The current low inflation rate in the Netherlands is hampering economic recovery, the Financieele Dagblad reports on Friday, quoting the government’s CPB macro-economic forecasting agency.

Low inflation increases the pressure on the economy caused by government and household debt, the paper says. An increase in inflation and rise in house prices would reduce this pressure, the paper says.

Low inflation means home owners who are in, or nearing, negative equity feel extra pressure to pay off their mortgages, which is putting a brake on economic growth.

Wages

CPB board member George Gelauff told a news conference on Thursday that wages in the Netherlands have not risen enough for some time to maintain spending levels. This has also contributed to low inflation.

The CPB has drawn up three variants of what economic recovery in the Netherlands could look like, producing economic growth of between 2.5% and 0.75% a year.

The lower end is based on a scenario in which household spending remains flat for the next 10 years. The upper limit reflects a 1.75% increase in consumer spending.