Dutch disease

Dutch disease is the pattern in which a commodity export boom pushes up a country's currency and wages, making its other export industries less competitive.

Dutch disease describes what can happen to the rest of an economy when a commodity export boom pulls in a wave of foreign currency. That inflow tends to push up the value of the country’s currency, which makes its other exports, manufacturing especially, more expensive for foreign buyers and less competitive against goods from countries whose currency has not strengthened.

The name comes from the Netherlands’ experience after large natural gas discoveries, when the country’s manufacturing sector reportedly struggled even as gas exports boomed. The underlying mechanism can appear anywhere a resource boom is large relative to the rest of the economy, and it is closely related to the broader pattern described by the resource curse, though Dutch disease refers specifically to the currency and competitiveness channel rather than the wider institutional effects the resource curse covers.