Lockdown pushes Dutch economy into recession | Financial

This is evident from figures published by the Central Bureau of Statistics (CBS) on Tuesday. Consumer spending fell very sharply in the first quarter. “This is mainly because the lockdown was longer and stricter,” reports the CBS.

The economy shrank by 0.5 percent in the first quarter compared to the fourth quarter. And a shrinkage (of 0.1 percent) had already been measured in that quarter. After two quarters of contraction in a row, the Netherlands is formally in recession. “The first quarter was dominated by the hard lockdown,” says Peter Hein van Mulligen, chief economist at Statistics Netherlands. “Most of the stores were closed and that had an impact on the growth of the economy.”

Less spending

“Consumers again spent much less on catering, recreation and culture, and transport, but they also spent less on clothing, shoes, home furnishings, cars and motor fuels.” During the lockdown, catering and so-called non-essential stores were closed. Due to the massive working from home, people also took to the road much less.

Despite the longer and tougher lockdown than a year earlier, economic activities continued to perform better. The recession was much deeper in the period from March to June 2020 than it is now. In the second quarter of last year, the economy plunged historically with a contraction of 8.4 percent. The numbers are slightly skewed as the blow of the economy is compared to the normal year 2019 last year and the economy is now compared to the corona year 2020.

Crownschade

The 0.5 percent contraction in the economy is in between the estimates of bank economists. ABN Amro expected a minus of 1 percent, ING at -0.4 percent. The Central Planning Bureau assumes that the Dutch economy will recover this year compared to the bad year 2020. The calculators assume a growth of 2 percent this year and 3.5 percent next year. The corona damage will not be repaired until later in 2022, it is estimated.

The fact that the second lockdown has also taken hold again can be seen in consumer spending in February. They spent 11.6 percent less in that month than a year earlier, when there was no corona crisis in the Netherlands. In March consumption fell by 0.4 percent. That is compared to March 2020 when the first lockdown was instituted.

Unemployment

Thanks to government support, the number of bankruptcies is still low. Unemployment is even declining slightly. Nevertheless, catering entrepreneurs, retailers, companies in the event sector and many other affected industries are facing major financial problems. For example, debts to the tax authorities, landlords and suppliers have risen sharply.

On Tuesday, the cabinet will meet with employers’ organizations and trade unions about extending the emergency aid. The recovery plan is also discussed. The recovery plan will be decided on Friday in the Council of Ministers. The cabinet would be willing to extend the repayment term for tax debts from three years to four to five years. Entrepreneurs want to be given at least ten years to get rid of their debts, after a two-year payment break.

Statistics Netherlands is positive about the economic recovery. The so-called business cycle clock, in which all kinds of economic indicators are combined, shows that things are slowly moving in the right direction. “The economic picture according to Statistics Netherlands’ Business Cycle Tracer is less negative in May than a month earlier, Statistics Netherlands reports. “The economy is in a recovery phase.”

Both consumer confidence and the confidence of entrepreneurs are improving, according to the measurements of Statistics Netherlands. Business confidence is even above the long-term average.

Van Mulligen sees that the economy is recovering due to the development in the first quarter: “The month of March is a lot better than January and February. It does not appear that we will see a contraction again in the second quarter. ”

Mid-range

Compared to other countries, the Netherlands is not doing much better in the first quarter, observes Van Mulligen. The economy even grew in France and Belgium. The British and Germans did have a deeper decline than the Netherlands. Van Mulligen: “The Netherlands was in the middle bracket in the past quarter.”

Regarding the entire corona crisis, the Netherlands is clearly performing better than many other countries. The Dutch economy has shrunk by 3.4 percent since the fourth quarter of 2019, the European average is -5 percent.

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