Dutch households will have more to spend this year than expected, and all income groups will benefit from a boost, the government’s macro-economic forecasting agency CPB said on Thursday.

At the same time, the CPB said, the government needs to get its finances in order because the budget deficit is creeping up to the EU maximum and will exceed 3% of GDP by 2028 without action.

The next government’s “policy ambitions must include clear choices to address the rising government deficit, as well as labour market shortages and the lack of space,” said director Pieter Hasekamp in a press statement.

Spending power fell by just under 1% in the Netherlands last year but will rise by 2.7% on average in 2024, buoyed by lower inflation and higher wages. Lower income groups in particular have benefited from the increase in the minimum wage and higher supplementary benefits.

This, the CPB said, will slightly reduce the number of children and adults living below the poverty line to 4.7%.

The CPB puts economic growth at a “modest” 1.1% this year, rising to 1.5% in 2025. Inflation will go down to 2.7% this year and the official unemployment rate will rise slightly to 3.7%.