News from Switzerland, the Netherlands and the Nordics: December 2024
Welcome to my latest newsletter. In this edition, we cover key developments from Switzerland, the Netherlands, and the Nordic region. Switzerland's inflation shows slight increases, raising expectations around potential SNB rate cuts. Meanwhile, the country faces growing criticism over its climate policies. In the Netherlands, economic growth exceeds forecasts, and house prices continue to rise. In the Nordics, Sweden’s central bank takes action in response to recession concerns, contrasting with Norway's more cautious stance.
Switzerland
Swiss Inflation Rises Less Than Expected, Fuelling Expectations of Larger SNB Rate Cut
Swiss inflation increased slightly to 0.7% in November from 0.6% the previous month, below the 0.8% forecast in a Reuters poll. Consumer prices fell by 0.1% compared to October. The Swiss National Bank (SNB) has reduced its benchmark rate three times in 2024, bringing it to 1%. With inflation under control, markets now expect a 71% chance of a 50 basis point rate cut at the SNB's upcoming meeting on December 12, up from previous expectations of a 25 basis point cut. Economists predict further rate cuts in 2025, possibly bringing the benchmark rate to 0%, with negative rates remaining a possibility. The SNB may also intervene in foreign exchange markets to manage the Swiss franc's value.
Switzerland plummets in climate change protection ranking
Switzerland has dropped 12 places to 33rd in the Climate Change Performance Index (CCPI) within a year, primarily due to a lack of progress in climate policy leading up to 2030, according to WWF and Greenpeace. While other nations and the EU have raised their climate goals since the 2015 Paris Agreement, Switzerland's 2030 target remains unchanged and insufficient for stabilising global warming. The report highlights that under current policies, Switzerland will exceed the CO2 budget necessary to meet the 1.5°C target. The federal government’s reluctance to adopt ambitious measures, along with rejecting the European Court of Human Rights ruling on climate seniors, exemplifies this stagnation.
The Netherlands
The Dutch Economy Grew by 0.8 in Q3
The Dutch economy saw a 0.8% growth in the third quarter of 2024 compared to the previous quarter, surpassing analysts’ forecasts of just 0.2%. The Netherlands outperformed the overall eurozone. Additionally, Q2 growth was revised up to 1.1%, with a boost from higher government and consumer spending, as noted by chief economist Peter Hein van Mulligen.
Consumer spending increased by 0.8% year-on-year, driven by higher purchases of clothing, household items, and energy. In September, consumer spending saw a notable 2.6% rise. Government spending also grew by 0.8%, mainly in areas like healthcare and public transport. Investments increased by 0.7%, supported by stronger spending in construction and vehicle and machinery sales.
In comparison, France's economy grew by 0.4%, while Germany and Belgium experienced slower growth around 0.2%. The Netherlands outpaced the US, where economic growth stood at 0.7%. Year-on-year, the Dutch economy grew by 1.7% in Q3, with full-year figures expected in February 2025.
Price Rises Boost Surplus Value to €220,000 per Home
The average surplus value tied up in Dutch homes has reached €220,000 per property, up from €175,000 two years ago, according to housing research group Calcasa. The surplus value represents the amount a home exceeds its mortgage and is realised when sold. This increase reflects rising house prices across the country. The true surplus value is likely higher, as Calcasa’s calculations were based on 100% mortgages and excluded homes last sold before 1993.
The Wadden Sea islands of Schiermonnikoog, Vlieland, and Ameland have relatively higher surplus values. Bloemendaal leads in real terms with €495,000, followed by Laren, Blaricum, Heemstede, and Wassenaar. Amsterdam homes have an average surplus value of €281,000. The average home price in the Netherlands is now €490,000.
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Shell wins landmark climate case against green groups in Dutch appeal
Shell has won a significant legal battle in the Dutch courts, overturning a previous ruling that required the company to reduce its carbon emissions by 45%. The Hague Court of Appeal concluded it could not establish a legal obligation for Shell to cut emissions by a specific amount, despite agreeing the company had a responsibility to limit emissions. This ruling came three years after a court had sided with Friends of the Earth and 17,000 citizens, requiring Shell to align its emissions reductions with the Paris Agreement. Shell welcomed the decision, while Friends of the Earth expressed disappointment and plans to appeal to the Supreme Court. The case hinges on the interpretation of an "unwritten duty of care" under Dutch law, with potential implications for corporate responsibility on climate change.
The Nordics
Sweden Cuts Key Interest Rate Amid Recession Concerns, While Norway Holds Steady
Sweden's central bank, the Riksbank, reduced its key interest rate by 0.5 percentage points to 2.75%, marking the largest reduction in over a decade. This was the fourth rate cut of the year, aimed at supporting the economy and helping inflation return to the central bank's 2% target. The Riksbank stated that if the outlook for economic activity and inflation remains the same, further cuts could follow in December and the first half of 2025.
Inflation in Sweden was 1.6% in October, well below the target, and the country entered into a recession, with economic output contracting in both the second and third quarters of 2024. Despite expectations for better times, clear signs of recovery are still lacking. The new rate applies from November 13, 2024.
The Riksbank’s decision to ease policy comes as global uncertainties, including political and economic challenges in Europe and the Middle East, continue to affect the outlook. Analysts expect the central bank to keep cutting rates into next year, with a forecast of three more 25 basis point cuts. Following the announcement, the Swedish crown strengthened slightly against the euro.
Meanwhile, in Norway, the central bank kept its policy rate unchanged at 4.5% on the same day. Norges Bank Governor Ida Wolden Bache indicated that the rate would likely remain at this level until the end of 2024. The decision follows significant rate hikes in recent years to curb inflation, with the current rate contributing to cooling down the Norwegian economy. From September 2023 to September 2024, Norway’s consumer price index was 3.0%.
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