Dutch economy in 2024: High inflation, high poverty, and rising purchasing power
With figures from Statistics Netherlands (CBS) revealing that the Netherlands is now officially in a recession, a report published by the Netherlands Bureau for Economic Policy Analysis (CPB) has warned that inflation will remain high in 2024 and that urgent action is required by the government in order to tackle the rising poverty rate.
The Netherlands officially enters mild recession
Preliminary calculations made by CBS on Wednesday, August 16, reveal that the national Gross Domestic Product (GDP) fell in the second quarter of 2023, marking the second period in a row in which the Dutch economy shrunk. A fall of 0,4 percent in the first quarter of this year, followed by a further decrease of 0,3 percent in the second quarter, means the Netherlands is officially in a recession.
In spite of this, economists aren’t overly concerned about the future of the Dutch economy. “It is not the case that the Netherlands is now suddenly on the brink of an economic abyss,” Peter Hein van Mulligen, chief economist at CBS, told NOS. “It is a period of stagnation.”
Indeed, Van Mulligen says the figures could signify some hope for the current labour market. “The number of bankruptcies is still low and there is still no sign of stagnation on the labour market. There are still more vacancies than unemployed,” he says, adding that “If that great pressure on the labour market decreases somewhat, that companies can find people more easily.”
Purchasing power to rise in 2024 - but inflation rate will remain high
The figures published by CBS on Wednesday were echoed in the 2024 Economic Outlook released by the CPB on Thursday morning. “The economy did contract slightly in the first quarters of this year, mainly due to falling exports and consumption,” the CPB writes - but emphasises that 2023 as a whole should see “meagre economic growth”.
According to the CPB, the Dutch economy will grow by 0,7 percent in 2023, followed by further growth of 1,4 percent in 2024. This will be coupled with an increase in the purchasing power of households; thanks in large part to the national labour shortage, median purchasing power will rise by 1,9 percent next year after falling by 1,1 percent in 2023.
While these figures may encourage some hope, the CPB does note that “inflation will remain high for longer than previously expected.” The body expects an annual inflation rate of 3,9 percent in 2023, followed by 3,8 percent next year.
CPB: Dutch government needs to act against rising poverty rates
As part of its report, the CPB also warns that, if the Dutch government fails to take action, the Netherlands will face a rather rapidly rising poverty rate, pointing out that the number of people living in poverty will rise from 4,8 of the population in 2023 to 5,7 percent in 2024 - or approximately 1 million people.
“Because the temporary purchasing power measures will end next year, poverty in the Netherlands will increase again,” says CPB director Pieter Hasekamp. “If the government wants to take extra measures for this, it is important to cover these in accordance with the existing budgetary rules. Because even without further policy, the government deficit will increase rapidly in the coming years.”
Thumb: Miroslav Posavec via Shutterstock.com.