“Dutch Disease” refers to an economic condition in which the discovery or rapid exploitation of valuable natural resources — such as oil, gas, or minerals — negatively impacts other sectors of a country’s economy, particularly manufacturing and agriculture.
When a country begins exporting large quantities of its newly found resource, it earns significant foreign currency. This influx of money strengthens the nation’s currency value (exchange rate).
As the currency becomes stronger, other sectors like manufacturing, textiles, or agriculture find it harder to export their goods because they become more expensive in the global market. At the same time, workers and investments shift toward the booming resource industry, leaving fewer resources and talent for other sectors.
The term “Dutch Disease” was first used to describe what happened to the Netherlands in the 1960s and 1970s after discovering natural gas in the North Sea. The resource boom led to a strong currency, but their manufacturing sector suffered major decline as exports became less competitive.
When the natural resource eventually depletes or its global price drops, the country often finds itself without strong alternative industries. This can lead to unemployment, lower income, and economic stagnation.
Dutch Disease highlights the importance of economic diversification. Countries must invest their resource wealth wisely — in infrastructure, education, and industrial development — to ensure balanced and sustainable growth.
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