The Dutch economy will continue to grow, leading to tensions on the labour market and an upward drive on wages, the government’s economic policy unit CPB said on Friday.

The CPB forecasts economic growth of 2.75% this year and in 2008, while unemployment will remain stable at 4%. Wage increases and higher indirect taxes will boost inflation to 1.5% in 2007 and 2% in 2008.
The CPB also predicts the budget deficit will reach 0.8% of GDP this year because of higher than expected spending on healthcare, an increase in incapacity benefits and lower revenues from natural gas.