Economy at its strongest for 10 years but stagnant wages could temper growth

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The economy is predicted to grow at its fastest rate for a decade, but wage rises are lagging behind, according to the latest forecast from the Dutch central bank.

The bank expects growth of 2.5% this year, a more optimistic picture than that painted by the government’s economic planning agency CPB, which predicted a rate of 2.1% back in March.

Businesses are investing more, exports are up and consumer confidence is on the rise, meaning people are spending more, according to the bank’s analysis. The jobs market is also set to improve, with unemployment predicted to fall to 400,000 or 4.4% of the working population within two years.

However, the bank cautioned that wage rises had been more modest and could act as a brake on the economy if they fall behind the rate of inflation, as consumers are more likely to delay big purchases.

Job Swank, the bank’s executive director of monetary affairs and financial stability, said the main threats to the economy were from outside, such as Brexit and the Trump administration’s protectionist policies.

Another problem was the shortage of credit for small and medium businesses, said Swank. ‘Part of this comes from businesses investing more themselves because their profits have increased. Additionally, banks are not allowed to take so many risks and have become stricter.’

The CPB’s next quarterly forecast is due out on Wednesday and will form the basis of the government’s budget in September.



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