The International Monetary Fund (IMF) has warned that the Dutch economy faces lower growth and higher inflation from spillovers linked to the Middle East war. Higher energy prices will weaken growth and push inflation above target, impacting households and businesses.
This renewed economic test comes despite the economy entering 2026 in a position of relative strength. The conflict's impact creates a more uncertain outlook, with energy prices, weak confidence, and capacity constraints weighing on activity. Household budgets will tighten, and firm costs will increase.
For Ghana, this international economic volatility adds another layer of complexity to its own economic management. Ghana is a net importer of oil, so sustained high global energy prices directly impact its balance of payments and domestic fuel costs. The Bank of Ghana closely monitors international commodity prices as a key factor in its inflation targeting strategy. Ghana’s economic forecasts, including those for GDP growth and inflation, often incorporate assumptions about global energy market stability. Persistent global inflation risks could constrain Ghana's ability to reduce interest rates or stabilize its currency, the Ghana Cedi.
Fabian Bornhorst, who led the IMF team during its Article IV Consultation from May 4 to May 13, 2026, delivered this assessment. The team noted that while the Dutch economy showed resilience in 2025, rising energy prices will dampen external demand. This will notably impact private consumption and investment.
In a baseline scenario, the IMF projects Dutch economic growth to moderate to 1.0% in 2026. Growth is expected to reach 1.3% in 2027. However, the Fund warns that risks are significantly tilted to the downside. A severe scenario, where oil and gas prices rise by an additional 40% and 100% respectively, could halve growth. This severe scenario would apply on average over 2026 and 2027.
Inflation is also expected to rise, with headline inflation projected at 2.9% in 2026. This increase is primarily driven by higher energy prices and their subsequent pass-through to other goods and services. Inflation is expected to remain elevated at around 2.5% in 2027 and 2028. It will only gradually converge to the 2% target thereafter. A more persistent energy shock could intensify second-round effects, leading to higher inflation feeding into wage agreements. Firms would then pass rising labour costs into prices. In the IMF’s severe scenario, inflation could exceed the baseline by 0.8 percentage points in 2026. It could further exceed the baseline by 2.3 percentage points in 2027.
The IMF endorsed the Dutch government's planned policy response to higher energy prices. It described the approach as well-targeted and fiscally restrained, designed to preserve price signals. The Fund recommended focusing support on vulnerable households, energy-intensive small and medium-sized enterprises, and housing-related energy investment. It cautioned against broad measures like price caps or VAT reductions. These interventions would be fiscally costly, weaken energy conservation incentives, and be difficult to unwind.
The Fund will keep fiscal policy plans well calibrated to slowing growth, provided energy-related risks are managed prudently. Ghana’s Ministry of Finance also faces similar decisions regarding targeted social protection versus broad-based subsidies during times of economic stress. Prudent management of GHS 4.2 billion in energy sector arrears, for example, shares parallels with the Dutch government's careful fiscal approach.
The IMF highlighted political and implementation risks that could make delivering coalition agreements difficult. These agreements propose higher defence spending, innovation-led growth reforms, and measures to ease structural bottlenecks. The Dutch government plans to increase defence spending to 3.5% of GDP by 2035. However, uncertain parliamentary majorities could delay or dilute these plans. This could potentially see fiscal deficits drift towards 3% of GDP. Medium- and long-term fiscal sustainability will depend on progress with healthcare and tax-funded pension reforms.
The IMF also urged the Netherlands to rebalance its tax revenue package away from labour taxation. Higher taxes on work could reduce labour participation and increase wage costs. The Dutch economy already faces ageing pressures and tight labour markets. Structural reforms are also critical, as weak investment and binding capacity constraints continue to weigh on the Netherlands’ medium-term outlook. Electricity grid congestion, nitrogen-related permitting uncertainty, labour shortages, and housing constraints limit investment and slow productivity growth. This situation mirrors Ghana’s ongoing challenges with infrastructure development and attracting foreign direct investment.