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The lights are green for the Dutch economy

Published: 14 June 2017

The lights are green for the economy of the Netherlands; it is growing and employment is increasing, leading to a decrease in unemployment to 4.7%. The government budget will result in a surplus, for both 2017 and 2018 . Wage and price developments, however, are expected to lag behind. These are the conclusions by CPB Netherlands Bureau for Economic Policy Analysis, in its June projections 2017.

Go straight to the data.

The economy is projected to grow by 2.4% in 2017 and 2.0% in 2018, which compares favourably with the expected moderate structural growth. Consumer spending, investments and exports all contribute to this growth. Household consumption will benefit from an increase in disposable income. This increase is determined, particularly, by the increase in employment. Purchasing power is expected to increase, slightly, in both years. With regard to the rising investment levels, the housing market is still in the lead, and exports will profit from favourable international developments.

The stable economic growth will lead to addition employment. Unemployment thus is expected to decrease to 4.9% in 2017 and 4.7% in 2018. Government finances are healthy, with projected surpluses of 0.5% in 2017 and 0.7% in 2018. In combination with economic growth, this will result in a declining debt ratio, down to 55%.   

The improving economy will not yet resonate in every sector. Contract wages will increase by a projected 1.7% in 2017 and 2.0% in 2018. This means they lag behind the favourable developments in economic growth and employment. This may be explained by the more flexible labour market. Inflation (HICP) also lags behind and is projected to come to 1.4%, in both years.  The ECB’s purchasing policy appears to have only a limited impact on inflation.

The green lights for the Dutch economy may turn to yellow, if international uncertainties change into setbacks. Examples of such uncertainties within Europe include the results from the Brexit negotiations and the financial stability of certain southern European countries. Outside Europe, the course steered by the United States and China’s economic developments also remain important factors.

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