The Dutch economy is on the rise again with projected growth of 0.6% in 2024 and 1.6% in 2025, the government’s macro-economic forecasting agency CPB said on Friday.

In addition, spending power has gone up by an average of 2.5% this year and will rise again by 1.1% in 2025, meaning the shock of high inflation has now been reversed, the agency said.

At the same time, however, the budget deficit in the coming years will be significantly higher than last year and, at 2.6%, close to the agreed safety margin of 3% of GDP. The new government has pledged not to break that limit.

“While the forecast contains good news for the short term, the situation regarding public finances is in fact deteriorating,” CPD chief Pieter Hasekamp said. “Government deficit margins are narrow, heightening the risk of sudden cuts in the event of setbacks. Moreover, the debt projection shows that current policies are shifting the financial burden into the future.”

The CPB’s August forecasts are used by the government to finalise its spending plans ahead of the publication of the budget on September 17.

Poverty

The CPB said the economic growth is partly driven by higher domestic spending and that all groups are benefiting from a higher income, particularly people in work.

More families are also being taken out of poverty. Some 4.1% of households will be officially classified as poor next year, compared with 4.6% this year, and this is down to new government policy.

“Spending power in 2025 is higher than in the previous estimate because of the tax and premium cuts outlined in the coalition accord,” the CPB said.

Finance minister Eelco Heinen has told reporters he will take a tough line with colleagues when the government’s 2025 spending plans are being finalised in the coming four weeks.

Speaking ahead of Friday’s cabinet meeting, Heinmen said that “every setback will have to be covered and I am going to keep colleagues to that.”

Some problems are already known. In June, the Supreme Court ruled that people who had paid too much in asset tax – because the government used an assumed increase not actual figures – should be compensated. The total bill could be as high as €4 billion.

The failure to sell the German energy grid owned by Dutch state-owned grid operator Tennet is another setback that will impact the government’s finances.

Asked if there were any windfalls, Heinen said “the only windfall I have seen is that the number of setbacks has stopped piling up”.

“We have setbacks and a mounting national debt,” he said. “That is a bitter message, but it is reality.”