Netherlands has second highest inflation in the eurozone

Netherlands has second highest inflation in the eurozone

Since October 2012, the Netherlands is among the countries with the highest inflation in the eurozone. This is largely due to increases in VAT, insurance tax and energy tax rates effective since last year. In recent months, the Dutch inflation rate has been at the highest level in more than a decade according to figures released by Statistics Netherlands.

According to the harmonised consumer price index (HICP), Dutch inflation was 3.2 percent in February 2013, i.e. significantly higher than the average eurozone rate of 1.8 percent. The Netherlands had the highest inflation in the eurozone after Estonia. Since the VAT rate was raised in October 2012, the Netherlands has been among the countries with the highest inflation. In 2011 the Netherlands still belonged to the countries with the lowest inflation.

Highest rate in more than a decade
In recent months, the Dutch inflation rate has been at the highest level in more than a decade. Apart from the VAT increase imposed in October, other measures also had an upward effect on inflation. In January 2013, for example, the insurance and energy tax rates and excise duty on petrol and tobacco products were raised. In the period around 2001, when the high VAT rate was raised to 19 percent and energy tax rose substantially, inflation was even higher. Prices in the sector hotels and restaurants and prices of food products increased rapidly.

Tax hikes main cause for high inflation rate in the Netherlands
If the increase in product-related taxes is not taken into account, the rate in January would have been 1.7 percent. Spain was the only country where the effects of tax hikes were more severe. Greece has the lowest rate in the eurozone; without the tax hikes, inflation in Greece would have been negative (deflation).

Netherlands currently far above 2 percent target
During the past two years, inflation in the Netherlands has been more than 2 percent, thus overshooting the target set by the European Central Bank (ECB). The ECB aims at inflation rates in the eurozone of close to 2 percent. If inflation is monitored over a longer period, the Netherlands complies with the ECB target. The average inflation level in the Netherlands over the past decade was 1.8 percent.

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