Dutch purchasing power expected to fall 6.8 pct. this year, Child poverty could hit 9.5%

The recent rising prices has become a serious detriment to the people living in the Netherlands. According to the Central Planning Bureau (CPB), the government’s macroeconomic planning office, purchasing power will probably fall by as much as 6.8 percent this year, something that has certainly not occurred in the Netherlands in decades. It is expected that more people will wind up in poverty as a result.

"Households are noticing the consequences of high inflation, and that has repercussions on the economy," CPB director Pieter Hasekamp said in a statement. There is a growing number of people who can barely make ends meet, and they are in danger of not being able to pay their energy bills, he said

After a strong recovery from the coronavirus crisis, economic growth is now falling again. For the whole of this year, the CPB is still counting on a high growth rate of 4.6 percent. This is mainly due to the strong growth in the second quarter. But the underlying picture is tilting, warns the CPB. Next year, the economy will probably only grow 1.1 percent.

If the energy crisis caused by the war in Ukraine is not further exacerbated, inflation is estimated to reach 9.9 percent this year. Inflation is expected to fall again next year, but will remain at a relatively high level at 4.3 percent. As a result, people need more and more money to meet their basic needs, while incomes are only slightly rising.

The CPB thinks that 7.6 percent of the Dutch population will be faced with poverty next year. This rate is even higher for children, which could reach 9.5 percent.

The amount of disposable income per household can differ greatly. This year, those earning the very least in income will benefit from the energy surcharge of 1,300 euros. But the CPB warns that this support measure will not reach all vulnerable households. In addition, this allowance is one-time-only, and this means that this lowest income group will have significantly less left to spend in 2023.

This August estimate from the CPB was highly anticipated in political circles in The Hague. The coalition and the Cabinet are under great pressure to ease the pain of high prices. Purchasing power was one of the discussion issues that took talks among politicians late into the night on Thursday.

In the meantime, the government is in a better position financially, the CPB notes. In terms of revenue, the treasury will benefit from the recovery of the economy after the coronavirus crisis. In addition, the high price of gas will also lead to significantly higher gas revenues. Additionally, due to the tight labor market, it is not possible to make all previously planned investments. The increase in government expenditure will be less than budgeted as a result