Wage increases will raise Dutch inflation by 2023

AMSTERDAM (Reuters) – Inflation in the Netherlands will remain high until at least 2023 as labor shortages raise wages in an economic boom, the Netherlands Central Bank (DNB) said on Monday.

In the fifth eurozone economy, inflation is likely to be 3.0% in 2022 and 2.9% in 2023, after rising energy prices this year after rising consumer prices by an average of 2.7%, the DNB said.

“In the labor market where inflation remains tight, wage increases will be driven,” the DNB said.

“But for now, we do not see a desirable level of wage inflation,” he added, adding that wages are expected to rise by an average of 2.5% over the next two years.

The European Central Bank (ECB) said last week that inflation across the eurozone would fall below 2% by the end of 2022 and was expected to fall by 1.8% in 2023 and 2024.

The Dutch economy has rebounded more strongly than most other countries as a result of the decline in coronavirus, and the DNB said it expects it to expand by 4.5% this year and 3.6% in 2022, before declining growth to 1.7% in 2023.

This strong recovery is also seen in the labor market, where the number of jobs 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 over the next year, the bank said.

The Netherlands returned to a strict blockade on Sunday, closing all essential shops and most other public places in an attempt to limit the spread of the Omicron variant.