Netherlands price rises increasingly persistent, widespread: ABN Amro

High energy prices are making more and more products and services in the Netherlands more expensive, and the price increases are becoming more persistent, economists at ABN Amro said in response to new inflation figures from Statistics Netherlands (CBS). They, therefore, believe that inflation will be higher than previously forecast throughout this year and next.

According to Statistics Netherlands, inflation exceeded 10 percent year-on-year in July for the first time since 1975. The increase was mainly due to energy prices continuing to skyrocket, despite the recent energy VAT cut. This can affect the prices of many products.

ABN Amro’s experts believe that energy prices will remain high until the end of 2023. But there will be some bright spots in the meantime. They expect disruptions in business supply chains to ease with the lifting of lockdowns in China. They also see a cooling in the commodity markets due to the global recession fears.

However, according to economists, it will probably take some time before the lower prices of raw materials reach the manufacturing industry and, ultimately, the consumer. “We assume that this can take until 2023.”

Another factor is that the government in the Netherlands is transferring part of this year’s inflation to next year with measures like the temporary reduction in excise duty on petrol and diesel and the temporary VAT reduction for energy. Because these measures will be in place until the end of 2022, prices are now somewhat depressed and will increase in 2023.

All this means that ABN Amro now expects inflation of 8.7 percent for the whole of this year. Next year, the overall price level will rise by 4 percent, they predict. In the previous forecast, they expected 8 and 3.8 percent inflation this year and next year.