With growth figures projected at 3.2% this year and at 2.7% in 2019, the Dutch economy will outperform the eurozone by an average 0.6 percentage points, per year, the government think tank CPB said in a statement on Tuesday.
The Dutch economic boom is the result of the favourable international economy, lower interest rates, an expansive budgetary policy, and a persistently strong housing market. These last two factors distinguish the Netherlands from other countries, the CPB said.
The CPB said unemployment is rapidly decreasing to its lowest level since 2001. The economic boom, however, will hardly affect the budgeting balance — mostly as a result of higher government spending. And because of the uncertainties, the projections could not take into account any future decision-making on extractions from the Groningen gas field.
Unemployment will go down to 3.9% this year, and 3.5% in 2019. The strong growth in employment can easily absorb new entrants into the labour market and companies will offer permanent labour contracts more often as well as paying higher wages to either attract or hold on to staff, the CPB said.
Rising labour costs and an increase in the low VAT tariff will cause inflation to increase to 2.3% in 2019. Nevertheless, median purchasing power will improve by 1.6% in 2019, because of the higher wages and lower income taxes.
The projections take a mild Brexit scenario into account in which a trade agreement is reached. However, negative consequences for the economy may increase, substantially, under a chaotic Brexit or in case of a disappointing negotiation result, the CPB said.
The government balance is not projected to improve, despite the booming economy. Last year, the surplus was 1.1% of GDP; it will be 0.7% this year and 0.9% in 2019. The already flourishing economy will be stimulated even further by increased spending on education and defence, and the rising expenditure on health care, the think tank said.
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