OECD warns on overheating economy

The Paris-based economic think-tank OECD warned the Dutch government on Thursday to take more steps to stop the economy, currently growing at almost 3% a year, from overheating.

The organisation made a similar warning last year. By overheating, the organisation means that there is more demand for goods and services than can be produced, which leads to a sharp increase in inflation.
The Dutch economy grew by some 2.9% last year and is set to grow by a similar amount in 2007, the OECD says.
At the same time, Dutch exports are profiting from growth in demand within the Eurozone.
After a number of lean years, Dutch industry will be working at full stretch this year. In order to dampen demand, the government should take steps to tighten the purse-strings, such as by not giving in to demands for tax cuts.
The OECD report also shows that Dutch job vacancies are at their highest level for six years and that wages are increasing by an average of 2%. It warns that wages will rise more sharply unless more steps are taken to increase the size of the workforce.

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