After the extraordinary year 2020, 2021 will also be economically unusual: despite strong growth, tens of thousands of jobs will disappear this year.
How big is the damage after the Corona shock and how do we get back to the top? This is one of the most important economic questions for this year. A study by ING Belgium shows how schizophrenia will go about healing.
That’s because the government stepped in collectively to relieve the shock of the past year. The Belgian economy shrank in 2020. Under normal conditions, 75,000 jobs would disappear in such a recession, says ING economist, Philip Lidnet. State aid was limited to 22,000.
But this year, weather robots will follow. The economy will recover by 3.6 percent, ING estimates, but that will not lead to a recovery in employment. On the contrary: the shock to the labor market continues. Ledent estimates that 15,000 to 20,000 jobs will be lost this year.
This number conceals a much greater shock. Leadent says you could easily create 60,000 more jobs a year with such growth. But due to the somewhat difficult Brexit impact and the Corona crisis, there are 80,000 fewer at the checkpoint, with the counter turning into the red.
ING estimates are on the optimistic side. The National Bank and Federal Bureau of Planning expect job losses to be three times higher. ING is also counting on an additional 10,000 bankruptcies this year, above the normal level. This estimate is also brighter than that provided by business data expert Graydon.
ING estimates are optimistic. The National Bank and Federal Bureau of Planning expect job losses to be three times higher.
That is, Lidnet says, because Graydon snapped a photo based on the company’s balance sheets at the end of 2019. From this they concluded that one in three companies has too little capital to weather the storm. On this assumption, there is no economic growth at all this year, says Ledent.
He is more optimistic because he assumes most companies will find additional capital and these new investors. Suppose we are in the middle of a third wave of the virus. There was no vaccine, no perspective. Then many companies facing difficulty may stop.
“But that perspective is there today, interest is low, families were able to save and once they were allowed to spend that money again,” Leidnett says, “We assume that in such circumstances a lot of people would want to invest in companies.
Like other banks, ING thinks growth will be poor in the first half of the year. Recovery is not expected only after the summer. Ledent says the rise in Corona numbers this week will not change his economic outlook immediately.
“We are very careful because the vaccinations are slow,” Leidnet says. This is why it is too early to forecast growth in the second quarter. This is possible in the United Kingdom or the United States, because vaccinations have already been completed.
The key to the recovery later this year lies in the labor market. This, too, is asymmetric: the restaurant industry remains in lockdown and appealing to temporary unemployment. Ledent finds more concern that some companies are also taking advantage of this temporary unemployment of more than 10 percent of employees, while they could ideally operate by working remotely. Examples include the advertising sector, market research, leasing, and some industrial firms. It indicates a decrease in demand.
In the case of the industry – which is operating again at pre-crisis levels – this may indicate that firms are achieving the same volume of sales with fewer people, and so permanent unemployment comes after temporary unemployment.
ING expects the unemployment rate to rise by a quarter to around 8%.