Global Economic Outlook – September 2022 HICP inflation recorded double-digit annual figures in July The spring update on the fiscal budget signaled a more (11.6%) and August (13.7%). Although this high headline expansionary stance, with policy measures such as a inflation is mainly driven by sky-high energy prices, core structural increase in defense spending (EUR2.2bn) to inflation (HICP excluding energy and food) has also risen achieve 2% of GDP by 2024 in line with the NATO target, sharply due to higher input prices and wages. CBS reported and linking the state pensions to changes in minimum that annual inflation on food, drink, and tobacco grew by wages (EUR2.4bn). The government has announced taxes over 10% in August. This led us to revise upwards our on energy bills will be significantly reduced in 2023, an inflation forecasts to 10.1% in 2022 and 3.9% in 2023. energy allowance will be paid to the most vulnerable The Dutch government activated an energy crisis plan in households, and an increase of 10% in minimum wage June to reduce reliance on Russian gas (around 15% of in 2023. The fiscal deficit is not expected to increase Dutch gas imports), which included buying LNG, cutting significantly in 2022 due to the scaling back of Covid-19 back gas consumption and removing the caps on coal testing and vaccination programs, and will increase slightly plants during 2022-2024. At the time of writing, the to 3% of GDP in 2023. However, there are medium and Netherlands has hit the 80% EU target on gas storage, long-term risks associated to an increasing national debt-to- ahead of the target date of November 1 set by the EU. GDP ratio to be passed on to future generations. The government has announced that gas storage facilities will continue to be filled in order to create an additional buffer, absorbing potential setbacks. This strategy has Diego Vilchez Neira gained greater importance after the shutdown of the Nord Senior Manager, KPMG in the Netherlands Stream 1 pipeline. Chart 39: Dutch consumer confidence plummets as inflation accelerates 20 16% 10 14% 0 12% -10 10% -20 8% -30 6% Annual growth, % -40 4% verage of the component questions A -50 2% -60 0% Aug Feb Aug Feb Aug Feb Aug 2019 2020 2020 2021 2021 2022 2022 Consumer confidence (LHS) Producer confidence (LHS) Inflation (RHS) Source: Statistics Netherlands, KPMG analysis. © 2022 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. 40