The Dutch economy is in a historically deep recession, despite all the support packages. The economy will shrink by nearly 6 percent this year, Rabobank economists write in their quarterly report. This means that the Netherlands is currently experiencing the deepest economic dip in a hundred years.
The worst shock is now behind us. In the second quarter, all kinds of sectors were forced to close. This was expected to shrink by 8 percent between late March and early June.
In particular, the catering industry has been hit mercilessly in recent months. “Restaurants and cafes are allowed to open again, causing the catering industry to pick up somewhat from the deep trough of the second quarter,” says Ester Barendregt, head of RaboResearch Netherlands. “But for the year as a whole, a contraction of 41 percent remains for this sector.”
The toughest period is yet to come in other sectors. “For example, the biggest blow to industry is likely to come in the third quarter,” said Barendregt. “Construction got off to a very strong start this year, but will now also experience the corona crisis and the long-standing nitrogen problems with a delay.” Rabobank expects shrinkage in construction to continue in 2021.
Flex workers and permanent contracts
Unemployment will also rise further. At the beginning of this year, 284,000 Dutch people were at home without a job, an unemployment rate of three percent. Rabobank economists expect this percentage to rise to 7 percent by the end of the year.
In the coming months, more and more self-employed workers and flex workers will be out of work. In the second half of the year, the bank also predicts more reorganisations and bankruptcies, as a result of which more employees with permanent contracts will also lose their jobs.
Companies are faced with consumers who will spend less money. In addition, the outlook for exports has also deteriorated. Many of our major trading partners have also been hard hit by the crisis. Dutch companies will therefore export 7.2 percent less goods and services, Rabobank foresees.
Bigger hits other countries
“The corona crisis is a huge blow to the Dutch economy,” says Barendregt. “Nevertheless, the Dutch expectations this year are still relatively mild if you look at other countries in the eurozone.” Not all sectors were locked in the ‘intelligent lockdown’ and the Dutch economy was also in good shape when the pandemic started.
This, together with the high degree of digitization, means that the first corona impact is lower in the Netherlands than in other European countries. Countries with stricter policies, such as France, Italy and the United Kingdom, are likely to experience shrinkage of over 10 percent this year. Spain is expected to even increase by 13 percent.
Rabobank predicts that the other countries will start to accelerate faster next year. The bank expects the Dutch economy to grow by 2.9 percent by 2021. Rabobank forecasts growth figures of 7 to 8 percent for France, Italy and Spain.
Barendregt: “This is partly a logical consequence of the less deep fall at the beginning of the corona crisis. But it is also because the Netherlands is relatively vulnerable to a drop in demand from abroad.”
Second corona wave
The recovery in the later part of this year and next year may be reversed if the coronavirus re-emerges later. With a second wave of viruses, bankruptcies and unemployment will increase even more sharply than with the first wave, Rabobank warns. A financial crisis and a crisis in the housing market are then real risks.
“Especially starters who have recently bought a house and fully financed it with a mortgage run the risk of being flooded when house prices fall,” says Barendregt. “This will lead to a decrease in consumption, which means that the dynamics in the housing market can intensify the economic downturn.”
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