Sleijpen says in a conversation with BNR that the Dutch economy is emerging from a “strong recovery after the corona crisis”. We expect growth this year to be 4.2%. But we see that the economy is starting to cool down and we expect 0.8% growth next year. As far as we are concerned, there will not be a recession, but we will overcome it.’
The bank sees that economic growth will be negative quarter-over-quarter. “But with these figures we prefer to speak of a stabilization of growth”. And that will actually happen in 2024, thinks Sleijpen. “We expect growth to return in 2024 to what we call trend growth, 1.5% for the Dutch economy.”
Even if the war in Ukraine continues until 2025, the effect on the economy will be less, Sleijpen thinks. “Growth will stay low for a longer period of time and inflation will also stay high for longer. But even in this scenario we still don’t see a recession reflected in the figures.’
High inflation continues
Inflation will remain high for now, but according to De Nederlandsche Bank the peak has been reached. “Inflation remains around five per cent, which is far too high. We also see this picture for the eurozone as a whole and that is why the European Central Bank said last week that we must work hard to reduce inflation.’
The fact that the economy is cooling will make it easier to fight inflation, Sleijpen thinks. “That stabilization leads to lower prices and that’s what you want because inflation is just too high.”
At the same time, the DNB also sees room for further wage increases, while employers are demanding that this not happen. ‘Wages are already increasing by about five percent at the macro level. Which is in line with core inflation (inflation without energy and food, ed) and which is a sort of anchor. But we also see that the share of labor income in the economy is declining, which indicates the scope. But that also depends on the sector.’
Vigilance
However, vigilance is needed, thinks Sleijpen: “We are not in favor of an automatic price compensation with which wages take back high inflation, thus running the risk of ending up in a wage-price spiral.” A wage increase of around twelve percent, as the unions want, is therefore “not a good idea,” says the chief economist of De Nederlandsche Bank.
According to DNB, the Dutch government will focus more on making households and businesses more sustainable, because gas prices will also remain high after next year and inflation will probably rise again in 2024. “We have to make sure that the using less gas becomes something structural”, says the expert.
He therefore believes that The Hague should take more control and coordinate matters better. “For example, people who live in a national monument. They can’t do anything right now. You should make arrangements for that.’ Sleijpen also believes the government should ensure that less isolated homes and social rented houses, where many low-income people live, are prioritized for sustainability.
Sleijpen argues that the government should not opt for long-term compensation of energy costs for large groups of households and businesses. ‘In 2024, focus support only on households and businesses experiencing financial problems without support. And use 2023 to prepare yourself for that,” is his cabinet advice. DNB has long warned that the government will make it harder to curb inflation with broad, untargeted support. Sleijpen also reiterates an earlier call that the cabinet should swiftly cover its compensation package for high energy prices in the budget.