The Dutch economy has grown by 3.3.% this year and is expected to grow at 3.1% and 2.3% in 2018 and 2019 respectively, according to the latest date released by Dutch central bank DNB.
In line with these figures, unemployment is set to fall to 4.9% by the end of the year and expected to drop further to 3.5% over the next two years, while inflation is expected to reach 1.3% by the end of the year and 1.4% in 2018. According to the DNB, the gradual rise in prices is fuelled a higher VAT rate as well as rising energy tax rates.
The DNB identifies household consumption as a key driver for the growth phase, predicting an average increase of spending by 2.2%. It anticipates that disposable incomes should improve due a combination of lower income markets and a tightening labour market, with negotiated wages expected to pick up from 1.7% this year to 2.1% in 2018 and 2.5% in 2019.
The central bank is equally upbeat about the outlook for the Dutch housing market, where prices have risen at 7.5% this year, the sector is expected to grow at “full steam ahead”.
At the same time, the DNB also identifies a potential rise of capital market rates as a key threat to its optimistic forecasts. “If these rates were to rise by one percentage point on a lasting basis, this would depress Dutch GDP growth by an average of 0.4 percentage points a year in the first four years” the central bank warns. Nevertheless, it predicts that “growth may be expected to remain well above its potential even at capital market rates that are one percentage point higher” the bank said.