The economy later recovers due to the continuing lockdown

Due to the ongoing lockdown and “bumpy” vaccination campaign, the economic recovery in the Netherlands will come later than expected. So De Nederlandsche Bank (DNB) lowered its growth forecast for this year. Central Bank Chairman Claas Knott remains confident of a strong recovery and also confirms that the economic impact of the Coronavirus crisis was actually better than expected.

DNB now expects 2.2% growth for this year and 4.2% growth next year. The previous estimate in December had assumed 2.9% growth in both years. DNB assumes in its calculations that we will not completely finish corona metrics in about a year.

This adjustment is mainly due to the fact that the Netherlands is currently still in a strong lockdown. “We now expect a renewed contraction of roughly 1 percent in the first quarter. When the economy is gradually liberalized later this year, it could recover substantially, similar to what we saw in the third quarter of last year.”

Imminent bankruptcies

Knot still finds it difficult to indicate exactly what the subsequent recovery of impending bankruptcy will mean for companies. In the wake of the pandemic, bankruptcy will likely be inevitable as the government phases out emergency packages. But Knot doesn’t want to go with the “shocking wording” about a real bankruptcy wave. He says that this is not the case yet.

Support packages

Over the entire last year, the Dutch gross domestic product has decreased by 3.8 percent, according to DNB. So the decline was historically significant, but less than feared at the start of the pandemic, and also much lower than in many other countries. According to Knot, this is largely due to support packages from the government.

According to Knot, measures to prevent the spread of the virus also play a role. If restrictive measures are not in place, the pandemic is likely to be more serious and the economic damage greater, according to the DNB.

Vaccinations

With multiple vaccines arriving, Knot says a cure is in sight. He finds it “troublesome” that the grafting process does not go very smoothly. As a result, Europe could be several months behind countries such as the United Kingdom and the United States. However, Knot still assumes that during this year there will come a time when almost everyone will get vaccinated.

The new forecast is still very uncertain. For example, variants of viruses that are resistant to current vaccines could screw everything up. But it is also possible, of course, that growth will eventually turn out to be more favorable, for example if the Netherlands wants to eliminate all connectivity-limiting measures faster than expected.

Also read: The economy in the North of the Netherlands is contracting further as a result of the Corona crisis

Written by: Redactie