August 11, 2015

Interim CPB projections published

CPB Netherlands Bureau for Economic Policy Analysis has published its interim projections today for the finalisation of the decision-making process around the draft national budget and tax plan for 2016.

The draft national budget and the tax plan for 2016 will be presented on Prinsjesdag (the day of the King's Speech in which the main features of government policy for the coming parliamentary session are announced).

The Dutch economy is projected to grow, both this year and next year, by 2.0% and 2.4%, respectively. The economic recovery will continue, despite lower natural gas production levels. Next year, the recovery will be supported by the announced 5 billion euro reduction in the tax burden, already incorporated in these projections.  For next year, unemployment is expected to decrease to 6.7% and the government deficit to 1,5% of GDP.

World trade has slowed down over the first quarters of 2015; particularly due to reduced trade in Asia and Latin America. The world trade that is relevant to the Netherlands is being carried by robust growth in Europe and the United States. This relevant growth is expected to recover further this year and during the following year, and is projected to amount to 2.8% in 2015 and 5.4% in 2016.  This acceleration is in line with the leading indicators within the eurozone that point to a continuing recovery, supported by low oil prices and the depreciation of the euro. Nevertheless, the uncertainty with respect to world trade developments in light of recent realisations is greater than usual. This year’s relatively low growth in relevant world trade, to date, has not had a noticeable impact on Dutch exports. These exports are expected to contribute substantially to GDP growth in 2015 and 2016.

Domestic spending is also substantially contributing to Dutch economic growth. Household consumption will benefit from an increase in real wages and from the additional reduction in the tax burden in 2016.  Investments in housing and other fixed assets are expected to increase. The decision to reduce the production level of natural gas will have a negative impact on growth. The projections have taken 33 billion m3 in gas sales from the Groningen field into account for 2015 and 2016.

The recovering economy is also expected to result in an increase in employment, both in this year and the next. Employment in the private sector, for instance, is projected to increase in 2015 by 1.0% and in 2016 by 1.3%. Unemployment will decrease to 620,000 people this year and to 600,000 in the following year. Inflation (HICP) in the Netherlands will increase further, next year, to 1.1%, as a result of the recovering economy.

The government deficit is projected to decrease this year to 2,1% and next year to 1,5% of GDP. The structural deficit, however, will increase from 0,8% to 1,1% of GDP. The continued economic recovery will have a positive impact on tax revenues while the expenditure on unemployment benefits will go down. Lower natural gas revenues will have a detrimental effect on the government deficit. In addition, the provisional package for reduction in the tax burden1 will have an upward impact on the deficit in 2016,  although this will be somewhat reduced by tax measures implemented to prevent an overrun of the real revenue framework. The result recently reached in the wage negotiations for the public sector has been taken into account in these projections.
Together with the press release and the main data table, CPB from now on will also publish a table presenting the development in median purchasing power for the various groups of households. This table forms the starting point in the decision-making process (in August) on the purchasing power for the following year.

CPB, at this time, does not provide any further elaboration of these interim projections. On Prinsjesdag – the opening day of Parliament; this year on 15 September – CPB will publish its Macro Economic Outlook (MEV) 2016, with an elaboration and explanation of these projections as well as a detailed analysis of the Dutch economic situation.


Edwin van de Haar
Johannes Hers
Dick Morks