According to the Central Planning Bureau, the Dutch economy is rumbling forward this year and next. But the citizen does not notice this in his wallet.
The growth figures for the first half of this year already showed that the economy is back on track last week. The latest forecasts from the Central Planning Bureau (CPB) show that the economy will grow by almost 4 percent this year. That is exceptionally high growth for mature economies such as the Netherlands.
It has been clear to everyone who goes outside for some time that things are going well. Everywhere there are signs with ‘staff wanted’ at the shops and the chance that the pub or restaurant is closed due to staff shortages is increasing by the day.
And it’s not just the retail and hospitality sectors that are begging for staff. They can also use extra hands in industry and healthcare. Hands that are hard to find. For the first time in history, there are more vacancies than there are job seekers.
The workers are therefore becoming scarce. And where there is scarcity, prices, in this case wages, rise, goes the economic law. But that is disappointing according to the CPB estimates. Wages will rise by an average of 1.9 percent this year and 2.2 percent next year.
Wage increases are being eaten by inflation and tax hikes
That wage increase is also completely eaten away by inflation and the tax hikes that are already in the pipeline. On balance, nobody will increase in purchasing power next year, the CPB has calculated. Not even in reverse.
However, the CPB is keeping a lid on the wage increase. Due to the shortage on the labor market, wages may rise somewhat faster than the cabinet’s accountants now expect.
Based on the now expected wage increase, it is hoped for workers that the caretaker cabinet will allocate some money for tax cuts so that purchasing power will increase somewhat. Money isn’t the biggest problem, according to the numbers. The government will save billions next year because the corona support will stop. Due to the high economic growth, more tax money is also coming in. The budget deficit therefore falls spectacularly from 5.3 percent of GDP to 1.8 percent. Well below the 3 percent that the deficit may be maximum.
The CPB also assumes that the interest that the state has to pay on loans will also be negative next year. This reduces the need to eliminate the shortfalls.
This year, each household has an average of 0.8 percent more to spend. But purchasing power will not increase next year, the CPB expects. Nevertheless, consumers are expected to spend more. Households have saved a lot during the corona pandemic. On the one hand, there was less need to spend money on clothes, for example, because as a home worker you can also walk around in your sweatpants all week. Moreover, people like to save a little extra in uncertain times.
Now the need to create a buffer is smaller and those new clothes are more urgent. That means saving less and spending more next year. It is precisely consumer spending that is largely the reason that the economy will grow by 3.2 percent next year.
The CPB supports the cabinet’s decision to stop providing corona support to companies this year. Also for sectors that are still affected by the measures, such as the catering industry, the arts sector and, for example, coach companies. This will lead to additional bankruptcies, but the CPB does not think it will lead to higher unemployment. Workers from those sectors who become unemployed can now easily find a job elsewhere.
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