It’s pouring windfalls!
Economic growth is set to pick up to 1.2% this year. Optimism about the growth outlook has received an extra impulse from the upward revision of the GDP figures for the fourth quarter. After a dip in the first quarter due to temporarily lower car sales, GDP growth will pick up in the quarters thereafter. Foreign trade remains the key driver of economic growth. This entails certain risks, due to the uncertainties surrounding Ukraine, China, the European elections and the deflationary trend in Southern Europe. In this light, it is encouraging that growth no longer depends entirely on foreign trade. Business investments are gathering momentum on the back of rising industrial output and capacity utilisation rates, and the housing market is showing cautious signs of recovery. In due course, the additional investments will lead to an improvement in the employment market, with positive knock-on effects for consumption. Now that purchasing power is improving and households have more money in their pockets, they have scope to strengthen their balance sheet position as well as make extra expenditures. The projected pick-up in domestic demand will be accompanied by accelerating imports. This marks the end of the steady increase in the current account surplus. Which is good news, because the exceptionally high surplus of 10% is out of step with EU policy frameworks. The improvement in public finances will meet with approval from Brussels. For the first time in five years, the budget deficit will drop below the 3% Maastricht ceiling, though the deficit reduction is partly due to one-off windfalls. In fact, windfalls have been pouring in recently. New calculation methods show that the economy is larger than previously calculated, which means the government debt is about five percentage points lower than under the previous definition.