Economic growth in the Netherlands will be stronger than expected in 2006, the Bureau of Economic Policy Analysis (CPB) said on Friday.

The gross national product will grow next year by 2.5 percent, said the CPB, adding that after five years of stagnation the economy will once again return to a normal growth rate.

That is a quarter of a percentage point more than the rate forecast in August and the stronger growth will be the result of an easing of the tax burden and extra investments.

On Thursday the CPB said that inflation rose in August to 1.8 percent. With that, the price increase was 0.2 percent higher than in the previous months.

The CPB said that the increase can mainly be attributed to a rise in petrol, gas, and electricity prices.

There is great uncertainty about the oil price. The CPB assumes an average oil price of 50 dollars a barrel in 2006 and also calculated a variant with an oil price of 70 dollars a barrel.

A high oil price is beneficial for the government because it results in higher revenues from the sale of natural gas, but puts pressure on consumption and raises prices in general.

Assuming an oil price of 50 dollars a barrel the CPB expects an inflation rate next year of 1 percent. An oil price of 70 dollars could lead to an inflation rate double that.

Source: Xinhua