Budget deficit forecast to drop to 2.7% but caution still needed

The Dutch budget deficit will go down to 2.7% next year, below the eurozone target of 3%, according to the latest estimates from the government’s macro-economic forecasting agency CPB.


The CPB had earlier said the deficit will be 2.9%, prompting concerns that further cuts may be needed.
At the same time the economy will grow 0.75%, following a contraction of 0.5% in 2012, the CPB said. Inflation will reach 2% while spending power will go down 0.75%.
The main reasons for the reduction in the budget deficit are higher healthcare premiums and improved local authority finances which have offset falling revenue from oil and gas, the CPB said.
Election
The institute’s forecasts are published three weeks before the general election and just one month before the outgoing government will present its spending plans for 2013. Those plans are based in part on an agreement to cut the budget deficit made between five parties in the spring.
However, several measures included in that agreement are now unlikely to be implemented by the new government and it is not clear what the impact will be on the deficit next year.
Reacting to the new forecasts, the ruling VVD and CDA said it remains a challenge to balance the books and it would be irresponsible to start increasing government spending.
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