CPBs short-term forecasts December 2015

World trade will increase by 4.3%, although there are large uncertainties about international developments. These are the predictions by CPB Netherlands Bureau for Economic Policy Analysis in their December Projections for 2015 and 2016, published today.

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Developments in the world are in motion. The flow of refugees and the threat of terrorism are having a great impact on society. For 2016, however, the economic effects are expected to be limited: population growth will be 0.3% and the government deficit will increase by 0.1%. Strong fluctuations in oil prices and exchange rates as well as on the stock market will have a greater impact on economic growth. The increase in world trade in 2015 has been volatile. For 2016, a moderate growth of 4.3% is projected for relevant world trade.

Consumption is expected to increase next year by over 2%, and savings by households will stabilise. Disposable incomes will increase due to higher wages under low inflation and increased employment, and because of a reduction of 5 billion euros in the financial burden which has been included in these projections. The increase in health care premiums will moderate purchasing power. Investments will increase, as a response to favourable economic developments and increases in profitability. Export levels are growing because of a further lowering of the euro’s exchange rate and the growth in world trade, while natural gas exports are declining. The market sector particularly benefits from a growing demand, with a production increase of 2.7%.

Although employment will increase, the decrease in unemployment will be limited in 2016, as there also will be a strong increase in labour supply. Companies will attract more personnel – and hold on to more people to be able to meet the rising demand. Government employment will see a slight growth, while employment in health care is expected to decline, slightly. Labour supply will increase as a result of demographic factors, policy incentives (including the 5-billion-euro package of measures) and a return to the labour market of the previously discouraged.

The EMU deficit will decrease, from 2.2% in 2015 to 1.8% in 2016, due to economic growth and the spending cuts introduced under the Rutte–Asscher Government Agreement. The reduced revenues from natural gas sales and the reduction in the financial burden through the 5-billion-euro package of measures, together, will dampen the reduction in deficit. The structural deficit will increase from 1.3% of GDP in 2015 to 1.9% in 2016, particularly due to lower revenues from natural gas sales. The government debt is projected to decrease to 65% of GDP.