A long war in Ukraine could see headline inflation in the Netherlands hit 10.8% this year and 5.1% in 2023 according to a “severe’ scenario outlined by the Dutch central bank Monday, while the country could slip into recession if Russia cuts off energy supplies to Europe. HICP inflation is projected to average 8.7% this year, before falling to 3.9% in 2023 and 2.4% in 2024 under the DNB's baseline scenario.
Core inflation is projected at 3.9% in 2022, falling to 2.6% in both 2023 and 2024.
However, if Russia’s invasion of Ukraine be prolonged or takes what the bank describes as an “even more serious course than expected,” greater uncertainty, higher energy and food prices and further falls in global trade are likely to further push up prices, while shaving 0.8% off GDP in 2022. Growth would then fall by 0.4% in 2023, recovering to a lowered forecast 1.3% in 2024. Were Russia to cut energy supplies to Europe, residual growth of 0.4% in 2022 would be followed by a 1.5% contraction in 2023, returning to 3.0% growth the following year.