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Forecast Central Economic Plan 2018

CPB Policy Brief 2018/06, 6 March 2018

The Dutch economy is gathering steam. The economic boom is the result of a favourable international economy, low interest rates, expansive budgetary policy and a persistently strong housing market. These last two factors distinguish the Netherlands from other countries. Positive domestic dynamics between increasing employment, higher disposable income levels, higher consumption and more investments will lead to a 3.2% economic growth in 2018 and 2.7% in 2019. Over the 2017–2019 period, the Dutch economy is projected to outperform that of the eurozone by 0.6 percentage points, in each of those years.

Read the accompanying press release or go to the data.

The global economy is flourishing, but also faces certain risks. The global economy is projected to grow by 3.9% in both 2018 and 2019, and world trade will increase by 4.4% in both years. Growth will be widespread, with the exception of the United Kingdom that will lag behind the eurozone. The low pound sterling is affecting purchasing power of UK households and the Brexit is discouraging investments. However, the eurozone has its own vulnerabilities, such as a number of weak banks, the ECB’s limited policy scope in case of a new shock, as well as political uncertainties. Despite the downward risks —also outside Europe— there are no concrete signs of global economic growth already having reached its peak.  

The Dutch labour market is tightening. In 2019, unemployment will decrease to 3.5%, its lowest point since 2001. The strong growth in employment can easily absorb the increase in labour supply. Companies more often are offering permanent labour contracts and pay higher wages to either attract or hold on to staff.  Rising labour costs and a higher low VAT tariff will cause inflation to increase to 2.4% in 2019. Median static purchasing power will increase by 1.6% in 2019, due to various fiscal measures — which is an improvement compared to the 0.6% increase in 2018.  

The budgetary balance is not improving, despite the economic boom.  Already implemented policy, higher health care expenditure and increases in spending on education and defence will cause government expenditure to increase by 3.5% in 2018 and 2.4% in 2019. Although tax revenues will increase, the already flourishing economy on balance will be stimulated even further by increased spending on education and defence. In 2018 and 2019, budget surpluses will be 0.7% and 0.9% of GDP, respectively, following the 1.1% of 2017. Future decision-making around natural gas extraction from the Groningerveld will have a negative impact on public finances and economic growth — this has not yet been included in these projections, due to the related uncertainties. 


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