Beyond the public healthcare crisis the coronavirus poses, economic recession is also looming on the horizon.
The Central Bureau of Planning (CPB) estimates that the Dutch economy will shrink by 6% this year. A limited recovery with a growth of 3% may occur in 2021, while unemployment is is rising and will double by 2021, reports NOS.
Uncertainty over the pandemic
The CPB expressed concern over the possibility of a second wave of coronavirus. If tight restrictions are taken again, the economy will deteriorate even further. If that is the case, the economy will shrink also in 2021, unemployment may reach 10% and government debt will rise to over 75% of the GDP.
Another factor to consider is also if other countries that trade with the Netherlands don’t recover, that will also have a negative impact on the Dutch economy. On the other hand, the economy could recover if restrictions get eased, leading to consumer optimism.
According to an economic plan laid down by the CPB back in March, the Netherlands is approaching “the darkest scenario”, in which the CPB took into account a shrinkage of 7.7%.
One of the options is a V recession. What that means it is that the economy will contract significantly, followed by a period of fast recovery. In those circumstances, the government needs to spend more money helping companies stay afloat, while tax revenue will fall and unemployment benefits will increase. The CPB considers the consequences of this scenario as “large, but tolerable” for the government budget.
A positive scenario
The CPB has also considered that there’s a chance for economic growth to increase if people spend the money they saved this year on things like vacations or restaurant visits in 2021. Companies could also make additional investments and so the unemployment rise would be limited, as people could then find jobs easier in other industries.
How are you approaching this year economically? Let us know in the comments!
Feature Image: DutchReview
