Poverty will increase sharply if the government does not announce any measures on Budget Day to help struggling households pay their bills. According to the Central Planning Office (CPB), about 5.7 percent of the total population and 7 percent of children will end up in poverty next year without additional policy. That is because many of the current support schemes expire from 1 January 2024.
“Poverty will also continue to rise slightly in the medium term,” said the planning office in its politically important economic forecast. “Structural policy is needed to combat this.” The government must find money for these measures by cutting spending or raising taxes. The CPB called it unwise to find money for the poverty policy by allowing the already growing national debt to rise even further.
Purchasing power will decline a bit further in 2023 by 1.2 percent. But in 2024, households will have more to spend, the CPB expects. According to the planning office, purchasing power will grow by 1.9 percent next year.
The economic forecast is important for the government because it forms the basis for the negotiations on next year’s budgets. These talks will start next week.
The government should pay specific attention to its household budget, said the CPB. Government finances will deteriorate in the short term. Therefore, it is essential to follow the budgetary rules to prevent the government from having too few buffers to absorb the blows of future crises. Not only have interest rates been high over the past few years, but a lot of government money remained on the shelf because the government could not spend it. In its August estimate, the planning office assumes “that the government will increasingly succeed in realizing the planned expenditures, as a result of which the government deficit will increase further to 3.9 percent in 2019, and the government debt will rise.”
The CPB expects the economy to grow by 0.7 percent in 2023, although growth will increase again in 2024 to 1.4 percent. Statistics Netherlands reported on Wednesday that the Netherlands has entered a slight recession. Although growth is falling, the Dutch economy has shown its “resilience” in recent years, absorbing several major shocks well. Labor shortages in many sectors prevented mass layoffs. “This economic cooling ensures that the tightness on the labor market and the high inflation decrease somewhat,” the CPB said.
Reporting by ANP