Weak quarter masks strength of Dutch recovery

According to the preliminary estimate, economic growth slowed down to 0.1% q-o-q in the second quarter of 2015, after an increase of 0.6% in the first quarter. The second quarter's growth rate was suppressed by the reduction of gas production. Earlier this year the government decided to cut the maximum allowed gas production from the Groningen field to 30 billion cubic meters for 2015 as a whole, as a response to earthquakes in the area. Much of the downward adjustment of gas production seems to have occurred in Q2, with the mining sector subtracting 0.5%-points from GDP growth. 

On the spending side, imports of gas were higher than normal and exports were lower, causing a negative contribution to GDP growth from net trade. However, GDP growth remained positive in the second quarter, due to a strong contribution from housing investments, as well as more limited increases in private consumption and business investment. 

Despite sluggish growth in Q2, the underlying economic recovery is well on track. Domestic spending is improving faster than expected at the start of this year. According to the latest forecast GDP will increase by 2.2% this year. With the negative effect from lower gas production disappearing in 2016, GDP growth is expected to accelerate to 2.7%. With a recovery in domestic demand now clearly underway, downside risks to this forecast can be found primarily in external developments. An unexpected further slowdown of the Chinese economy, renewed unrest surrounding Greece, and the resulting stress in financial markets could dampen the growth forecasts.