December 18, 2017 / 12:29 PM / a year ago

Dutch economic boom to last through 2018, says central bank

AMSTERDAM (Reuters) - The Dutch economy will grow faster than expected in 2018 and 2019 as rising wages and historically low unemployment fuel a boom in consumer spending, its central bank (DNB) forecast on Monday.

The DNB pegged growth at 3.1 percent in 2018, a full percentage point higher than it predicted in June. Growth will slow to 2.3 percent in 2019, also considerably stronger than the previous forecast.

“The economy is firing on all cylinders,” central bank director Job Swank told a news briefing. “High growth rates will persist, while unemployment drops to a very low level.”

The Dutch economy has beaten all expectations this year, outperforming most other euro zone countries as accelerating international trade and a surge in employment led to a decade-high growth rate of 3.3 percent, DNB said.

Domestic demand will be its main driver in coming years, as the strong job market leads to faster wage growth and increasing labor shortages in sectors including construction, communications technology and other service sectors.

But wages will rise less than the rate of economic growth would normally predict, Swank said, keeping a lid on the rise of consumer prices. Inflation is expected to rise from 1.4 to 2.3 percent in 2019, but only because of a higher tax rate kicking in that year.

“It will probably take years for inflation to structurally reach a level higher than 2 percent”, Swank said. “We have seen in the U.S. that you need five to six years of falling unemployment for inflation to reach that level.”

Reporting by Bart Meijer; editing by John Stonestreet

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