However, the Netherlands is by no means out of the danger zone, because although core inflation is the same, it is still very high at 6.7%. This means that the Netherlands is still below the European average, which has dropped from 7.5 to 7.3 percent. There is therefore no reason to panic, according to Mujagic. “Looking ahead to the rest of 2023, there’s a lot to be said for the expectation that inflation will come down,” he says. But that doesn’t mean we can let go of all worries. Even if we stabilize at around 4 percent due to the currency devaluation, inflation will still be high.”
“Inflation should come down”
However, Mujagic says it makes sense to factor in a drop in inflation in the coming months. All the more so since the European Central Bank’s interest rate hikes – which operate with a certain lag – are slowly but surely controlling inflation. According to the macroeconomist, it also appears that economic growth will be much lower by the end of the year, “and this is usually accompanied by lower inflation,” continues Mujagic.
The end justifies the means
Whether the cure is worse than the disease, however, he dare not say. “The main thing is that no one will be happy with persistently high inflation, that has to be the biggest lesson of the past year,” Mujagic says. Once they learn their lesson, they will have to deal with high inflation. And that simply cannot be done without making the economy run less smoothly.’
He believes that we must realize that the ambition of a soft or soft landing (raising inflation just enough for the economy to cool at the right pace, ed.) cannot always be achieved. “Experience shows that such a soft landing is not very easy, or happens often,” she concludes. “So you have to take into account that it won’t work now either.”
The crash is confirmed
It must also be taken into account that economic growth will decrease and therefore inflation will also decrease. “And then we all hope it goes without too much pain,” concludes Mujagic. “But it will hurt.”