June 19, 2018

Continuing growth, increasing political risk

The positive economic development in the Netherlands is continuing. The slight setback during the first quarter is expected to be only temporary, although the period of peak economic growth is probably behind us. The Dutch economy is benefiting from the excellent growth in world trade and domestic dynamics, but political risks have increased on an international level. Political developments in Italy and around the Brexit have their immediate effect on the Dutch economy, as does the developing conflict with the United States over international trade. The trade restrictions implemented to date will lead to sectoral adjustments, although the impact on global growth levels is only negligible. However, escalation could have far-reaching consequences and may lead to substantial long-term GDP losses. This is concluded by CPB Netherlands Bureau for Economic Policy Analysis in its recently published June Projections.

 

  2017 2018 2019
Economic growth continuing 3.2 2.9 2.7
Inflation is increasing 1.3 1.5 2.3
Contract wage increases on the rise 1.6 2.1 3.1
Unemployment down to its lowest level since 2001 4.9 3.8 3.4
Government budget surplus continues 1.1 0.6 0.9

Unemployment is decreasing further, to its lowest level since 2001. The economic boom involves a strong increase in employment, which in turn causes a sharp decline in unemployment. Labour market shortages and higher inflation are causing a rise in contract wage increases. Higher oil prices and higher indirect taxation, in addition to the rising wage costs, all contribute to the increase in inflation. The government continues to have a budget surplus.