The Central Planning Bureau has forecast that purchasing power will decline by 4% next year, while energy prices will remain structurally high. It seems far from positive, even if the economist Edin Mujagic speaks of a ‘small windfall’.
“If you had the idea earlier this year that high inflation would continue into 2023, then that wouldn’t be so bad,” he says. “The CPB says monetary devaluation will amount to 3.5%, which is significantly lower than what we have experienced this year.” Mujagic cites the main reason for this decrease as the fact that the Dutch government introduced price caps for consumers. “The CPB says that if it hadn’t been established, inflation next year would have been six per cent. So you can certainly see that it helps a lot.’
Good indication
According to Mujagic, the CPB also gives a good indication of what the situation will look like next year. “If we get the news we’re all hoping for — that the war in Ukraine is over — within the next year — there’s very little chance that energy prices will return to pre-war levels,” he continues. “According to the CPB, it must be taken into account that these prices will remain high in the coming years”.
But, Mujagic points out, next year will be crucial. “So the price cap expires. As a government you can then decide to continue it. This will cost a lot of money and will have to come from somewhere. But on the other hand the government can say it will stop after a year. Then you will still have inflation – which you disguise in 2023, so to speak – in 2024.’
Structural solution
Mujagic therefore calls on the government to make good use of the “gained time” for consumers and the government itself. ‘They have to sit down and see how they can find a structural solution. Because with a one-off solution like this it won’t work.’
Listening to the CPB would be a good first step, she thinks. “Usually it’s good for government to listen to what the CPB says, and this year is no different.” That’s why consumers need to be even more careful. “You have to know that if inflation turns out to be surprisingly low next year, it will be because inflation is in disguise. It wasn’t just thrown away. And if the government does not take structural measures, it will return in 2024″.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
