EU country warns of persistent economic risks

The Netherlands will face high inflation and slower growth in the coming years, its central bank has warned  

Inflation in the Netherlands will remain high due to stagnating economic growth, De Nederlandsche Bank (DNB), the country’s central bank warned on Monday.

After reaching a peak of 11.6% last year, Dutch inflation is expected to decline to 4.2% this year, 3.7% next year, and 2.5% by 2025, the bank’s report said.

DNB reported that, despite the decline from double digits, inflation remained too high in the country and attributed the development to lower economic growth. After this year’s stagnation, Dutch GDP will increase slightly to 1.3% next year and 1.1% in 2025, according to the regulator.

It described the trend as worrying, given efforts by the European Central Bank (ECB) to reduce consumer price growth to 2% across the Eurozone.

“If inflation in the Eurozone falls but remains relatively high in the Netherlands, lowering inflation in the Netherlands will become even more difficult,” the central bank explained.

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According to DNB, core inflation, which strips out energy and food prices, has proved more stubborn than previously projected and is now higher than headline inflation. This year, core inflation in the Netherlands is expected to be 6.8%, falling to 3.6% next year and to 2.8% only in 2028, it said.

The regulator appealed to employers and trade unions to be more restrained in increasing wages and prices. The Dutch central bank prompted companies to maintain controlled growth in profits and wages “to prevent the economic adjustment process from leading to a leapfrog dynamic that further exacerbates inflation.”

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