Planning Bureau: less poverty and growing economy, but budget deficit is growing

The number of people in poverty will decrease this year and next year. The Central Planning Bureau (CPB) expects this in a new estimate. In 2023, 4.6 percent of the population lived below the poverty line. By 2025 it is expected to be 4.1 percent.

Poverty among children will also decrease, from 5.8 percent in 2023 to 4.6 percent in 2025. Poverty will increase slightly again in the years after 2025, the CPB predicts.

The estimate includes measures from the main agreement of the new cabinet, as long as they were clear enough. This also leads to the conclusion that the purchasing power of many people is likely to increase. “Purchasing power in 2025 is clearly higher than in the previous estimate due to the tax reduction from the main lines agreement,” wrote the CPB.

In contrast to less poverty and more purchasing power, the budget deficit is rising, because government spending is rising faster than income. This will bring the deficit close to the maximum of 3 percent set by the EU, the CPB says. “There is a chance that sudden cuts will have to be made if problems occur in the future.”

The rising deficit also increases the government debt. If nothing is done about it, the debt will rise above the EU level of 60 percent of gross domestic product in 2034. “Government debt is at a low level, but it is on an upward trajectory that needs to be reversed back at some point,” the CPB believes.

After a period when the economy barely grew, growth will pick up again this year and next. Higher wages and improved global trade will ensure average growth of 0.6 percent this year and 1.6 percent next year.

The estimate was published a month before Budget Day and therefore did not include the impact of the measures announced on Budget Day. Therefore the CPB estimate in August is the basis for the discussions before Budget Day.

For example, in the past some allowances were increased, so that the purchasing power of some groups improved. On Budget Day, the Central Planning Bureau will issue a new estimate, which includes the Budget Day measures.