an average home with a mortgage, compared to nearly one in two in 2019.
What DNB recommends
DNB identifies three steps to strengthen the Dutch economy: reinforce European economic cooperation, as the Netherlands is too small to compete as an independent player in a world of major powers; ensure the government maintains fiscal buffers to absorb future shocks; and address structural bottlenecks such as the overloaded electricity grid, nitrogen restrictions and uncertain policy, all of which are currently discouraging business investment.
DNB warns that if the trade war escalates significantly, with mutual high tariffs between major economies, Dutch growth could come close to a standstill. It is urging the Netherlands and the EU to maintain multilateral, rules-based cooperation and to continue developing the European internal market, which makes the economy less dependent on any single region.
