The government’s macro-economic think tank CPB is forecasting inflation will average  5.2% this year, but says the Russian invasion of Ukraine may force that even higher, mainly because of the impact on energy prices.

‘At this stage [of the war], any other effects, such as on trade, financial markets on investments and spending are still limited,’ the CPB said in its March forecasts. Inflation is currently around 7%.

Nevertheless, to illustrate the uncertainty, the report also includes the consequences if energy prices would remain high for a longer period, as well as if they were to return to their 2019 level this summer. In these two variants, inflation in 2022 would average at 6% and 3% respectively, the agency said.

The impact of rising energy prices will cut spending power by an average of 2.7% in the baseline projects but by 3.4% if energy prices remain higher for a longer period. The impact will also vary significantly from household to household.

‘We assume that, sooner or later, everyone will feel the impact of a higher energy bill,’ said CPB director Pieter Hasekamp. ’But whether this impact will be a mere nudge or a big blow depends on the share of energy costs in people’s disposable income. I do worry about people on lower incomes, especially if they live in a poorly insulated house.’

Research institute TNO said last year that some 550,000 households in the Netherlands are living in ‘energy poverty’ because they have high bills, poorly insulated homes and low incomes.

The CPB expects the economy to grow by 3.6% in 2022 and 1.7% in 2023, with consumer spending and exports making the largest contributions.

The labour market is projected to remain tight, with unemployment rising only slightly to 4.3% in 2023.