The Dutch economy will grow by 0.7% overall in 2023 and double that next year, but unless the government takes action, more people will be living below the poverty line, the government’s macro-economic forecasting unit CPB said in its autumn statement.

Although spending power is expected to rise by 1.9% on average because of wage growth, some 7% of the country’s children will grow up in poverty next year without new measures, the CPB said on Thursday.

The Dutch economy has withstood several major shocks “surprisingly well” in recent years but the coronavirus crisis, the war in Ukraine and the energy crisis, high inflation and rising interest rates had a major impact on many households and businesses, the CPB said.

The economy did nevertheless contract slightly in the first two quarters of this year, mainly due to declining exports and consumer spending. And inflation is set to remain high for longer than previously expected, at 3.9% in 2023 and 3.8% in 2024, the CPB said.

The government introduced temporary measures last year to mitigate the impact of higher energy prices, particularly for low-income households, but the price ceiling will end this year.

And without new policy, the percentage of the population living in poverty will rise from 4.8% this year to 5.7% in 2024, the CBS said. In the case of children, the percentage living in poverty will rise from 6.2% to 7%.

“If the government wishes to take additional measures to address this, it must fund them in accordance with the current budget rules, because even without additional policy the government deficit is set to rise rapidly in the years ahead,” said CPB director Pieter Hasekamp.

The agency expects rising public expenditure on interest, climate policy and health care, as well as in other areas and says this will lead to a sharp deterioration in public finances over the medium term.

If policy remains unchanged, the CPB predicts the government deficit will rise from 2.4% of GDP in 2024 to 3.9% of GDP in 2028. Government debt will consequently rise to 54.3% of GDP in 2028.

Read the forecast, in English

The caretaker cabinet will present its 2024 spending plans on the third Tuesday in September. However, it will not be able to introduce major new policy measures without the agreement of parliament.

Before the summer recess, a majority of MPs had called on the government to take action to reduce rising poverty.