AMSTERDAM – Inflation in the Netherlands is set to remain elevated until at least 2023 as a labour shortage drives up wages during an economic boom, the Dutch central bank (DNB) said on Monday.
Inflation in the euro zone’s fifth-largest economy is likely to run at 3.0% in 2022 and 2.9% in 2023, after a spike in energy prices drove up consumer prices by an estimated 2.7% on average this year, the DNB said.
“Inflation will be driven up by higher wages in a labour market that continues to be tight”, the DNB said.
“But for now, we don’t see undesirable levels of wage inflation”, the central bank added, as wages are expected to rise by 2.5% on average in the next two years.
The European Central Bank (ECB) last week said inflation in the euro zone as a whole would fall slightly below 2% by the end of 2022 and was expected at 1.8% in 2023 and 2024.
The Dutch economy has rebounded more strongly than most other euro countries from its coronavirus slump, and the DNB said it expects it to expand by 4.5% this year and 3.6% in 2022 before growth moderates to 1.7% in 2023.
This strong recovery is also visible in the labour market, where the number of vacancies has been higher than the number of unemployed for months and the DNB expects unemployment to remain at historically low levels until at least the end of 2023.
The outlook could worsen, however, if the coronavirus pandemic continues to limit activity throughout next year, the bank said.
The Netherlands reverted to a strict lockdown on Sunday, closing all but essential stores and most other public places in a bid to limit the spread of the Omicron variant.
(Reporting by Bart Meijer; Editing by Hugh Lawson)
