Both export and consumer spending have a positive effect on growth. This year, the government will retain approximately 5 billion Euro which can be used for tax reductions and other incentives. Björn Giesbergen of the Rabobank: "We expect the private consumption to increase by 1.5% during both years. The low inflation and the increase in wages lead to an increase in buying. For 2016 we foresee a lower growth of real wages due to the rise of inflation. That personal consumption will also increase in 2016 has to do with the fact that households are no longer dependent on their savings, and with the increase in job opportunities."
No stop to government spending
"Furthermore, it is also beneficial to our economy that for the first time in years, there is no stop to government spending. It is even conceivable that domestic spending will receive an extra push next year due to tax cuts for individuals and businesses. Unemployment is decreasing, but remains relatively high due to the increase in labour."
Eurozone is growing, though unevenly
According to the Rabobank, the growth in the Eurozone will be about 1.5% this year. Next year the bank expects a growth of 1.75%. The growth rates within the Eurozone diverge. In the first quarter of 2015, the economy grew by 0.4% compared to the previous quarter. (quarter-on-quarter; QQQ).
Spain is working toward a strong comeback. The economy grew by 0.9% QQQ. France has also grown surprisingly by 0.6% in the first quarter after zero growth in the final quarter of last year. However, growth in Germany has been somewhat disappointing (0.3%), and the economy in Finland, Estonia, Lithuania and Greece has even decreased in the first quarter. Finland has traditionally strong trade relations with Russia, which is currently in a deep recession. In Greece, the political uncertainty paralyses economic growth.
The growth in the Eurozone is being driven by the policies of the ECB, causing the value of the Euro to drop dramatically. That makes export more attractive and European products relatively cheaper outside the Eurozone. The negative growth of world trade and the disappointing performances in key export markets (the United States, Great Britain and China) inhibit growth.
Labour market remains cause for concern
Hugo Erken, international economist for the Rabobank: "The dynamics in the Eurozone are strong enough to cope with the declining world growth. The labour market in the eurozone, however, remains a cause for concern. We expect unemployment to only decrease gradually this year and the next, 11.25 % and 10.75% respectively. Characteristic of the problems in the eurozone's job market is that the connection between job seekers and new jobs seems to go less smoothly; the number of jobs is increasing again, but up until now that has hardly led to less unemployment.
Lower growth worldwide
Outside the Eurozone, the growth rates in the US, China and Great Britain dropped during the first quarter. These economies are expected to grow this year. Japan, on the other hand, made a remarkable growth in the first quarter: 0.6%. However, the underlying situation has hardly changed and reforms are needed to structurally bring the economy to a higher level.
There are also risks: the geopolitical tensions in Ukraine and the Middle East can affect growth. The situation in Greece also remains worrisome.
source: Rabobank