Economy to grow more than expected next year: report

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The Dutch economy will be slightly better than expected in 2015. The gross domestic product (GDP) is expected to grow by 1.5 percent. That is a slightly higher growth than the 1.25 percent that was expected in previous calculations. 

This is according to an estimate of the Netherlands Bureau for Economic Analysis (CPB), which was published today. This December estimate is an updated version of the Macro Economic Outlook from September. The CPB's figures serve as guidelines for government policy.

The growth is mainly driven by exports, but also by the improving household consumption and improved purchasing power for consumers, the CPB writes. In general, the recovery remains fragile.

The labor market seems to be improving. Unemployment fell from 605 thousand unemployed this year to 570 thousand in 2015. In the previous forecast the CPB predicted 620 thousand and 605 thousand unemployed in 2014 and 2015 respectively.

Despite the modest recovery, there remain risks that could disrupt further growth. The CPB warns about the international world trade and international GDP. "The continuing negative interplay of low growth and low inflation in the euro area can dampen the investment and consumption and slow the economic recovery", said the CPB. The potentially escalating situation in Russia could also harm Europe's economic growth.

A second uncertainty is the development of the low inflation, which the whole euro are is struggling with. The danger of low inflation is that it can turn into deflation. "In the first place deflation can lead to an increase in the debt problems of households and the government", the CPB warns. Deflation increase the value of money, and therefore also the debt. This may have a negative effect on consumption. The CPB considers the risk of prolonged deflation "small".

 

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