Moderate economic growth will keep inflation above 2% in the years ahead

Inflation in the Netherlands will steadily decline over the next two years, but will remain above 2%. The rate of price increases will slow from 3.5% in 2002 to 2.5% in 2003, and further to 2.1% in 2004.

The sharp rise in labour costs is the main determinant of the high rate of inflation this year and in 2001. Labour costs contributed 2.7 percentage points to the 4.5% inflation rate of 2001. This year, labour costs contributed 2.4 percentage points. In 2003 and 2004, labour costs will account for an average 1 percentage point of estimated inflation. Economic growth is rallying slowly. After a marginal GDP rise of 0.2% in 2002, growth will pick up slightly to 1.1% in 2003. For 2004, 2.1% growth is expected, still lower than the usual economic growth rate for the Netherlands. As the labour market usually responds with a time lag to cyclical developments, unemployment growth in 2002 will remain limited to 23,000. In 2003, a further 66,000 will become jobless. Unemployment growth will level off in 2004, when the number of job-seekers will increase by 10,000.

(source: De Nederlandsche Bank)

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